First purchase tax and commercial commodity test under U.P. Sales Tax law: liability turns on the charging provision and proper evidence.

Purchase tax under section 3-D(1) of the U.P. Sales Tax Act is attracted to the first purchase of the commodity, and liability does not depend on prior payment of tax in an earlier transaction. The article also states that whether arhar, after processing, becomes a new commercial commodity must be determined by applying the correct legal test on proper evidence, rather than by assuming that processed and unprocessed forms are necessarily different goods. On that basis, the assessment orders described in the text were treated as based on an erroneous understanding of the charging provision and were quashed, with the matter remitted for fresh assessment.

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Issues: (i) whether arhar and arhar dal, after the processing described in the record, became a different commercial commodity so as to attract purchase tax under section 3-D of the U.P. Sales Tax Act; (ii) whether purchase tax under section 3-D(1) was attracted only when the commodity had earlier borne tax, and whether the assessment orders were based on a correct understanding of the charging provision.

Issue (i): whether arhar and arhar dal, after the processing described in the record, became a different commercial commodity so as to attract purchase tax under section 3-D of the U.P. Sales Tax Act.

Analysis: The distinction between the same article in an unprocessed and processed form does not by itself answer the statutory question. The controlling inquiry is whether the processes applied to arhar resulted in the emergence of a new commercial commodity. On the material before the Court, the factual foundation for finally deciding that question was inadequate, and the relevant test had to be applied with further evidence and correct legal criteria.

Conclusion: The issue was not finally determined on merits and was sent back for fresh determination by the Sales Tax Officer.

Issue (ii): whether purchase tax under section 3-D(1) was attracted only when the commodity had earlier borne tax, and whether the assessment orders were based on a correct understanding of the charging provision.

Analysis: Section 3-D(1) fastens liability on the first purchase of the commodity. The decisive factor is the first taxable purchase, not whether tax had in fact been paid on some earlier transaction. The assessment orders proceeded on the mistaken basis that prior payment of tax was the test of liability, which misconceived the charging provision.

Conclusion: The assessment orders were based on an erroneous view of section 3-D(1) and could not stand.

Final Conclusion: The writ petitions succeeded, the impugned assessment orders were quashed, and the matters were remitted for fresh assessment in accordance with law and after taking appropriate evidence.

Ratio Decidendi: Purchase tax under section 3-D(1) of the U.P. Sales Tax Act is attracted to the first purchase of the commodity, and whether processing creates a new commercial commodity must be determined by applying the correct legal test on proper evidence.

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