Intra-State purchase tax on untanned hides and skins upheld where later movement outside the State did not create an inter-State sale.

Purchases of untanned hides and skins completed in Andhra Pradesh were not inter-State sales merely because the goods were later moved to Madras by the buyer's branch or agent; section 3 of the Central Sales Tax Act requires the sale itself to occasion the movement, and that condition was absent. Raw hides and skins were treated as "consumed" in the tanning process because they were used as raw material to produce a commercially distinct commodity, tanned leather. Under section 6 read with item 6 of Schedule IV to the Andhra Pradesh General Sales Tax Act, untanned hides and skins purchased by a tanner within the State were taxable at the point of purchase, so the purchase tax was valid.

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Issues: (i) Whether the purchases of untanned hides and skins occasioned movement of goods from Andhra Pradesh to Madras so as to constitute inter-State sales or purchases under section 3 of the Central Sales Tax Act, 1956. (ii) Whether raw hides and skins could be treated as articles fit for consumption for the purpose of levy of sales tax. (iii) Whether untanned hides and skins were taxable at the point of purchase under section 6 read with item 6 of Schedule IV to the Andhra Pradesh General Sales Tax Act, 1957.

Issue (i): Whether the purchases of untanned hides and skins occasioned movement of goods from Andhra Pradesh to Madras so as to constitute inter-State sales or purchases under section 3 of the Central Sales Tax Act, 1956.

Analysis: The decisive test was whether the sale or purchase itself occasioned the movement of goods from one State to another. The transactions were found to have been completed within Andhra Pradesh, after which the goods were moved to Madras by the purchasing branch or the purchasing agent. A completed intra-State transaction followed by subsequent movement does not satisfy section 3(a). The facts were treated as comparable to earlier decisions holding that a sale completed within the State is not converted into an inter-State transaction merely because the goods are later transported outside the State.

Conclusion: The transactions were not inter-State sales or purchases. This issue was decided against the petitioners and in favour of the Revenue.

Issue (ii): Whether raw hides and skins could be treated as articles fit for consumption for the purpose of levy of sales tax.

Analysis: The expression "consumption" was applied in the sense of use in the process of production. Raw hides and skins, though not final consumer goods in their untanned form, are consumed by a tanner as raw material in the process of tanning, which yields a commercially distinct product, namely tanned leather. The process of converting one commercial commodity into another was treated as consumption within the legal sense relevant to the tax law.

Conclusion: Raw hides and skins were articles fit for consumption in the tanning process. This issue was decided against the petitioners and in favour of the Revenue.

Issue (iii): Whether untanned hides and skins were taxable at the point of purchase under section 6 read with item 6 of Schedule IV to the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: Section 6 expressly subjected declared goods to tax only at the rate and point specified in the Fourth Schedule. Item 6 specifically provided that untanned hides and skins purchased by a tanner in the State were taxable at the point of purchase by the tanner. The petitioners' contention that the tax could not be levied on them as purchasers was rejected because the statutory scheme directly fastened liability on the purchaser-tanner where the purchase was made within the State.

Conclusion: The purchase tax was validly leviable on the petitioners at the point of purchase. This issue was decided against the petitioners and in favour of the Revenue.

Final Conclusion: The statutory levy on the intra-State purchase of untanned hides and skins by the tanner was upheld, and the petitions failed on all the contentions urged.

Ratio Decidendi: A purchase is not inter-State merely because the goods are later moved to another State after the transaction is completed, and where the statute specifically levies tax on untanned hides and skins at the point of purchase by the tanner, such levy is valid.

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