Purchase tax liability arises only on despatch outside the State; penalty and interest fail with the invalid levy.

Purchase tax under section 4-B of the Punjab General Sales Tax Act, 1948 was held to arise only when manufactured goods were despatched outside the State, not on the purchase or use of raw material in manufacture. The charging provision was read according to its plain language and statutory context, making the despatch event the taxable trigger. Because the underlying levy failed, consequential penalty and interest could not be sustained and were set aside. The appeals were allowed, the Tribunal's orders were set aside, and the recovery and ancillary demands fell with the invalid tax demand.

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Issues: (i) whether purchase tax under section 4-B of the Punjab General Sales Tax Act, 1948 became payable on the purchase or use of raw material, or only when the manufactured goods were despatched outside the State; (ii) whether penalty and interest could be levied when the underlying tax demand failed.

Issue (i): whether purchase tax under section 4-B of the Punjab General Sales Tax Act, 1948 became payable on the purchase or use of raw material, or only when the manufactured goods were despatched outside the State.

Analysis: The charging provision was construed according to its plain language and statutory context. The liability under section 4-B attached only when the dealer purchased goods other than those in Schedule B, used them in manufacture, and then sent the manufactured goods outside the State otherwise than by inter-State sale or export. The taxable event was therefore the despatch of the manufactured goods outside the State, not the earlier purchase of raw material or its consumption in manufacture. The Court treated the levy, in substance, as one connected with consignment of goods, and applied the governing precedent which had explained the point of time at which such liability arises.

Conclusion: The tax became exigible only on despatch outside the State, and the assessee succeeded on the main levy issue.

Issue (ii): whether penalty and interest could be levied when the underlying tax demand failed.

Analysis: Once the demand of purchase tax was found unsustainable, there was no foundation for consequential penal action or interest on the alleged unpaid amount. The powers invoked for recovery and ancillary consequences could not survive independently of a valid tax liability.

Conclusion: The penalty and interest could not be sustained and were set aside.

Final Conclusion: The appeals were allowed, the orders of the Sales Tax Tribunal were set aside, and the consequential recovery and ancillary demands fell with the invalid tax levy.

Ratio Decidendi: Under section 4-B, liability to purchase tax arises only on the statutory despatch event specified in the provision, and consequential penalty or interest cannot be imposed where the underlying levy is not sustainable.

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