Composition payment in lieu of sales tax does not make the buyer the first purchaser for arecanut tax liability.

A composition payment made by a registered dealer in lieu of sales tax was treated as a substitute for the tax otherwise payable, and its character as tax in substance was not lost. On that basis, the seller continued to be the first purchaser of arecanuts under the statutory scheme, and the buyer could not be fastened with liability as the first purchaser under the relevant entry. The attempted assessment of escaped turnover against the buyer therefore had no legal basis and was unsustainable.

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Issues: Whether a dealer who purchases arecanuts from a registered dealer who has entered into composition under section 17 of the Mysore Sales Tax Act can be treated as the first purchaser and fastened with tax liability under section 12-A read with the seventh entry in the Third Schedule.

Analysis: The composition paid under section 17 was treated as a substitute for the tax otherwise payable by the registered dealer. The fact that the tax was discharged in the form of composition fee did not erase the character of that payment as tax in substance. Consequently, the seller remained the first purchaser for purposes of the relevant arecanut entry, and the composition did not shift the incidence of tax to the buyer. The attempted assessment of escaped turnover against the petitioner therefore lacked legal basis.

Conclusion: The petitioner was not liable as a first purchaser, and the assessment made against him was unsustainable.

Ratio Decidendi: A composition payment made in lieu of sales tax does not convert the subsequent buyer into the first purchaser where the statutory scheme levies tax at the first purchase point.

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