Purchase tax under a general charging provision can apply to taxable goods even when a particular sale is not taxed.

Section 7-A of the Madras General Sales Tax Act, 1959 was construed as an independent purchase-tax charging provision meant to prevent leakage and evasion. The phrase "goods, the sale or purchase of which is liable to tax under this Act" was held to refer to taxable goods generally exigible to tax, even where a particular sale is not taxed because of the seller's status or transaction circumstances. Goods exempted from tax altogether fall outside the provision, but ordinarily taxable goods can attract purchase tax when the statutory conditions are met. On that construction, section 7-A applied to the purchases in question and the purchase tax proceedings were sustained.

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Issues: Whether section 7-A of the Madras General Sales Tax Act, 1959 applies to purchases of taxable goods made in circumstances in which no tax is payable under sections 3, 4 or 5, where the purchaser consumes the goods in manufacture or otherwise disposes of them or despatches them outside the State.

Analysis: Section 7-A was construed as an independent charging provision intended to plug leakage and prevent evasion. The expression "goods, the sale or purchase of which is liable to tax under this Act" was held to mean taxable goods, that is, goods of a kind generally exigible to tax, even though a particular sale may not itself bear tax because of the status of the seller or the circumstances of the transaction. The Court distinguished taxable goods from the taxable event and the taxable person, and held that the two requirements in the section were not inconsistent. Goods exempted from tax altogether were outside the provision, but goods ordinarily taxable under the Act could still attract purchase tax if the statutory conditions were satisfied. The reasoning adopted in the comparable Madhya Pradesh and Kerala provisions supported this construction.

Conclusion: Section 7-A was held applicable on the facts to the purchases in question, and the challenge to the purchase tax proceedings failed.

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