Purchase tax on levy rice and refund for tax-paid paddy depend on the statutory scheme and proof before assessment.

A procurement agent purchasing levy rice and despatching it outside Karnataka may attract purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957, because that provision operates independently where goods are purchased in circumstances in which no tax is leviable on the sale price and are then moved outside the State. The second proviso to Section 5(4) deems the relevant sale structure for levy purposes, but does not exclude purchase tax on that basis. The third proviso permits reimbursement of tax already suffered on paddy only on a proper claim supported by proof before the assessing authority; absent such a claim, deduction cannot be claimed in assessment, though refund may still be sought in accordance with law.

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Issues: (i) Whether procurement of levy rice by a procurement agent and its despatch outside the State attracted purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957. (ii) Whether the assessee was entitled to reduction or reimbursement of tax on paddy already suffered tax under the third proviso to Section 5(4) of the Karnataka Sales Tax Act, 1957.

Issue (i): Whether procurement of levy rice by a procurement agent and its despatch outside the State attracted purchase tax under Section 6 of the Karnataka Sales Tax Act, 1957.

Analysis: The second proviso to Section 5(4) treated the first sale to a procurement agent as not being a sale, but expressly deemed the subsequent sale by the procurement agent to be the point of levy. Section 6 is an independent charging provision that applies when taxable goods are purchased in circumstances where no tax is leviable on the sale price and the goods are then despatched outside the State. The earlier decision relied upon by the assessee was held inapplicable because it dealt with a different proviso and a different statutory setting. The Court applied the principle that the State cannot be deprived of purchase tax merely because the initial transaction is given a deemed character for levy purposes.

Conclusion: The assessee was liable to purchase tax under Section 6, and the contention that no tax could be levied failed.

Issue (ii): Whether the assessee was entitled to reduction or reimbursement of tax on paddy already suffered tax under the third proviso to Section 5(4) of the Karnataka Sales Tax Act, 1957.

Analysis: The third proviso permits reimbursement where tax has already been paid on paddy that is later sold to, or hulled and the resultant rice sold to, a procurement agent. The Court held that the benefit is available only on a proper claim supported by proof before the assessing officer. As no such claim or evidence had been placed before the assessing officer, the assessee could not insist on deduction at the assessment stage. However, liberty was reserved to seek refund in accordance with law within the period fixed by the Court.

Conclusion: The assessee was not entitled to deduction in the assessment proceedings, though liberty to seek refund was preserved.

Final Conclusion: The challenge to the assessment orders failed on the merits, and the petitions were dismissed, with only a limited liberty reserved to pursue refund in accordance with the statutory proviso.

Ratio Decidendi: A procurement agent remains liable to purchase tax under Section 6 when the statutory scheme deems the initial levy sale outside tax and the goods are despatched outside the State, and reimbursement for tax already paid on paddy can be claimed only on proof and a proper claim before the assessing authority.

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