Purchase Tax Liability: Triggered at Initial Purchase by Miller

Sri Venkateswara Rice, Ginning and Groundnut Oil Mill Contractors Co. and Others Versus State of Andhra Pradesh and Others  

Sri Venkateswara Rice, Ginning and Groundnut Oil Mill Contractors Co. and Others Versus State of Andhra Pradesh and Others   - [1971] 28 STC 599 (SC), ... Issues:
1. Interpretation of the point of levy of purchase tax under the Andhra Pradesh General Sales Tax Act, 1957.
2. Determining whether the liability to pay tax arises at the time of purchase by the miller or at the time of the last purchase.
3. Analysis of the provisions of the Central Sales Tax Act, 1956 and the Andhra Pradesh General Sales Tax Act, 1957 in relation to the taxation of declared goods like groundnut.
4. Examination of the liability of millers under the Act in relation to the purchase of groundnut for extracting oil and subsequent sale.
5. Consideration of the High Court's decision regarding the point of levy of purchase tax on groundnut purchases.

Detailed Analysis:

The Supreme Court addressed the issue of the point of levy of purchase tax under the Andhra Pradesh General Sales Tax Act, 1957. The main question was whether the liability to pay tax arises at the time of purchase by the miller or at the time of the last purchase. The Commercial Tax Officer, Assistant Commissioner, Sales Tax Appellate Tribunal, and the High Court had differing opinions on this matter. The High Court ultimately reversed the decision of the Tribunal and upheld the order of the Commercial Tax Officer, leading to the appeal before the Supreme Court.

The Court considered the provisions of the Central Sales Tax Act, 1956, which designate groundnut as a "declared good" of special importance in inter-State trade. Under the Andhra Pradesh General Sales Tax Act, the point of levy for purchase tax on groundnut is specified in the Third Schedule. The Court highlighted that the purchase of groundnut by a miller is subject to tax at the point of purchase by the miller or the last dealer buying in the State, with a tax rate of 2 paise in the rupee.

The Court clarified that the liability to pay tax arises as soon as the miller purchases the groundnut, regardless of the subsequent use or sale of the purchased goods. The turnover becomes liable to tax upon purchase, subject to any exemptions provided by the Act. The Court emphasized that once a quantity of groundnut is taxed at the point of purchase, any further dealings with the same goods cannot be taxed under the Act.

Regarding the argument that tax should only apply to the portion of groundnut crushed for oil extraction, the Court rejected this contention, stating that the liability arises at the time of purchase by the miller, not based on the subsequent use or sale of the goods. The Court also dismissed the argument that subsequent purchases of the same groundnut should not be taxed, reiterating that tax liability is triggered at the initial purchase by the miller.

The Court upheld the High Court's decision on the point of levy of purchase tax and criticized a later decision by the same High Court that contradicted the earlier ruling. The Court emphasized the importance of adhering to precedent and dismissed the appeals, affirming the decision of the High Court.