2005 (3) TMI 458 - SC - VAT and Sales Tax

Who is liable to pay purchase tax under the U.P. Sales Tax Act, 1948? Held that - Appeal allowed. The High Court should have considered the truth of the statement as made by the appellants in their counter-affidavit read with the letter dated September 5, 1985. Accordingly, we set aside the decision of the High Court and remand the matter back in order to enable the High Court to redetermine this fact.

Summary

Issues:
1. Liability to pay purchase tax under the U.P. Sales Tax Act, 1948.

Analysis:
The Supreme Court addressed the issue of liability to pay purchase tax under the U.P. Sales Tax Act, 1948 in this judgment. The Explanation II to section 3-D of the Act was a crucial aspect of the case, which provided clarity on the tax levied at the point of purchase of foodgrains. The High Court's interpretation of the Explanation in a previous case was pivotal, where it was held that purchases by the Regional Food Controller needed to be in compliance with the Essential Commodities Act for the purchaser to be considered the first purchaser. In the present case, rejected wheat was sold by the Regional Food Controller to the respondents-flour mills, leading to a dispute over purchase tax liability. The appellant contended that the respondents were the first purchasers based on the Explanation II, but the High Court disagreed, directing the issuance of certificates to the respondents. The Supreme Court noted that no stay was granted during the appeal process, and the appellant complied with the High Court's order by providing the requisite forms to the respondents. Despite the compliance, the appeal was deemed not infructuous, emphasizing that compliance did not equate to waiving the right to appeal.

Furthermore, the appellant argued that the High Court misinterpreted the previous decision regarding the Essential Commodities Act's applicability to the wheat procurement. It was highlighted that the wheat had been procured under the Support Price Scheme, with orders issued under the Essential Commodities Act during the relevant years. The Supreme Court observed that this crucial fact was on record but was not adequately addressed by the High Court. Consequently, the Supreme Court set aside the High Court's decision and remanded the matter for a reevaluation considering the factual elements presented. Ultimately, the appeal was allowed without any specific order regarding costs, emphasizing the need for a comprehensive review of the factual and legal aspects involved in determining the purchase tax liability under the U.P. Sales Tax Act, 1948.