1969 (1) TMI 66 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of Section 3-D(1) of the U.P. Sales Tax Act regarding the levy of purchase tax on turnover of first purchases of foodgrains
- Determination of whether broken down dal purchased by the petitioner constitutes a first purchase or a second purchase
- Analysis of whether the broken down dal is essentially different from the original arhar dal purchased by the dal mills

Analysis:
The judgment by the High Court of Allahabad involved the interpretation of Section 3-D(1) of the U.P. Sales Tax Act concerning the levy of purchase tax on the turnover of first purchases of foodgrains. The petitioner, a dealer in cereals and pulses, challenged an assessment order for the purchase tax on dal for the assessment year 1966-67. The petitioner argued that the dal purchased by him, after being broken down by dal mills, should be considered a second purchase, as the first purchase was made by the dal mills. The Sales Tax Officer, however, treated the petitioner's purchase of broken down dal as the first purchase, leading to the dispute.

The court analyzed the processes involved in the production of broken down dal by dal mills, which included cleaning, de-husking, and breaking down the dal into smaller particles. The petitioner contended that the broken down dal was essentially the same as the original arhar dal purchased by the dal mills, with the only difference being the size of the dal particles. The court noted that there was no change in the chemical composition of the dal and that the processes undertaken by the dal mills did not result in a new and different article from the original grain.

Referring to legal precedents, the court emphasized the distinction between "processing" and "manufacturing," highlighting that for a commodity to be considered essentially different, it must undergo a transformation resulting in a distinctive new article. The court cited cases where similar processes did not alter the essential character of the commodity, such as the conversion of groundnut oil through hydrogenation. Applying these principles, the court concluded that the broken down dal purchased by the petitioner was not a commodity essentially different from the original arhar dal, and therefore, the petitioner's purchase should not be considered a first purchase for the purpose of levy under Section 3-D(1).

Additionally, the court addressed the objection raised by the Commissioner regarding the petitioner's choice to seek relief through a writ petition instead of pursuing the appellate and revision processes available under the U.P. Sales Tax Act. The court held that the existence of an alternative remedy did not bar the petitioner from seeking relief under Article 226, especially considering the significance of the issue affecting the mercantile community dealing in the commodity. Ultimately, the court allowed the petition, quashed the assessment order, and awarded costs to the petitioner.