Purchase tax on cotton: post-purchase wastage cannot reduce estimated turnover absent statutory allowance.

For purchase tax on cotton under item 2 of the Second Schedule to the Tamil Nadu General Sales Tax Act, the taxable event is the purchase of kapas before conversion into ginned cotton. Where reliable purchase accounts exist, later loss in weight or wastage during ginning does not reduce the purchase turnover. In the absence of proper accounts, the assessing authority may estimate purchase value by reference to sales turnover as a substitute for actual consideration, but no notional deduction is permitted for invisible loss or wastage after purchase unless the statute expressly provides for it. The assessment restored by the Board of Revenue was upheld.

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Issues: Whether invisible loss or wastage in the process of ginning raw cotton into lint could be excluded from the estimated purchase turnover when the assessee maintained no purchase accounts.

Analysis: Tax under item 2 of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959 was levied on the purchase value at the last point of purchase, namely before conversion of kapas into ginned cotton. Where correct purchase accounts were available, subsequent loss in weight by driage or in manufacture would not affect the purchase turnover as determined at the time of purchase. In the absence of reliable accounts, the assessing authority's estimate of purchase value by reference to sales turnover was only a substitute for the actual purchase consideration, and there was no basis in the Act for allowing a deduction for invisible loss or wastage in such estimation.

Conclusion: Invisible loss in the process of manufacture could not be deducted from the estimated purchase turnover, and the assessment as restored by the Board of Revenue was upheld against the assessee.

Ratio Decidendi: For purchase tax on cotton, wastage or driage after the point of purchase does not reduce the purchase turnover, and when purchase value has to be estimated for want of accounts, no notional allowance for such post-purchase loss is permissible absent statutory provision.

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