Purchase tax liability arises when taxable goods bought from unregistered dealers are used in property development business activity.

A registered dealer purchasing taxable goods from an unregistered dealer is liable to purchase tax under section 3(2) of the Karnataka Value Added Tax Act, 2003 when the goods are used in the course of business. The provision does not apply to purchases for personal consumption, but it does apply where the goods support business activity. Here, goods acquired for self-development of flats and property were used as part of the dealer's property development business, so the statutory conditions for levy were satisfied. The Tribunal's contrary view was incorrect, and purchase tax was payable.

---

---

Issues: Whether a registered dealer who purchases taxable goods from an unregistered dealer for construction of its own flats and property development is liable to purchase tax under section 3(2) of the Karnataka Value Added Tax Act, 2003.

Analysis: Section 3(2) levies tax on purchases of taxable goods by a registered dealer from an unregistered dealer when the goods are bought for use in the course of business. Liability does not arise where the purchase is merely for personal consumption, but it does arise when the goods are used as part of the dealer's business activity. The assessee was engaged not only in works contracts but also in property development, and the goods purchased from unregistered dealers were used for development of its own property. Such development activity was part of the assessee's business, so the statutory condition for levy was satisfied.

Conclusion: The assessee was liable to purchase tax under section 3(2), and the Tribunal's view to the contrary was incorrect.

Ratio Decidendi: A registered dealer is liable to purchase tax on taxable goods bought from an unregistered dealer when those goods are used in the course of the dealer's business, including self-development of property as part of that business.

---