2003 (9) TMI 714 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the procurement of rice by the assessee under the Karnataka Rice Procurement (Levy) Order constitutes a sale or purchase under Section 6 of the Karnataka Sales Tax Act.
2. Whether the tax under Section 6 of the Act is applicable to the foodgrains transferred by the assessee outside the State of Karnataka.
3. Whether the assessee is entitled to a deduction of tax paid on levy-paddy under the third proviso to Section 5(4) of the Act.

Issue-wise Detailed Analysis:

1. Procurement of Rice as Sale or Purchase:

The first contention by the assessee was that the procurement of rice under the Karnataka Rice Procurement (Levy) Order does not constitute a sale or purchase and thus Section 6 of the Act is not applicable. The assessee relied on the decision in Madhur Trading Co. v. State of Karnataka, arguing that the procurement is not a sale and therefore, the tax under Section 6 cannot be levied. However, the court rejected this argument, stating that the second proviso to Section 5(4) of the Act makes it clear that while the initial sale to the procurement agent is not deemed a sale, the subsequent sale by the procurement agent is taxable. The court emphasized that the principle from Madhur Trading Co. does not apply here as it dealt with a different provision (Section 5(3)(c)).

2. Applicability of Tax Under Section 6:

The second issue was whether the tax under Section 6 of the Act is applicable to the foodgrains transferred by the assessee outside Karnataka. The court clarified that Section 6 imposes a tax on the purchase of goods in circumstances where no tax is levied under Section 5, and these goods are either consumed or dispatched outside the State. The court rejected the assessee's argument that since the miller is not liable to tax on the sale to the assessee, the tax under Section 6 is not applicable. The court held that the procurement agent is liable to pay tax when the goods are dispatched outside the State, as per Section 6 of the Act.

3. Deduction of Tax Paid on Levy-Paddy:

The third issue was whether the assessee is entitled to a deduction of tax paid on levy-paddy under the third proviso to Section 5(4) of the Act. The court acknowledged that the assessee is entitled to such a deduction if the tax has already been paid on the paddy. However, the court noted that the assessee did not make this claim before the assessing officer and only raised it before the first appellate authority. The court allowed the assessee the liberty to make a claim for a refund of the tax paid on the paddy sold to it, within five months from the date of receipt of the court's order. The assessing officer was directed to consider this claim on its merits, without raising any objection regarding the period of limitation.

Conclusion:

The court dismissed the petitions, upholding the orders of the lower authorities. The assessee was given the opportunity to claim a refund for the tax paid on levy-paddy, but this did not absolve the assessee from its liability to pay tax under Section 6 of the Act. The court emphasized that the procurement agent must comply with the assessment orders and make the necessary payments.