Purchase tax on consumables and sugarcane: statutory conditions trigger liability at the purchase stage under Punjab sales tax law

Purchase tax applies to consumables bought on the strength of a registration certificate and used in manufacturing where the statutory conditions under section 4B are met, even if the goods go into both taxable and tax-free products. The text also states that sugarcane attracts purchase tax under section 4(1) when its sale is exempt, so tax is levied at the purchase stage. The discussion relies on the statutory scheme and prior Supreme Court guidance to explain that consumables used in manufacture and exempt agricultural produce can both fall within purchase tax liability.

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Issues: (i) Whether purchase tax was leviable under section 4B of the Punjab General Sales Tax Act, 1948 on consumables purchased on the strength of the registration certificate and used in the manufacture of taxable and tax-free goods. (ii) Whether purchase tax was leviable on sugarcane under section 4(1) of the Punjab General Sales Tax Act, 1948.

Issue (i): Whether purchase tax was leviable under section 4B of the Punjab General Sales Tax Act, 1948 on consumables purchased on the strength of the registration certificate and used in the manufacture of taxable and tax-free goods.

Analysis: Section 4B levies purchase tax where goods other than Schedule B goods are purchased and used within the State in the manufacture of goods, or otherwise dealt with in the specified manner, and no tax is payable under any other provision. The provision, as explained by the Supreme Court, is intended to tax the purchase of raw material or goods used in manufacture when the statutory conditions are satisfied. Consumables used in the manufacture of taxable and tax-free goods fall within that principle, and the earlier decision concerning fuel or ancillary goods not forming part of the end-product does not assist the assessee on these facts.

Conclusion: Purchase tax under section 4B was leviable on the consumables, and the finding was against the assessee.

Issue (ii): Whether purchase tax was leviable on sugarcane under section 4(1) of the Punjab General Sales Tax Act, 1948.

Analysis: The question was already settled by the Supreme Court, which held that section 4(1) covers levy of purchase tax where sale of the goods is exempt and the purchase is therefore taxable. Sugarcane, being agricultural produce sold by growers and exempt on sale, attracts purchase tax in the hands of the purchaser under section 4(1). The later Division Bench decision followed that binding declaration of law.

Conclusion: Purchase tax on sugarcane was leviable under section 4(1), and the finding was against the assessee.

Final Conclusion: Both referred questions were answered in favour of the Revenue, and the reference stood concluded accordingly.

Ratio Decidendi: Where goods purchased are used as consumables in the manufacture of goods and the statutory conditions of purchase tax are satisfied, purchase tax is attracted; separately, sugarcane exempt on sale is taxable at the purchase stage under section 4(1).

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