Purchase tax on notified goods turns on first purchase within the State and inter-State movement caused by the transaction.

For purchase tax under section 3-D, "first purchase" was read as the first purchase within Uttar Pradesh, because the charging provision could not operate extra-territorially. Purchases of notified goods by agents of ex-U.P. principals under a commission agency arrangement, where the goods were despatched outside the State in fulfilment of that transaction, were treated as inter-State purchases under section 3(a) of the Central Sales Tax Act and not exempt on that ground. Section 3-D(2) also applied to sales of foodgrains by the assessee to unregistered dealers on behalf of ex-U.P. principals, because the statutory conditions were satisfied once the first taxable purchase occurred within Uttar Pradesh.

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Issues: (i) Whether purchases of notified goods made in Uttar Pradesh by agents of ex-U.P. principals were liable to tax under section 3-D as inter-State purchases under section 3(a) of the Central Sales Tax Act. (ii) Whether sales of foodgrains by the assessee to unregistered dealers, made on behalf of ex-U.P. principals, attracted tax under section 3-D(2) of the U.P. Sales Tax Act.

Issue (i): Whether purchases of notified goods made in Uttar Pradesh by agents of ex-U.P. principals were liable to tax under section 3-D as inter-State purchases under section 3(a) of the Central Sales Tax Act.

Analysis: The expression "first purchase" in section 3-D was read as referring to the first purchase within the State, because the charging provision could not be given extra-territorial operation. The goods were purchased under a commission agency arrangement for ex-U.P. principals and were despatched outside the State in fulfilment of that contract. The movement of goods was therefore occasioned by the purchase transaction itself, satisfying section 3(a) of the Central Sales Tax Act.

Conclusion: The purchases were inter-State purchases and were not exempt from levy under section 3-D on that ground; the answer was in favour of the Revenue.

Issue (ii): Whether sales of foodgrains by the assessee to unregistered dealers, made on behalf of ex-U.P. principals, attracted tax under section 3-D(2) of the U.P. Sales Tax Act.

Analysis: Section 3-D(2) was held to apply where notified goods were first purchased by an unregistered dealer from a selling agent. Since the sales were to unregistered dealers and the assessee acted as selling agent for ex-U.P. principals, the statutory conditions were satisfied. The fact that the goods had originally been purchased outside the State did not defeat liability once the first taxable purchase occurred within Uttar Pradesh.

Conclusion: The assessee was liable to tax under section 3-D(2); the answer was in favour of the Revenue.

Final Conclusion: The reference was answered against the assessee on the substantive questions, and the third question was rendered academic and left unanswered.

Ratio Decidendi: For purchase tax purposes, "first purchase" in a State charging provision denotes the first purchase within that State, and a purchase made under a commission agency arrangement that occasions movement of goods out of the State is an inter-State purchase under the Central Sales Tax Act.

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