TMI Blog2004 (4) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... and 4333-4337 of 2003, - - - Dated:- 13-4-2004 - RUMA PAL AND KAPADIA S.H. JJ. D.A. Dave, S. Ganesh and P.P. Rao, Senior Advocates. S.P. Chauhan, Amit Gupta, Mrs. Santosh Gupta, Sarva Mitter, S.P. Singh Chauhan, O.P. Goyal, Sushendra Kumar Chauhan, Ravi Prakash Gupta, R.C. Kaushik, Ujjal Singh, J.P. Singh, Mahabir Singh, Ramesh Dahiya, Ms. Madhusumita Bora, Nikhil Jain, Gagandeep Sharma, Ms. Mahalakshmi Parani, G. Balaji, A. Sumanth, Neeraj Kumar Jain, Ms. Kavita Wadia and Vinay Kumar Grag, Other Advocates. -------------------------------------------------- The judgment of the Court was delivered by S.H. KAPADIA, J. -Leave granted. 2.. These civil appeals by special leave involve common question of law as to whether the State has power and competency to levy tax on paddy, purchased by the miller for sale of rice to the exporter, in view of section 5(3) read with section 15(ca) of the Central Sales Tax Act, 1956 (hereinafter referred to as "the 1956 Act"). 3.. For the sake of convenience, we may refer to the facts of Civil Appeal Nos. 3674-3710 of 2002. Appellant is the miller. It produces paddy, processes it and sells rice to the exporter who expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d single point levy of tax for declared goods. These are in-built in sections 6 and 17 read with Schedule D to the 1973 Act. For sake of convenience, we quote hereinbelow sections 5 and 15 of the 1956 Act along with sections 6 and 17 read with Schedule D of the 1973 Act: Sections 5 and 15 of the 1956 Act: "Section 5. When is a sale or purchase of goods said to take place in the course of import or export.-(1) A sale or purchase of goods shall be deemed to take place in the course of the export of the goods out of the territory of India only if the sale or purchase either occasions such export or is effected by a transfer of documents of title to the goods after the goods have crossed the customs frontiers of India. (2) A sale or purchase of goods shall be deemed to take place in the course of the import of the goods into the territory of India only if the sale or purchase either occasions such import or is effected by a transfer of documents of title to the goods before the goods have crossed the customs frontiers of India. (3) Notwithstanding anything contained in sub-section (1), the last sale or purchase of any goods preceding the sale or purchase occasioning the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxable quantum, shall from the 27th day of May, 1971 and every other dealer shall, on the expiry of thirty days after the date on which his gross turnover first exceeds the taxable quantum, be liable to pay tax under this Act on the sale or purchase of goods by him in the State at the stage hereinafter provided,- (a) on declared goods at the stage specified under section 17; (b) on goods notified under section 18 at the stage of first sale as specified under that section; (c) on all other goods at the stage of,- (i) last sale when the goods are sold to any person other than a registered dealer who furnishes declaration as specified under section 27 or as notified under section 13 or as prescribed under section 13B of this Act; (ii) last purchase in all other cases except when the purchase is made on payment of tax: Provided that this sub-section shall not apply to a dealer who deals exclusively in goods specified in Schedule B or who executes a sub-contract with a contractor who is liable to pay tax in respect of the works contract of which the sub-contract is a part: Provided further that in the case of a dealer,- (a) who imports any goods for sale or for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of three consecutive years during each of which his gross turnover has failed to exceed the taxable quantum and such further period after the date of such expiry, as may be prescribed, and on the expiry of this latter period his liability to pay tax shall cease. (4) Every dealer, whose liability to pay tax has ceased under the provisions of sub-section (3), shall again be liable to pay tax under this Act in accordance with the provisions of sub-section (2). (5) Notwithstanding anything to the contrary contained in this Act or any other law or judgment or order of any court or authority in respect of cases relating to assessments for the period from the 7th September, 1955 up to the commencement of this Act, every dealer who was assessed under the Punjab General Sales Tax Act, 1948, shall be deemed to have been assessed under this Act as if this Act was in force during the said period. Section 17. Tax on declared goods.-Tax on declared goods shall be leviable and payable at the stage of sale or purchase, as the case may be, and under the circumstances specified against such goods in Schedule D: Provided that where the goods have not been subjected to tax at any of the stag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oming to the question of single point tax, it is important to bear in mind that in law every transaction has two ends- sale end and purchase end. Section 14 of the 1956 Act enumerates declared goods including paddy and rice. It does not impose any liability. Section 15(a) of the 1956 Act, as it stood at the relevant time, makes it mandatory for the State to tax either the sale point or the purchase point. Accordingly, under sections 6 and 17 read with Schedule D of the 1973 Act, a single point tax is levied on rice and paddy separately provided there is sale and purchase of identical goods. Section 15(c) of the 1956 Act, inter alia, provides for adjustment/set-off of tax paid on paddy against tax paid on rice procured therefrom. To the same effect are the provisions in section 15, proviso (iii), 15-A and 27 of the 1973 Act. Hence, the Legislature had all along treated rice and paddy as two separate taxable items for all purposes till September 28, 1996 when clause (ca) was introduced to get over the effect of the judgment of the High Court in the case of United Riceland Limited v. State of Haryana reported in [1997] 104 STC 362 (P H) [FB]. In that case, it was held that paddy and r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that although the penultimate sale was not liable to tax in terms of section 5(3) of the 1956, the exporter had to pay purchase tax on purchase of paddy under the 1973 Act. Consequently, rice exported from India lost its competitive edge as its export became costlier in the international market as compared to rice exports from neighbouring countries. In the circumstances, clause (ca) was inserted in section 15 on September 28, 1996 under which paddy and rice were made taxable at one stage so that purchase of paddy could be exempted from tax under the local law thereby enabling the exporter to reduce the cost of export. It was contended that today we live in the age of globalisation where revenue from exports held the national economy and, therefore, this Court should read the above provisions in the widest possible terms keeping in mind the global competition in the world market. It was submitted that purchases and sales are two sides of the same coin and where such purchases and sales have been made prior to and not subsequent to placement of export orders by the foreign buyer, such transactions should get benefit of exemption under section 5(3) read with section 15(ca) of the 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n these civil appeals is: whether purchase of paddy by the appellant (miller), who procures rice from it and sells the rice to the exporter is a purchase which occasions export or is it a purchase for export. Section 5(1) of the 1956 Act exempts export sales. There are three categories of sales, namely, local sale, inter-State sale and export sale. Section 5(1), therefore, covers direct export whereas section 5(3) covers last sale or purchase preceding direct export which is deemed to be in the course of export. The last sale or purchase preceding the direct export is deemed to be in the course of export as the two are so closely connected that breach of one may result in breach of the composite contract. It is for this reason that section 5(3), inter alia, requires such sale or purchase transaction being entered into after and in compliance with the export order being placed by the foreign buyer. The underlying rationale of section 5(3) is that such penultimate sale or purchase must occasion export in order to constitute sale or purchase in the course of export. Section 5(3) does not cover the penultimate transaction which occasions sale in the local market, nor does it cover sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act provides for a limited deeming fiction attached to purchased commodity, namely, paddy purchased by the miller-cum-exporter. In the present matter, we are concerned with levy of purchase tax under section 17 read with Schedule D of the 1973 Act. Schedule D was introduced by notification dated August 1, 1988 in line with the provisions of section 5(3) of the 1956 Act, which as stated above, defines last sale or purchase preceding export sale, as sale or purchase in the course of export. Schedule D refers to levy of tax on "last purchase", an expression which is borrowed from section 5(3) of the 1956 Act. Schedule D of the 1973 Act is, therefore, in-conformity with the provisions of section 5 of the 1956 Act. So read, it is clear that the words "last purchase" in Schedule D connotes purchase which occasions export and not purchase of paddy for export. In the case of Hotel Balaji v. State of Andhra Pradesh reported in See [1993] 88 STC 98 (SC). (1993) Supp. 4 SCC 536 this Court has observed that it is difficult to define the words "last purchase " except with reference to the mode of the use of the purchased goods subsequent to that purchase and in that sense levy can be crystall ..... 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