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TMI Blog1981 (3) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... 1802, 1803, 1804, & 1805 of 1975, - - - Dated:- 24-3-1981 - TULZAPURKAR V.D., VENKATARAMIAH E.S. AND AMARENDRA NATH SEN JJ. N. Nettar, Advocate, for the appellant. J. Ramamurthy and Miss R. Vaigai, Advocates, for the respondent in C.A. No. 1804 of 1975. -------------------------------------------------- The judgment of the Court was delivered by VENKATARAMIAH, J.- The question which arises for consideration in these appeals by certificate is whether the respondents (hereinafter referred to as "the assessees") are liable to pay purchase tax under section 6(i) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act"), on the turnover consisting of the price paid by them for purchasing paddy fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a revision petition in the last case. The High Court after holding that the turnovers in question were not liable to tax under section 6(i) of the Act dismissed the petitions filed by the State Government and allowed the petition of the assessee who is the respondent in Civil Appeal No. 1805 of 1975. Thereafter the High Court granted by a common order a certificate of fitness in all these cases to prefer appeals before this Court to the State Government. On the basis of the said certificate, these appeals have been filed by the State Government against the orders of the High Court. Since these appeals involve a common question of law, they are disposed of by this common judgment. The relevant part of section 6 of the Act reads: " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehusked and rice produced, its identity remained. It was true that rice was produced out of paddy but it is not true to say that paddy continued to be paddy even after dehusking. It had changed its identity. Rice is not known as paddy. It is a misnomer to call rice as paddy. They are two different things in ordinary parlance. Hence quite clearly when paddy is dehusked and rice produced, there has been a change in the identity of the goods." The above view has been followed by this Court in Babu Ram Jagdish Kumar Co. v. State of Punjab [1979] 44 S.T.C. 159 (S.C.). It is unfortunate that the High Court as well as the Tribunal have tried to distinguish the decision of this Court in Ganesh Trading Co.'s case [1973] 32 S.T.C. 623 (S.C.)., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... flour respectively in the course of their business. We have to understand the word "consumes" in section 6(i) of the Act in this economic sense. It may be interesting to note that this is the basis of the levy of "value added tax", popularly called as VAT, which is levied as an alternative to tax on turnover in some Western countries. The difference between "value added tax" and tax on the turnover of sales or purchases is explained by Professor Paul A. Samuelson in his book entitled "Economics" (Tenth Edition, 1976), at page 168 thus: "A turnover tax simply taxes every transaction made: wheat, flour, dough, bread. VAT is different because it does not include in the tax on the miller's flour that part of its value which came from the whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities and services produced as constitutes the 'utilization' thereof. For each commodity, there is ordinarily what is generally considered to be the final act of consumption. For some commodities, there may be even more than one kind of final consumption. Thus grapes may be 'finally consumed' by eating them as fruits; they may also be consumed by drinking the wine prepared from 'grapes'. Again, the final act of consumption may in some cases be spread over a considerable period of time. Books, articles of furniture and paintings may be mentioned as examples. It may even happen in such cases, that after one consumer has performed part of the final act of consumption, another portion of the final act of consumption may be performed by his heir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ended that since the assessees would be exposed to double taxation both as buyers of paddy and as sellers of rice we should hold that the levy in question is impermissible because paddy and rice are liable to be taxed at a single point. No provision is shown to us which bars such taxation when the commodities are different. In fact, in this case there is no double taxation on the same commodity. A similar contention was rejected by this Court in the case of Babu Ram Jagdish Kumar [1979] 44 S.T.C. 159 (S.C.)., thus: "We may at this stage refer to one other subsidiary argument urged on behalf of the appellants. It is argued that because paddy and rice are not different kinds of goods but one and the same, the inclusion of both paddy and ric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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