Ginning loss and dryage cannot be taxed as purchase turnover when the dealer's accounts and yield remain unchallenged.

The Karnataka High Court held that a mere difference between kapas purchased and the cotton and cotton seeds sold after ginning did not, by itself, establish taxable purchase by the dealer as the last purchaser under Entry 6 of the Fourth Schedule to the Karnataka Sales Tax Act, 1957. The levy applies only to the last dealer in the State, and the dealer's books showed that the entire kapas was processed into bales and seeds. As the authorities did not reject the accounts or disprove the normal yield, the explained shortage caused by dryage and incidental ginning loss could not be taxed as purchase turnover.

---

---

Issues: Whether the difference between the quantity of kapas purchased and the quantity of cotton and cotton seeds sold after ginning could be treated as taxable purchase of cotton in the hands of the dealer as the last purchaser under Entry 6 of the Fourth Schedule to the Karnataka Sales Tax Act, 1957.

Analysis: The taxable levy under Entry 6 is attracted only on the last dealer in the State. The dealer's accounts showed that the entire kapas purchased was converted by ginning into bales of cotton and cotton seeds, and the authorities did not reject the books of account or dispute the normal yield percentage. The shortfall in weight was explained as resulting from dryage and incidental wastage during ginning, and that explanation was not found unacceptable. In such a situation, mere variance between the purchase weight and the sold output could not justify treating the dealer as the last purchaser of the quantity lost in processing.

Conclusion: The shortage arising from ginning loss and dryage could not be brought to tax as purchase by the last purchaser; the levy was unsustainable and the assessee succeeded.

---