Purchase tax on paddy upheld despite rice sales tax exemption where the statute expressly authorised the levy.

Exemption from sales tax on the sale of rice did not bar levy of purchase tax on paddy used as the input where the Orissa Sales Tax Act expressly authorised purchase tax. The statutory scheme under section 3-B permitted the State to declare goods liable to purchase tax, and the fact that the finished product fell within a tax-free entry did not create immunity for the purchased raw material. The levy on paddy was therefore upheld as valid, absent any constitutional or central statutory prohibition.

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Issues: Whether purchase tax was leviable on paddy used for producing rice sold to a transaction exempt from sales tax, notwithstanding that the rice was exempt under the tax-free entry and the goods were treated as declared goods.

Analysis: Section 3-B of the Orissa Sales Tax Act, 1947 expressly empowers the State Government to declare goods liable to purchase tax. The exemption from sales tax on the sale of rice did not create a corresponding immunity from purchase tax on the paddy used as input. The statutory scheme contemplated levy of purchase tax on paddy, and the exemption applicable to the sale of rice under the tax-free list did not bar such levy. The cited authority was read as supporting the principle that, unless there is a constitutional or central statutory bar, purchase tax may be levied on purchases within the State.

Conclusion: The purchase tax on paddy was validly leviable, and the challenge to such levy failed.

Ratio Decidendi: An exemption from sales tax on the eventual sale of a finished product does not, by itself, preclude levy of purchase tax on the input goods where the statute expressly authorises such levy.

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