2009 (1) TMI 811 - HC - VAT and Sales Tax

Court upholds purchase tax on rice shelling units, clarifies exemption rules. Purchase of paddy triggers tax liability.

The court upheld the imposition of purchase tax on rice shelling units, clarifying that the exemption under Section 13B did not extend to purchase tax. ... Liability of the petitioners to pay purchase tax - Held that:- The argument that no purchase tax is deemed to be recovered while recovering the payment of rice would be wholly without substance because the obligation to pay purchase tax is not dependent on anything else but on the event to pay purchase tax. Such an event arises, as already noticed, when the petitioner-dealers purchase paddy being the last purchaser. The miller is to mill the paddy, which is raw material for extracting rice and other allied products. Even otherwise the costing sheet, etc., always keep the element of purchase tax in view which is ordinarily reimbursed to the miller. Therefore, the argument is wholly misconceived and is, thus, liable to be rejected. The rice sold to DFSC by the petitioner-dealers has not attracted the payment of sales tax and, therefore, the petitioner-dealers cannot avoid payment of purchase tax. The other contention of the petitioner-dealers that in the eyes of law they are deemed to have paid sales tax is equally devoid of merit because once the sale transactions of the petitioner-dealers are exempted under section 13B of the Act from payment of sales tax then it would not amount to granting exemption in respect of purchase tax as well. In law it cannot be presumed, as suggested, that sales tax has been paid by the petitioner-dealers. Assessee appeal dismissed. Issues Involved:1. Legality of the imposition of purchase tax on rice shelling units.2. Interpretation of Note (i) of Schedule III of the Levy Order.3. Applicability of Section 13B exemption to purchase tax.4. Determination of the taxable event for purchase tax.5. Legality of the assessment orders and appeals process.Detailed Analysis:1. Legality of the Imposition of Purchase Tax on Rice Shelling Units:The petitioners challenged the imposition of purchase tax at four percent on rice shelling units by the Haryana Tax Tribunal. The Tribunal upheld the demand, stating that the units were exempt from sales tax but not from purchase tax. The taxable event for purchase tax was the milling of paddy, making the millers the last purchasers liable for the tax.2. Interpretation of Note (i) of Schedule III of the Levy Order:The petitioners argued that Note (i) of Schedule III did not imply that they had charged purchase tax from the DFSC. The Tribunal, however, concluded that the price of rice paid by the DFSC included purchase tax. The court agreed with the Tribunal, stating that the obligation to pay purchase tax arose when the petitioner-dealers purchased paddy as the last purchasers.3. Applicability of Section 13B Exemption to Purchase Tax:The petitioners contended that their exemption under Section 13B from sales tax implied exemption from purchase tax as well. The court rejected this argument, clarifying that the exemption certificate only covered sales tax and not purchase tax. The court emphasized that the liability to pay purchase tax continued despite the sales tax exemption.4. Determination of the Taxable Event for Purchase Tax:The court referred to Sections 6 and 17 of the Haryana General Sales Tax Act, which specify that tax on declared goods is payable at the stage of the last purchase. The court cited the Supreme Court's decision in Hotel Balaji v. State of Andhra Pradesh, which held that the taxable event is the purchase of raw material (paddy) by the last purchaser (miller). The court concluded that the taxable event occurred when the miller purchased paddy for milling.5. Legality of the Assessment Orders and Appeals Process:The petitioners' appeals against the assessment orders were dismissed by the Joint Excise and Taxation Commissioner (Appeals) and the Haryana Tax Tribunal. The court upheld these decisions, stating that the assessments were justified as the petitioners had not paid sales tax on rice and were liable for purchase tax on paddy. The court dismissed the petitions, affirming the legality of the assessment orders and the appeals process.Conclusion:The court dismissed the petitions, upholding the imposition of purchase tax on rice shelling units. The court clarified that the exemption under Section 13B did not cover purchase tax, and the taxable event for purchase tax was the purchase of paddy by the millers. The court affirmed the legality of the assessment orders and the appeals process, concluding that the petitioners were liable to pay purchase tax.