Purchase tax under Section 7A cannot be levied on a buyer merely because the seller failed to remit otherwise payable tax.

Purchase tax under Section 7A of the Tamil Nadu General Sales Tax Act, 1959 was held not to arise merely because the seller failed to remit tax on a sale that was otherwise taxable. The court treated Section 7A as a separate charging provision applicable only where the purchase is made in circumstances in which no tax is legally payable on the sale. Because the vendors' sales were taxable and the purchaser had already used the goods in manufacture and paid tax on the finished products, the Revenue had to proceed against the vendors rather than fasten purchase tax on the buyer. The levy on the purchaser was therefore unsustainable and the assessment could not stand.

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Issues: Whether purchase tax under Section 7A of the Tamil Nadu General Sales Tax Act, 1959 could be levied on the buyer merely because the seller did not remit tax on a sale that was otherwise liable to tax.

Analysis: Section 7A is a separate charging provision and applies only where the purchase is made in circumstances in which no tax is payable. The expression "no tax is payable" does not include a transaction where tax is legally payable on the sale but has not been remitted by the seller. On the facts, the vendors' sales were liable to tax in their hands under the Act, and the buyer had already used the goods in manufacture and discharged tax on the finished products. The proper course, if the vendors failed to pay tax, was for the Revenue to proceed against the vendors rather than fasten purchase tax on the purchaser. The impugned order had therefore proceeded on an incorrect understanding of the charging provision.

Conclusion: Purchase tax under Section 7A was not attracted merely because the seller failed to remit tax on a sale that was otherwise taxable, and the levy on the buyer was unsustainable.

Final Conclusion: The assessment based on purchase tax could not stand, and the writ petitions succeeded by setting aside the Tribunal's order.

Ratio Decidendi: Purchase tax under Section 7A of the Tamil Nadu General Sales Tax Act, 1959 can be levied only when the purchase is made in circumstances in which no tax is legally payable on the sale, not merely when the seller defaults in remitting tax that was otherwise payable.

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