Purchase tax on last purchase point upheld as valid State levy, not a consignment tax

Section 4-B of the Punjab General Sales Tax Act was upheld as a valid purchase tax within State legislative competence under the constitutional allocation of taxing powers. The levy was characterised as tax on the purchase of goods, not a tax on consignment or branch transfer, because liability arose when the dealer became the last purchaser liable to tax in the State. The reasoning in Hotel Balaji was treated as disapproving the earlier contrary view in Goodyear, and Mukerian Papers was not accepted as controlling against validity. The provision was therefore held intra vires and the challenge failed.

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Issues: Whether section 4-B of the Punjab General Sales Tax Act, 1948 was beyond the legislative competence of the State Legislature and void as a levy on consignment or branch transfer of goods, or whether it validly imposed purchase tax on the last purchase point.

Analysis: The impugned provision was examined in the light of the constitutional allocation of taxing power under Entry 54 of List II and Entry 92B of List I. The challenge rested on the premise that the levy, in substance, taxed consignment of goods sent outside the State. The Court rejected that characterisation and held that the statutory scheme imposed tax on the purchase of goods, with liability arising when the dealer became the last dealer liable to tax within the State. The later decision in Hotel Balaji was treated as having disapproved the earlier contrary view in Goodyear, and the reasoning in Mukerian Papers was not accepted as controlling against the validity of section 4-B.

Conclusion: Section 4-B was held to be intra vires the Constitution, and the State Legislature was held competent to enact it.

Final Conclusion: The challenge to the purchase tax provision failed, and the levy was sustained as a valid exercise of State taxing power on purchase transactions rather than on consignment.

Ratio Decidendi: A provision imposing tax on the purchase of goods remains a valid purchase tax within State competence even if liability is triggered by the dealer's subsequent dispatch of the goods outside the State, so long as the levy is in substance on purchase and not on consignment.

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