G.K. Misra, C.J.
1. Mr. Mohanty at the opening of the case made it absolutely clear that in this writ application he does not challenge the order refusing to give stay, or any order of assessment which will be gone into by the appropriate authorities.
2. The only point canvassed in this writ application is that the amendment introduced into Rule 27(3) of the Orissa Sales Tax Rules, 1947, on 26th of March, 1963, by Notification No. 10751-F. is ultra vires Section 5(2)(A)(d)(i) of the Orissa Sales Tax Act, 1947 (hereinafter referred to as the Act). To appreciate this contention, these two provisions may be extracted. Section 5(2)(A)(d)(i), as it stood during the relevant period, is :
5. (2)(A) In this Act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom:
(d)(i) purchases from a registered dealer of goods declared by the State Government under Section 3-B.
Section 3-B enumerates goods liable to purchase tax. It says :
The State Government may, from time to time by notification, declare any goods or class of goods to be liable to tax on turnover of purchases :
Provided that no tax shall be payable on the sales of such goods or class of goods declared under this section.
Thus, Section 5(2)(A)(d)(i) read with Section 3-B insists that the purchasing dealer shall deduct from the taxable turnover goods declared by the State Government under Section 3-B provided he proves that he purchased the same from a registered dealer. The goods in this case constitute rice which was at the relevant time liable to purchase tax. There is no dispute over that point. In order to get deduction, the only other thing the dealer has to prove is that he purchased the rice from a registered dealer.
3. The impugned addition to Rule 27(3) is to the effect :
Provided the selling registered dealer has paid or is liable to pay purchase tax on the goods covered by the cash receipt or bill.
The validity of the residual portion of Rule 27(3) is not questioned before us. Mr. Mohanty contends that the proviso puts a further burden on the purchasing dealer to establish that the selling registered dealer has either paid the tax or was liable to pay purchase tax in respect of the goods which the purchasing dealer purchased from the selling dealer. This contention appears to be well founded. The rule goes beyond the provisions of the Act and imposes a condition not postulated by the Act. On this simple ground this proviso must be declared ultra vires the Act.
4. The matter may be examined from another point of view. The scheme of the Act is single point taxation. In the case of a purchase tax, the tax is ordinarily realised from the first purchaser but if the second purchaser purchases from the first purchaser who is a registered dealer and the article comes within the ambit of Section 3-B, then the second purchaser is entitled to deduction from his taxable turnover. The process may go on in this manner and ultimately the same article may be purchased by the hundredth man without paying the purchase tax. The proviso puts the burden on the purchasing dealer to establish that either all or any of the earlier purchasers had paid the tax or at any rate had the liability to pay tax. This is a very heavy burden and could not be introduced by a rule when the Act does not intend to impose such a burden. It is open to the Legislature to introduce such a clause in the Act itself. We are told that the same has been done by the amending Act 15 of 1968.
5. On the aforesaid analysis, we are clearly of opinion that the impugned proviso is ultra vires the Act and is liable to be quashed.
6. We accordingly issue a writ. The application is allowed but in the circumstances there will be no order as to costs.