2001 (7) TMI 1261 - HC - VAT and Sales Tax

Summary

Issues:
Whether the purchase of turmeric made by the petitioner from a registered dealer is liable to be taxed as the first purchase of the goods.

Analysis:
The petitioner, a dealer in turmeric and other goods, claimed exemption on the purchase of turmeric worth Rs. 3,48,440 from a registered dealer, M/s. Bantu Chinnaiah & Co., Nizamabad, during the assessment year 1986-87. The assessing authority rejected the claim, stating that the evidence did not show the turnover suffered tax and that the seller did not pay the tax. The petitioner produced an affidavit from the seller stating that the turnover was taxed and assessed by the Deputy Commercial Tax Officer. The Tribunal disallowed the claim citing reasons that the transaction was not in the petitioner's return and the tax was not paid by the seller.

The Court referred to a previous case and established two principles for exemption claims: the first seller must be a real and identifiable dealer within the State, and non-payment of tax by the first seller does not shift the liability to the second seller. In this case, M/s. Bantu Chinnaiah & Co. was a registered dealer, and the petitioner purchased from a real and identifiable dealer within the State. Although there was no satisfactory evidence that the vendor filed returns including the sale of turmeric, the department assessed and determined the tax. The Court emphasized that the vendor's failure to pay the assessed tax cannot be a valid reason to disallow the petitioner's claim for exemption.

Based on the principles laid down and the facts of the case, the Court allowed the tax revision case, setting aside the Tribunal's order. The Court declared that the petitioner was entitled to the exemption for the disputed turnover, emphasizing that the vendor's tax liability should be pursued separately by the authorities under the Act.