Export-linked tax exemption is confined to the penultimate sale; earlier paddy purchases by a miller remain taxable.

The statutory fiction treating paddy and rice as a single commodity was confined to the limited purpose of export-linked exemption under section 5(3) of the Central Sales Tax Act. That exemption applied to the export sale and the penultimate sale preceding export, but not to the miller's earlier purchase of paddy from the market or a commission agent; accordingly, such purchase remained liable to purchase tax. The challenge to assessment orders was also held to be better pursued through the statutory appellate remedy where factual verification of returns and transactions was required. Administrative instructions merely drawing attention to binding High Court precedent were not unlawful interference with quasi-judicial discretion.

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Issues: (i) whether the purchase of paddy by a miller who sells rice to an exporter is exigible to purchase tax, (ii) whether the petitioners should be relegated to the statutory remedy in respect of the assessment orders, and (iii) whether the State instructions referring authorities to the binding precedent were illegal.

Issue (i): whether the purchase of paddy by a miller who sells rice to an exporter is exigible to purchase tax

Analysis: The statutory fiction in clause (ca) inserted in section 15 of the Central Sales Tax Act treated paddy and rice as a single commodity only for the limited purpose of section 5(3). Section 5(1) exempts the sale that occasions export and section 5(3) extends the exemption to the penultimate sale preceding the export. That fiction does not extend to the prior purchase of paddy by the miller from the market or commission agent. The distinction between paddy and rice remained intact except within the narrow compass created by the amendment. The exemption therefore applies to the exporter and to the penultimate sale to the exporter, not to earlier purchases by the miller.

Conclusion: The purchase of paddy by the petitioners was liable to purchase tax and was not exempt.

Issue (ii): whether the petitioners should be relegated to the statutory remedy in respect of the assessment orders

Analysis: Although the existence of an alternative remedy does not by itself bar writ jurisdiction, the challenge to the assessment orders depended upon factual examination of the returns and transactions for different years. Such matters are ordinarily to be examined by the statutory appellate authority rather than in writ proceedings. The Court therefore directed that an appeal, if filed within the stated time, should be entertained on merits without objection as to limitation.

Conclusion: The petitioners were relegated to the statutory appellate remedy.

Issue (iii): whether the State instructions referring authorities to the binding precedent were illegal

Analysis: Administrative instructions cannot control quasi-judicial discretion, but the impugned letter only drew attention to a binding decision of the jurisdictional High Court. Bringing binding precedent to the notice of authorities did not amount to unlawful interference with their discretion.

Conclusion: The instructions were held to be lawful.

Final Conclusion: The writ petitions failed on all substantive grounds. The tax exemption claim was rejected, the assessment challenge was left to the statutory appellate process, and the administrative instructions were upheld.

Ratio Decidendi: A statutory legal fiction granting export-related exemption must be confined to the precise limits fixed by Parliament, and earlier purchases outside the penultimate export transaction do not acquire export immunity merely because the goods are ultimately exported.

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