State purchase tax on raw material upheld where levy targeted last intra-State purchase, not despatch of manufactured goods.

State purchase tax provisions on goods used in manufacture and later despatched outside the State were upheld as within legislative competence. The Court treated the Punjab, Kerala, Tamil Nadu, West Bengal and Maharashtra enactments as materially similar to provisions earlier sustained in Hotel Balaji, held that Goodyear was not the correct statement of law, and found no conflict in Mukerian Papers warranting a larger reference. It ruled that the levy was directed at the last purchase of raw material within the State, not at the despatch of manufactured goods, and accordingly sustained the validity of the impugned and amended provisions.

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Issues: Whether the impugned State sales tax provisions levying purchase tax on goods used in manufacture and thereafter despatched or transferred outside the State were beyond the legislative competence of the State Legislatures.

Analysis: The challenged provisions in the Punjab, Kerala, Tamil Nadu, West Bengal and Maharashtra enactments were materially similar to the provisions earlier upheld in Hotel Balaji. The Court held that the reasoning in Goodyear did not represent the correct view of law and that Mukerian Papers did not create any conflict requiring a larger reference. It further held that the impugned provisions were intended to levy purchase tax on the last purchase of raw material within the State and not a tax on the despatch of manufactured goods as such. On that basis, the Court sustained the validity of the Punjab, Kerala, Tamil Nadu, West Bengal and Maharashtra provisions, including the amended and substituted West Bengal and Maharashtra provisions.

Conclusion: The constitutional challenge failed, and the impugned purchase tax provisions were held to be valid and within legislative competence.

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