Sales tax measure must match the taxable sale, not a later retail price printed on the package.

Entry 54 of List II permits taxation of a completed sale as understood under the Sale of Goods Act, 1930, and the tax measure must retain a real nexus with that taxable event. The Rajasthan Sales Tax Act, 1994 could not validly measure tax on first-point wholesale sales by reference to the maximum retail price printed for a later retail sale, because that future transaction was distinct from the taxable first sale and not the wholesaler's consideration. The provision was therefore unsustainable to that extent and was read down or struck down in part, with partial relief granted and no refund ordered for tax already collected.

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Issues: Whether section 4A of the Rajasthan Sales Tax Act, 1994, to the extent it required tax on first point sale of notified goods to be measured with reference to the maximum retail price printed on the package, was within legislative competence under entry 54 of List II and whether such measure had a sufficient nexus with the taxable event of sale.

Analysis: The expression "tax on sale or purchase of goods" in entry 54 of List II was held to mean a completed sale as understood under the Sale of Goods Act, 1930, consisting of competent parties, mutual assent, transfer of property, and price in money paid or promised. The power to tax sale cannot be expanded by legal fiction so as to bring within the levy a future transaction that has not yet come into existence. While the Legislature may choose the point of levy and may adopt a machinery for collection, the measure applied to the taxable event must retain a real nexus with that very sale. The Court distinguished cases where price control or statutory fixation operated on the same sale transaction from the present situation, where the measure was linked to the maximum retail price of a later sale by the retailer to the consumer. That later retail price was neither the consideration received nor receivable by the wholesaler from the retailer on the taxable first sale. On the scheme of the Rajasthan Sales Tax Act, 1994 and the Drugs (Price Control) Order, 1995, the first sale by the wholesaler to the retailer was the taxable event, but the MRP reflected the subsequent retail transaction and could not be transplanted into the first sale as the measure of tax.

Conclusion: The impugned measure under section 4A was held invalid to the extent it applied MRP to first point sales by wholesalers to retailers; the challenge succeeded in part and the provision was read down / struck down to that extent in favour of the assessee.

Final Conclusion: The writ petition was disposed of by granting partial relief: tax already collected was not directed to be refunded, but the use of MRP as the measure for first point sales was not sustained.

Ratio Decidendi: For a tax on sale of goods, the measure must be referable to the completed sale that constitutes the taxable event and cannot be based on the value of a distinct future transaction that has not yet come into existence.

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