Purchase tax on paddy and export exemption: Haryana relief, Punjab liability, and paddy-rice treated as distinct goods.

A specific purchase-tax exemption for raw material used in producing exported goods prevailed over the general charging and amendment provisions of the Haryana Act while that exemption remained in force, so purchase tax on paddy was not leviable for the relevant period and adjustment of tax paid was allowed, though refusal of refund was not unconstitutional. Under the Punjab Act, the different charging scheme meant purchase tax on paddy remained payable despite export of rice. The Court also held that paddy and rice are distinct commodities under the commercial parlance test and section 14 of the Central Sales Tax Act, so the section 5(3) export exemption could not extend to paddy.

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Issues: (i) Whether, under the Haryana General Sales Tax Act, 1973, purchase tax could be levied on paddy purchased for manufacture of rice that was exported, despite the earlier exemption under section 9(1)(b) and the amendments to sections 2(p), 6, 15 and 15-A; (ii) Whether section 15-A of the Haryana General Sales Tax Act, 1973 could be applied to deny adjustment or refund of purchase tax paid on paddy, and whether such denial was constitutionally invalid; (iii) Whether, under the Punjab General Sales Tax Act, 1948, a dealer purchasing paddy and exporting rice was liable to purchase tax, including in light of section 4-B and the export provisions; and (iv) Whether paddy and rice could be treated as the same goods for the purpose of section 5(3) of the Central Sales Tax Act, 1956 and article 286 of the Constitution of India.

Issue (i): Whether, under the Haryana General Sales Tax Act, 1973, purchase tax could be levied on paddy purchased for manufacture of rice that was exported, despite the earlier exemption under section 9(1)(b) and the amendments to sections 2(p), 6, 15 and 15-A.

Analysis: Section 6 was treated as the general charging provision, but it operated subject to other provisions of the Act. Section 9(1)(b) created a specific charge on purchase of raw material only where no tax was otherwise payable and exempted the levy when the manufactured goods were sold within the State, sent outside the State in inter-State trade, or exported. The later amendments to the turnover and charging provisions did not displace section 9 while it remained on the statute. The Court applied the earlier decisions construing section 9(1)(b) and held that paddy purchased for export-linked manufacture of rice fell within the statutory exemption for the relevant period before omission of section 9.

Conclusion: The assessee was not liable to purchase tax on paddy for the assessment years when section 9(1)(b) remained in force, and the Haryana amendments did not alter that position.

Issue (ii): Whether section 15-A of the Haryana General Sales Tax Act, 1973 could be applied to deny adjustment or refund of purchase tax paid on paddy, and whether such denial was constitutionally invalid.

Analysis: Section 15-A was read subject to clause (iii) of the proviso to section 15(1), which required reduction of tax on rice by the amount of tax levied on paddy. Applying harmonious construction, the Court held that section 15-A could not override the statutory adjustment mechanism. At the same time, the statute's refusal to grant refund on paddy, cotton and oilseeds was not unconstitutional, because the Constitution and the Central Sales Tax Act did not mandate refund of purchase tax on paddy in the circumstances considered. The retrospective operation was not held to be excessive or arbitrary in the relevant period.

Conclusion: Adjustment of purchase tax paid on paddy was permissible, but denial of refund was not unconstitutional.

Issue (iii): Whether, under the Punjab General Sales Tax Act, 1948, a dealer purchasing paddy and exporting rice was liable to purchase tax, including in light of section 4-B and the export provisions.

Analysis: The Court distinguished the Punjab charging scheme from the Haryana scheme. Section 4 of the Punjab Act was itself a charging provision covering purchases, and section 4-B was only a special provision with exemptions in specified situations. The fact that section 4-B resembled section 9(1)(b) of the Haryana Act did not control the result because the scope of the Punjab charging section was materially different. The export exemption provisions also did not assist, since the relevant provision dealt with export of the same goods and the statutory framework did not exempt purchase tax on paddy in the facts found.

Conclusion: The assessee was liable to pay purchase tax on paddy under the Punjab Act.

Issue (iv): Whether paddy and rice could be treated as the same goods for the purpose of section 5(3) of the Central Sales Tax Act, 1956 and article 286 of the Constitution of India.

Analysis: The Court rejected the argument that paddy and rice were the same commodity. Applying the commercial parlance test and relying on the statutory recognition in section 14 of the Central Sales Tax Act, 1956, it held that paddy and rice are distinct goods. The benefit of section 5(3) was therefore unavailable because the exported commodity was rice, not paddy, and the penultimate sale or purchase exemption could not be extended to the purchase of paddy after processing.

Conclusion: Paddy and rice are different commodities, and section 5(3) did not grant exemption on the purchase of paddy used to produce exported rice.

Final Conclusion: The Haryana appeals succeeded only to the extent of recognising the statutory exemption and adjustment for the relevant period, while the Punjab appeals failed. The Court maintained the distinction between the two State enactments and upheld purchase tax liability in the Punjab matters.

Ratio Decidendi: A specific purchase-tax exemption governing raw material used to manufacture exported goods prevails over general charging and amendment provisions while it remains on the statute, but the exemption cannot be extended where the statutory scheme of the relevant Act imposes purchase tax on purchases themselves and the exported product is a distinct commodity from the raw material.

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