Purchase tax on declared goods fails single-stage limit where sales tax is also levied, but levy otherwise stays within state competence.

A purchase tax on goods used in manufacture and later transferred outside the State remained within the State sales tax entry because the taxable event was the purchase, not the subsequent despatch or consignment, so the levy was not beyond legislative competence. For declared goods, however, the State could tax only once at a single identifiable stage, and imposing purchase tax in addition to sales tax on the same goods, with the enhanced burden after 1 April 1983, breached the section 15(a) restriction and the constitutional limit on declared goods to that extent. The levy was not otherwise invalid under articles 14, 19(1)(g) or 301. Relief was limited to adjustment against tax on declared goods already subjected to sales tax.

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Issues: (i) Whether the impugned purchase tax on goods used in manufacture and later transferred outside the State was a consignment or despatch tax beyond the State Legislature's competence, or a valid purchase tax under the State sales tax entry. (ii) Whether levy of both sales tax and purchase tax on declared goods at the same stage, and the enhanced burden after 1 April 1983, violated article 286(3) of the Constitution and section 15(a) of the Central Sales Tax Act, 1956. (iii) Whether the impugned levy was invalid under articles 14, 19(1)(g) and 301 of the Constitution of India.

Issue (i): Whether the impugned purchase tax on goods used in manufacture and later transferred outside the State was a consignment or despatch tax beyond the State Legislature's competence, or a valid purchase tax under the State sales tax entry.

Analysis: The taxable event was the purchase of goods, not the later transfer or despatch of manufactured products. The levy was attracted only when the purchaser, after availing concessional purchase or sales tax on an undertaking as to intended use and disposal, ultimately disposed of the goods or products contrary to that declaration. On that construction, the levy retained the character of a purchase tax and did not become a tax on consignment or despatch. The State Legislature's power under the relevant sales tax entry was therefore not exceeded.

Conclusion: The levy was held to be a purchase tax and not a consignment or despatch tax; this contention failed.

Issue (ii): Whether levy of both sales tax and purchase tax on declared goods at the same stage, and the enhanced burden after 1 April 1983, violated article 286(3) of the Constitution and section 15(a) of the Central Sales Tax Act, 1956.

Analysis: Declared goods enjoy a statutory restriction that tax can be imposed only at a single ascertainable stage. Sale and purchase may be different aspects of the same transaction, but they are separate stages for the purpose of section 15(a). The State could choose only one of those stages for taxation in respect of declared goods. Since the impugned provisions imposed purchase tax in addition to sales tax on the same declared goods, the levy offended the single-stage restriction. The increased rate from 1 April 1983 also pushed the aggregate burden beyond the permissible ceiling. The levy was therefore unsustainable in respect of declared goods, though the provisions were not struck down wholesale because they applied to other goods as well.

Conclusion: The levy of purchase tax on declared goods was held invalid to that extent and could not be collected so long as sales tax was also levied on those goods.

Issue (iii): Whether the impugned levy was invalid under articles 14, 19(1)(g) and 301 of the Constitution of India.

Analysis: The classification between manufacturers who sell within the State and those who dispose of goods otherwise than by sale or transfer them outside the State had a rational basis and a direct nexus with the object of the statute. The levy did not directly and immediately restrain trade or commerce, nor did it unreasonably infringe the right to carry on business.

Conclusion: The challenges under articles 14, 19(1)(g) and 301 were rejected.

Final Conclusion: Relief was granted only to the extent that purchase tax could not be levied or collected on declared goods while sales tax continued to be levied on those goods, and completed and pending assessments were to be adjusted accordingly.

Ratio Decidendi: For declared goods, the State may tax only once at a single identifiable stage of sale or purchase, and a levy that combines both at the same stage or exceeds the statutory ceiling is invalid to that extent.

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