First purchase tax on rejected wheat depends on statutory procurement orders and the material factual distinction under the sales tax scheme.

Explanation II to section 3-D of the U.P. Sales Tax Act treated the first purchase of foodgrains bought from the State Government or its agent, where the purchase was made pursuant to an order under section 3 of the Essential Commodities Act, 1955, as the taxable first purchase. The record showed that rejected wheat had been procured under the Support Price Scheme and that purchase orders were issued under section 3 during the relevant years, a factual distinction material to liability. The High Court had applied an earlier decision without addressing that distinction. The High Court's decision was set aside and the matter remanded for reconsideration of the relevant factual issue.

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Issues: Whether, on the facts relating to procurement and sale of rejected wheat, the respondents were to be treated as the first purchasers liable to purchase tax under Explanation II to section 3-D of the U.P. Sales Tax Act, 1948, and whether the High Court had overlooked the material distinction arising from purchase orders issued under section 3 of the Essential Commodities Act, 1955.

Analysis: Explanation II deemed the first purchase to be the purchase made by a dealer from the State Government or its purchasing agent in relation to foodgrains purchased pursuant to an order under section 3 of the Essential Commodities Act, 1955. The earlier High Court decision was treated as turning on the absence of proof that the purchases had been made under such statutory orders. In the present matter, the record showed that the wheat had been procured under the Support Price Scheme and that, during the relevant years, the purchase orders were issued under section 3 of the Essential Commodities Act, 1955. That factual distinction was material, and the High Court had not addressed it before applying the earlier decision.

Conclusion: The High Court's decision was set aside and the matter was remanded for reconsideration of the relevant factual issue; the appeal succeeded for the appellant to that extent.

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