2022 (4) TMI 647 - HC - VAT and Sales Tax

Levy of purchase tax - equivalent paddy out of which rice obtained and sold to Project Director, World Food Programme - exemption as per Entry-30HH of List-a of the Schedule of rates under the OST Act - rice which is a notified first post goods - HELD THAT - The State Government has admittedly issued a Notification under Section 3-B subjecting paddy to 4% purchase tax. Entry 149 of the rate list appended to the OST Act specifies 4% tax on the sales of the rice permitting set off of the purchase tax paid on paddy against such sale. However, in the present case, the sale to the World Food Programme (WFP) Project falls under Entry 30HH of the Tax Free List, and therefore no such exemption would be sought for and made available to the Petitioner. The argument that no purchase tax can be levied on paddy does not impress the Court. There is no complete ban on the imposition of purchase tax. In fact Section 3-B expressly permits levy of purchase tax on certain classes of goods. The view taken by the Tribunal in the present case, which is in favour of the Department and against the Assessee, does not appear to suffer from any illegality - the purchase tax is indeed leviable on the equivalent paddy out of which rice was sold to WFP, which sales may be exempt under Entry 30HH of List-a of the Schedule of rates under the OST Act. Also, even though rice may be a notified first point goods being exempted by a notification under Section 6 of the OST Act, the equivalent paddy would still be exigible to purchase tax at 4%. Whether in the facts and circumstances of the case rice which is a notified first post goods being exempted by notification under Section 6 of the OST Act under Entry- 30HH of List-a whether paddy used as input is subject to levy of purchase tax? - HELD THAT - The amount involved being in substantial, the Court leaves the question open for consideration in some other appropriate case. The revision petition is disposed of.

Summary

Issues:
- Whether purchase tax is leviable on equivalent paddy out of which rice obtained and sold to World Food Programme under Entry-30HH of the OST Act?
- Whether paddy used as input for exempted rice sales is subject to levy of purchase tax?
- Whether levy of interest under Section 12(4-a) of the OST Act is lawful and valid?

Analysis:

Issue 1 & 2 - Purchase Tax on Paddy and Exempted Rice Sales:
The contention raised is that paddy, being a declared good, should not be subject to purchase tax as it is converted to rice for sales exempted under Entry 30HH of the OST Act. However, Section 3-B of the Act allows the State Government to declare goods liable to purchase tax, and paddy has been subjected to a 4% purchase tax through a notification. The Court rejects the argument that no purchase tax can be levied on paddy, citing previous rulings and the clear language of the law. The Tribunal's decision in favor of the Department is upheld, stating that purchase tax is indeed leviable on paddy, even if rice sales are exempt under Entry 30HH. Therefore, the purchase tax on paddy stands at 4%, irrespective of the exemption on rice sales.

Issue 3 - Validity of Interest Levy:
Regarding the levy of interest under Section 12(4-a) of the OST Act, the Court leaves this question open for consideration in a future case due to the substantial amount involved. No definitive ruling is provided on the lawfulness and validity of the interest levy at this stage, indicating that further examination may be required in a suitable case.

In conclusion, the revision petition is disposed of with the decision in favor of the Department on the issues of purchase tax on paddy and exempted rice sales. The Court leaves the question of the validity of interest levy under Section 12(4-a) open for future consideration, emphasizing the need for a more appropriate case to address this matter.