Purchase tax on last sale upheld despite outward despatch of goods; provisions were treated as valid State legislation.

Sections 5, 5A and 8 of the Kerala General Sales Tax Act, 1963 were upheld as valid purchase-tax provisions. The levy on pepper was treated as tax on last purchase turnover, not as a tax on consignment or inter-State despatch. Section 5A was construed as fastening liability where goods purchased without earlier tax were consumed, otherwise disposed of, or despatched outside the State, except where the despatch was a direct result of inter-State trade or commerce. Applying entry 54 of List II and the doctrine of pith and substance, the provisions were held to be within State legislative competence and only incidentally operative on goods moved outside the State.

---

---

Issues: Whether sections 5, 5A and 8 of the Kerala General Sales Tax Act, 1963 were unconstitutional or beyond the legislative competence of the State so far as they subjected the petitioner's purchases of pepper to tax when the goods were despatched outside the State.

Analysis: The levy was upheld as a tax on purchase turnover and not as a tax on consignment. Under section 5, pepper was taxable at the last purchase point, and section 5A fastened liability where goods purchased but not taxed at an earlier stage were consumed, otherwise disposed of, or despatched outside the State except as a direct result of inter-State trade or commerce. Section 8 merely fixed the stage at which the series of sales or purchases concluded for goods exported outside the State. The earlier Kerala decisions construing section 5A, and the Supreme Court decision approving that construction, were followed. The later decision concerning tax on despatch of manufactured goods after manufacture was distinguished as turning on a different taxable event. Applying entry 54 of List II and the doctrine of pith and substance, the provisions were treated as legislation on sale or purchase tax with ancillary and incidental operation, and not as an impermissible tax on inter-State consignment.

Conclusion: The challenge to the constitutional validity of sections 5, 5A and 8 failed. The levy on the petitioner's purchase turnover as last purchase tax was valid and the objection based on consignment tax was rejected.

Ratio Decidendi: Where a statute genuinely imposes purchase tax on goods which become liable at the last purchase point and merely fixes the stage of taxability for goods despatched outside the State, it remains within the State's legislative competence under entry 54 of List II and is not invalid as a tax on consignment or inter-State despatch.

---