Purchase tax on taxable transactions remains valid even when liability is triggered by later use in manufacture.

Section 6 of the Karnataka Sales Tax Act, 1957 was construed as a purchase tax provision fastening liability on the taxable purchase transaction, with liability arising only where goods were purchased in the course of business and later used or dealt with in the manner specified by the section. The levy was held not to be on manufacture itself and therefore did not encroach on the Union field of excise under Entry 84 of List I. It was instead within the State's competence to tax purchases under Entry 54 of List II. The constitutional challenge failed and the provision was upheld.

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Issues: Whether section 6 of the Karnataka Sales Tax Act, 1957, which imposes purchase tax in specified circumstances, is unconstitutional as being in substance a levy of excise duty beyond the State Legislature's competence.

Analysis: Section 6 was construed as fastening liability on the transaction of purchase, and the liability arose only where a dealer purchased taxable goods in the course of business under circumstances in which no tax was leviable under section 5 and thereafter used or dealt with the goods in the manner specified by the provision. The levy was held not to be on manufacture as such, but on the purchase transaction connected with business. On that construction, the provision did not trench upon the field of excise under Entry 84 of List I and remained within the State's power to tax purchases under Entry 54 of List II.

Conclusion: Section 6 was upheld as constitutionally valid, and the challenge to the levy failed.

Ratio Decidendi: A purchase tax provision that attaches liability to the taxable purchase transaction, even when liability is triggered by subsequent use of the goods in manufacture for sale, remains within the State's legislative competence and does not become an excise levy merely because manufacture is one of the triggering circumstances.

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