Foodgrains supply to Food Corporation subject to purchase tax under M.P. Sales Tax Act

The High Court upheld that the supply of foodgrains to the Food Corporation of India under the Foodgrains Levy Order constitutes disposal of goods, subjecting it to purchase tax under section 7 of the M.P. General Sales Tax Act, 1958. The Court relied on a previous decision affirming this tax liability, rejecting the argument that there was a distinction between "disposal" and "disposed of." The Court found no reason to depart from the precedent and ruled in favor of the department, with each party bearing their own costs.

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Issues:
Interpretation of section 7 of the M.P. General Sales Tax Act, 1958 regarding the levy of purchase tax on the supply of foodgrains to the Food Corporation of India under the Foodgrains Levy Order.

Analysis:
The High Court of Madhya Pradesh considered a reference under section 44(1) of the M.P. General Sales Tax Act, 1958, regarding the levy of purchase tax on the supply of foodgrains to the Food Corporation of India. The question was whether such supply amounted to disposal of goods in a manner other than by sale under section 7 of the Act, making the purchases liable to purchase tax. The assessee, a dealer in foodgrains, oil-seeds, etc., had not included the price received for supplying wheat and juwar to the Food Corporation of India in their gross turnover. The assessing authority held that the purchases from unregistered dealers, supplied to the Food Corporation, were liable to purchase tax under section 7(1) of the Act. The Tribunal upheld this decision, leading to a reference to the High Court.

In a similar case previously decided by the High Court, it was held that such transactions were indeed subject to purchase tax under section 7 of the Act. The current assessee argued that there was a distinction between "disposal" and "disposed of," but the Court found this argument unconvincing. The Court noted that the previous decision had not been overruled by any higher authority and, therefore, upheld the interpretation that the dealers were liable to the levy of purchase tax. The Court agreed with the decision in the previous case and answered the reference in the affirmative, in favor of the department. Each party was directed to bear their own costs in this reference.

Therefore, the High Court affirmed that the supply of foodgrains to the Food Corporation of India under the Foodgrains Levy Order does amount to disposal of goods in a manner attracting purchase tax under section 7 of the M.P. General Sales Tax Act, 1958. The Court's decision was based on the interpretation of the relevant provisions and the lack of any compelling reason to deviate from the precedent set by the previous judgment on a similar issue.

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