Fiscal classification and dealer status upheld, but purchase tax failed because construction materials were not consumed in manufacture for sale.

Section 6-A of the Andhra Pradesh General Sales Tax Act was not unconstitutional under article 14, because the distinction between purchases from registered and unregistered dealers was a rational fiscal classification aimed at tax collection and anti-evasion. Builders purchasing materials for constructing flats were treated as dealers, since the statutory definition covers business purchases and activities incidental to the main commercial venture. However, section 6-A(ii)(a) applied only where the purchased goods were consumed in the manufacture of other goods for sale; use of those goods in construction of flats did not satisfy that condition. The impugned assessment notices were therefore unsustainable and were quashed.

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Issues: (i) Whether section 6-A of the Andhra Pradesh General Sales Tax Act, 1957 was violative of article 14 of the Constitution of India on the ground of discriminatory treatment between purchases from registered dealers and purchases from unregistered dealers; (ii) Whether the petitioners, being builders purchasing materials for construction of flats, were "dealers" within section 2(1)(e) of the Andhra Pradesh General Sales Tax Act, 1957 read with section 2(1)(bbb)(ii); (iii) Whether section 6-A(ii)(a) could be invoked where the purchased goods were used in construction of flats and not consumed in the manufacture of other goods for sale.

Issue (i): Whether section 6-A of the Andhra Pradesh General Sales Tax Act, 1957 was violative of article 14 of the Constitution of India on the ground of discriminatory treatment between purchases from registered dealers and purchases from unregistered dealers.

Analysis: The differentiation between purchases from registered dealers and persons other than registered dealers was held to bear a rational relation to the object of tax collection and prevention of evasion. The classification was treated as a permissible one in fiscal legislation, where legislative discretion is wider, and the provision had already been upheld in prior binding reasoning.

Conclusion: The challenge under article 14 failed and section 6-A was not unconstitutional on that ground.

Issue (ii): Whether the petitioners, being builders purchasing materials for construction of flats, were "dealers" within section 2(1)(e) of the Andhra Pradesh General Sales Tax Act, 1957 read with section 2(1)(bbb)(ii).

Analysis: A person need not both buy and sell the same goods to answer the definition of dealer. A person who purchases goods in the course of business is also a dealer, and business includes transactions incidental or ancillary to the main commercial activity. Purchases of sand, bricks, gravel and similar materials in connection with the business of constructing and selling flats brought the petitioners within the statutory definition.

Conclusion: The petitioners were dealers within the meaning of the Act.

Issue (iii): Whether section 6-A(ii)(a) could be invoked where the purchased goods were used in construction of flats and not consumed in the manufacture of other goods for sale.

Analysis: The language of section 6-A(ii)(a) was read as requiring consumption of the original goods in the manufacture of other goods for sale, and not merely use otherwise. Faced with conflicting Supreme Court decisions on the scope of the identical expression, the later view was preferred. Since the materials purchased by the petitioners were used only in construction of flats and not in manufacturing other goods, the statutory condition for levy was absent.

Conclusion: Section 6-A(ii)(a) was not attracted and the petitioners were not liable to tax on the impugned purchases.

Final Conclusion: The notices issued for assessment could not be sustained, and the writ petitions succeeded with quashing of the impugned notices.

Ratio Decidendi: For levy under section 6-A(ii)(a), the purchased goods must be consumed in the manufacture of other goods for sale; mere use of the goods in construction or any non-manufacturing activity does not attract the charging provision.

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