Purchase-tax liability and promissory assurance: rejected wheat buyer relieved, and prescribed declaration directed to issue.

Purchase-tax liability on rejected wheat was treated as not shifting to the petitioner because the record did not prove that the wheat had been bought under an order made under section 3 of the Essential Commodities Act, so the statutory exception in Explanation II to section 3-D(1) of the U.P. Sales Tax Act was not established. In those circumstances, and in light of Government orders and correspondence showing that the purchasing organisation would bear the tax and issue the prescribed declaration, the Regional Food Controller was treated as the relevant first purchaser. The State was also held bound by its assurance, and could not deny the promised tax treatment or refuse the declaration. Form III-C(2) was directed to be issued.

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Issues: Whether the liability to pay purchase tax on the rejected wheat fell on the Regional Food Controller or on the petitioner, and whether the respondents could be compelled to issue Form III-C(2) in view of the statutory scheme and the Government's repeated assurances.

Analysis: The Court held that the record did not establish that the rejected wheat had been purchased under an order made under section 3 of the Essential Commodities Act, 1955 so as to attract Explanation II to section 3-D(1) of the U.P. Sales Tax Act, 1948 against the petitioner. In the absence of clear proof that the statutory exception applied, and in view of the Government orders and correspondence indicating that the purchasing organisation would bear the tax and issue the prescribed declaration, the Court treated the Regional Food Controller as the relevant first purchaser for the transaction. The Court also applied the principle that the State cannot resile from a promise or assurance on which the petitioner had acted.

Conclusion: The petitioner succeeded. The respondents were directed to issue Form III-C(2) for the rejected wheat sold during the assessment year 1983-84, and the petitioner was not held liable for the purchase tax on that transaction.

Ratio Decidendi: Where the statutory condition for shifting purchase-tax liability is not proved, and the State has given a clear assurance on which the dealer acted, the State cannot deny the promised tax treatment or related declarations.

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