TaxTMI 
TaxTMI 
1981 (3) TMI 213
X X X X Extracts X X X X
X X X X Extracts X X X X
....e question which arises for consideration in these appeals by certificate is whether the respondents (hereinafter referred to as "the assessees") are liable to pay purchase tax under section 6(i) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act"), on the turnover consisting of the price paid by them for purchasing paddy for the purpose of converting it into rice for sale, in their respective rice mills. The assessees are owners of rice mills in the State of Karnataka and are registered dealers under the Act. In the course of their business, they purchase paddy and after milling paddy sell the resultant rice. During the assessment years, the assessees purchased paddy from agriculturists who were not liable to pay ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ases to prefer appeals before this Court to the State Government. On the basis of the said certificate, these appeals have been filed by the State Government against the orders of the High Court. Since these appeals involve a common question of law, they are disposed of by this common judgment. The relevant part of section 6 of the Act reads: "6. Levy of Purchase tax under certain circumstances.-Subject to the provisions of sub-section (5) of section 5, every dealer who in the course of his business purchases any taxable goods in circumstances in which no tax under section 5 is leviable on the sale price of such goods and, (i) either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as been a change in the identity of the goods." The above view has been followed by this Court in Babu Ram Jagdish Kumar & Co. v. State of Punjab [1979] 44 S.T.C. 159 (S.C.). It is unfortunate that the High Court as well as the Tribunal have tried to distinguish the decision of this Court in Ganesh Trading Co.'s case [1973] 32 S.T.C. 623 (S.C.)., on insubstantial grounds, a detailed reference to which is unnecessary. We reiterate the view expressed in the above two cases and hold that paddy and rice are two distinct commodities and that the milling of paddy involves a manufacturing process. There is no merit in the submission made on behalf of the assessees that they had not consumed paddy when they produced rice from it by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the turnover of sales or purchases is explained by Professor Paul A. Samuelson in his book entitled "Economics" (Tenth Edition, 1976), at page 168 thus: "A turnover tax simply taxes every transaction made: wheat, flour, dough, bread. VAT is different because it does not include in the tax on the miller's flour that part of its value which came from the wheat he bought from the farmer. Instead, it taxes him only on the wage and salary cost of milling, and on the interest, rent, royalty, and profit cost of this milling stage of production. (That is, the raw material costs used from earlier stages are subtracted from the miller's selling price in calculating his 'value added' and the VAT tax on value added..................)." At every ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....apes'. Again, the final act of consumption may in some cases be spread over a considerable period of time. Books, articles of furniture and paintings may be mentioned as examples. It may even happen in such cases, that after one consumer has performed part of the final act of consumption, another portion of the final act of consumption may be performed by his heir or successor-in-interest, a transferee, or even one who has obtained possession by wrongful means. But the fact that there is for each commodity what may be considered ordinarily to be the final act of consumption, should not make us forget that in reaching the stage at which this final act of consumption takes place the commodity may pass through different stages of production an....