Purchase tax liability on paddy remained intact despite sales tax exemption on rice under the Haryana sales tax scheme.

Rice sheller units exempt from sales tax on finished rice remained liable to purchase tax on paddy bought as the last purchaser, because purchase tax arises at the stage of last purchase of declared goods under the Haryana General Sales Tax Act, 1973, and is a distinct levy from sales tax on the finished product. The exemption under section 13B and rule 28A was confined to sales tax and did not extend to purchase tax. The statutory scheme, including the relevant rules and levy provisions, allowed adjustment only as prescribed by law; it did not permit avoidance of purchase tax. Note (i) to Schedule III of the Levy Order was treated as making the rice price inclusive of purchase tax and mandi charges.

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Issues: Whether the rice sheller units, though exempted from sales tax under section 13B of the Haryana General Sales Tax Act, 1973, remained liable to purchase tax on paddy purchased as the last purchaser, and whether the procurement price of rice under the Levy Order could be construed as having included or adjusted the purchase tax burden.

Analysis: The liability to purchase tax was held to arise at the stage of last purchase of declared goods under sections 6 and 17 of the Haryana General Sales Tax Act, 1973, read with Schedule D, when paddy was purchased for milling. The exemption under section 13B and rule 28A was limited to sales tax and did not extend to purchase tax. The Court applied the principle that taxing the sale of finished rice and taxing the purchase of paddy are distinct incidents, and that purchase tax is not extinguished merely because sales tax is waived on the finished product. Reference was also made to section 27, section 15(1)(b)(iii), and rule 24(m) to hold that the statutory scheme contemplated adjustment only in the manner provided by law and did not permit the assessees to avoid purchase tax. Note (i) to Schedule III of the Levy Order was construed as making the rice price inclusive of purchase tax and mandi charges, thereby negating the contention that no such amount had been recovered.

Conclusion: The assessees remained liable to pay purchase tax on the purchase of paddy, and the exemption from sales tax did not relieve them of that liability.

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