Purchase tax provisions upheld as valid charging-cum-remedial measures, not taxes on despatch of goods outside the State.

Section 4-B of the Punjab General Sales Tax Act, 1948 and section 9(1)(b) of the Haryana General Sales Tax Act, 1973 were construed as levying purchase tax on the purchase of taxable goods used in manufacture, not as an impermissible tax on later despatch or consignment outside the State. The provisions were treated as charging-cum-remedial measures designed to prevent tax evasion and were held intra vires under Entry 54 of List II; the earlier contrary view was overruled. The penalty notices under section 50 were also upheld because the penalty provision operated independently of the ultimate tax liability and the challenge on the pleaded ground failed.

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Issues: Whether section 4-B of the Punjab General Sales Tax Act, 1948 and section 9(1)(b) of the Haryana General Sales Tax Act, 1973 imposed a purchase tax on the act of purchase or an impermissible tax on despatch or consignment of goods outside the State; and whether the consequential challenge to the penalty notices under section 50 could succeed.

Issue (i): Whether section 4-B of the Punjab General Sales Tax Act, 1948 and section 9(1)(b) of the Haryana General Sales Tax Act, 1973 imposed a purchase tax on the act of purchase or an impermissible tax on despatch or consignment of goods outside the State.

Analysis: The provisions were examined in the background of earlier decisions on analogous sales tax enactments. The Court held that the true taxing event was the purchase of taxable goods used in manufacture, not the later despatch of manufactured goods outside the State. The relevant provisions were treated as both charging and remedial in character, intended to prevent evasion and plug leakage of tax. A construction that preserved their workability and kept them within the State's competence under Entry 54 of List II was preferred over the narrower view adopted in the earlier Division Bench ruling.

Conclusion: The provisions levied purchase tax and were intra vires. The earlier contrary view was overruled.

Issue (ii): Whether the challenge to the penalty notices under section 50 could succeed.

Analysis: The penalty provision was held to operate independently of the ultimate liability to purchase tax, because it attached to misuse of goods purchased without payment of tax contrary to the registration certificate. Once the substantive levy was upheld, the notices could not be treated as illegal on the ground pressed by the petitioners.

Conclusion: The penalty notices were not invalid on the ground urged.

Final Conclusion: The Full Bench upheld the impugned purchase-tax provisions, rejected the challenge founded on the earlier contrary decision, and dismissed the writ petitions, leaving only the separately listed matters to await the connected decision.

Ratio Decidendi: Where a purchase-tax provision is aimed at the purchase of taxable goods and is enacted to prevent tax evasion, it is to be construed as a valid charging-cum-remedial measure within the State's legislative field, and not as a tax on mere despatch or consignment of goods outside the State.

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