- (1.) The question in issue in this appeal is as to who is liable to pay purchase tax under the U.P. Sales Tax Act, 1948. Explanation II to Sec. 3-D of the Act provides as: "Explanation II.-For the purposes of this sub-section, in relation to purchase of foodgrains in pursuance of any order made u/s. 3 of the Essential Commodities Act, 1955 , including any purchase in excess of the levy share, the purchase first made by a dealer from the State Government or its purchasing agent shall be the first purchase of such foodgrains and the tax shall accordingly be levied at that point on such dealer."
(2.) The Explanation was construed in a decision of the High Court in Rajendra Flour & Allied Industries (P) Ltd. V/s. State of U.P. in which it was held that unless it was established that the purchasers of foodgrains by the Regional Food Controller were in pursuance of any order made u/s. 3 of the Essential Commodities Act, 1955 , the purchasers from the Regional Food Controller would not be treated as a first purchaser and the Regional Food Controller would be liable to issue Form III-C(2) to the roller flour mills certifying in respect of the wheat sold by it to the roller flour mills.
(3.) In this case the Regional Food Controller, Varanasi had sold rejected wheat to the respondent Flour Mills. The appellant sought to levy purchase tax on the respondent on the ground that the respondents were the first purchaser of the rejected wheat. It was contended by the appellant that by virtue of Explanation II to Sec. 3-D of the Act, the respondents were deemed to be the first purchasers of the wheat. The High Court negatived this contention following the decision in Rajendra Flour Mills & Allied Industries (P) Ltd. The High Court directed the Regional Food Controller at Varanasi and Regional Food Controller, Moradabad to issue the requisite certificates in Form III-C(2) to the respondents for the wheat sold by them to the assessees for the financial years 1982-83 and 1983-84.;