TaxTMI 
TaxTMI 
1992 (10) TMI 240
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.....P. (Civil) No. 8359, W.P. (Civil) No. 8360, W.P. (Civil) No. 8361, W.P. (Civil) No. 8362, W.P. (Civil) No. 8363, W.P. (Civil) No. 8364, W.P. (Civil) No. 8365, W.P. (Civil) No. 8366, W.P. (Civil) No. 8367, W.P. (Civil) No. 8368, W.P. (Civil) No. 9610, W.P. (Civil) No. 9611, W.P. (Civil) No. 9612, W.P. (Civil) No. 9613, W.P. (Civil) No. 9614, W.P. (Civil) No. 9615, W.P. (Civil) No. 9616, W.P. (Civil) No. 9617, W.P. (Civil) No. 9618, W.P. (Civil) No. 9619, W.P. (Civil) No. 9620, W.P. (Civil) No. 9621, W.P. (Civil) No. 9622, W.P. (Civil) No. 9623, W.P. (Civil) No. 9624, W.P. (Civil) No. 9625, W.P. (Civil) No. 9626, W.P. (Civil) No. 9627, W.P. (Civil) No. 9628, W.P. (Civil) No. 9629, W.P. (Civil) No. 9630 of 1982, W.P. (Civil) No. 947, W.P. (Civil) No. 948, W.P. (Civil) No. 949, W.P. (Civil) No. 950, W.P. (Civil) No. 951, W.P. (Civil) No. 952, W.P. (Civil) No. 953, W.P. (Civil) No. 954, W.P. (Civil) No. 955, W.P. (Civil) No. 956, W.P. (Civil) No. 957, W.P. (Civil) No. 958, W.P. (Civil) No. 959, W.P. (Civil) No. 960, W.P. (Civil) No. 3698, W.P. (Civil) No. 3699, W.P. (Civil) No. 3700, W.P. (Civil) No. 3701, W.P. (Civil) No. 3702, W.P. (Civil) No. 3703, W.P. (Civil) No. 3704, W.P. (Civil....
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.... 3909, C.A. Nos. 3910, C.A. Nos. 3911, C.A. Nos. 3912, C.A. Nos. 4202, C.A. Nos. 4203, C.A. Nos. 4204, C.A. Nos. 4205, C.A. Nos. 4302, C.A. Nos. 4737 of 1991, C.A. Nos. 70, C.A. Nos. 1280, C.A. Nos. 1281, C.A. Nos. 1282, C.A. Nos. 1283 of 1992, S.L.P. (Civil) No. 1045 of 1989, T.C. (Civil) No. 220 of 1988 T.V.S.N. Chari and Ms. Suruchi Aggarwal, Advocates, for the respondent in W.P. Nos. 655 to 659 of 1983, C.A. Nos. 10753 to 10761 of 1983 (State of Andhra Pradesh). B.K. Mehta, Senior Advocate (Meenakshi Arora and Anip Sachthey, Advocates, with him), for the respondents (State of Gujarat and others) in the Gujarat matters. R.R. Aggarwal, Senior Advocate (S. Ganesh, Advocate, and Ravinder Narain and S. Sukumaran, Advocates, of J.B. Dadachanji and Co., with him), for the appellants in C.A. Nos. 1280 to 1283 of 1992. B. Kanta Rao, Advocate, for the petitioner in W.P. Nos. 655 to 659 of 1983. Mrs. Janaki Ramachandran, Advocate, for the appellant in C.A. No. 10761 of 1983. Dushyant Dave, Advocate, and K.J. John and Dipa Dixit, Advocates of Swarup John and Co., for the appellants in certain appeals from Gujarat. A. Subba Rao....
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....ction 3-AAAA is a very simple provision. According to its marginal note, its effect is the imposition of a liability to purchase tax on certain transactions. This liability is attracted in respect of goods, which are liable to tax at the point of sale to the consumer. In other words, the goods in question as such have run through their gamut of sales in the State. There will be no more sales in the State of the goods in that form, which can be taxed by the State, whether intrastate or inter-State, or in the course of export. Such goods are then made liable to tax in the hands of a purchaser dealer-cum-consumer either because he purchases them from a registered dealer by whom tax is not payable or because he purchases them from a person other than a registered dealer, i.e., a person who is not accessible to the Revenue, whose sales cannot be easily verified or from whom tax may not be easily recovered. To put it differently, since the tax is at the point of sale to the consumer, the Legislature, in order to ensure that goods do not escape tax in the State altogether, made the purchaser liable in respect of the last sale in the State of the goods in question, if otherwise the sales o....
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.... (SC); [1990] 2 SCC 71. So far as the State of Gujarat is concerned, the provisions of section 15-B, inserted by a retrospective amendment of 1990, are somewhat different. Cutting out certain words not relevant in the present context, it provides that where a dealer, being liable to pay tax under the Act, purchases any taxable goods and uses them in the manufacture of taxable goods, a purchase tax will be levied on the turnover of such purchases. Rule 42-E, which was also framed with effect from May 1, 1990, provides that, where the assessee is a registered dealer and the goods manufactured by him have been sold in the State of Gujarat, he will be entitled to relief in respect of the purchase tax levied under section 15-B. Here again, it is argued, the provision is tainted because it refers to manufacture of the purchased goods and the rule ensures that no purchase tax is levied if the manufactured goods are sold in the State itself; in other words, the levy comes in only if they are consigned outside the State, attracting Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71. It will be seen at once that the three provisions under consideration vary from one another. Section 3-....
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....hich is sought to be brought to tax. Here again, the intention of the Legislature is to tax, at purchase point, a class of goods, viz., goods purchased by a manufacturer. It has no concern, unlike the A.P. or Haryana Acts, with what he does with the manufactured goods. Presumably the idea is that the manufacturer is able to profit by adding value to the purchased raw material by utilising the infrastructure, fillips or facilities provided in the State to encourage setting up of industries therein and so can afford to pay tax on the purchased raw materials. The concession provided by rule 42E is an independent provision relieving him and the public consuming the manufactured goods of additional burden where such goods are sold inside the State and get taxed on the added value. In my opinion, there is considerable force in the substance of the contention of these States that these provisions only impose a tax on purchases. The marginal title to the provisions indicates that their direct purpose is to levy a tax on purchases effected in the State in certain circumstances. The tax is couched as a tax on all goods (in U.P.) and on raw or processing materials and consumable stores (in....
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....tes he may receive that the goods will be used inside the State. Again, where goods are purchased from a person other than a registered dealer, the tax at the sales point may escape actual taxation for many reasons: such person may not be a dealer at all or, being an unregistered dealer, the State may not be able to ascertain his whereabouts and ensure that he is taxed or that the tax is collected. In cases where no sales tax is paid at the point of sale, it becomes necessary for the State Legislature to provide that the tax will be met by the purchaser. Invariably in such cases the legislations attach levy of tax to the last purchase made in the State, of a particular item of goods. Of course, the legislation could have simply said that the last purchase in the State will attract tax unless the tax is payable or has been paid at one of the earlier stages of sale and could not have been objected to. But that type of legislative wording might lead to difficult questions as to the definition of the expression "last purchase". That is why the section imposing purchase tax is worded in the manner in which it has been worded in the Andhra and Haryana Acts. As pointed out by the learned ....
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....ve been utilised in a particular way but will it be correct to say that the power of the State to levy a tax on sales or purchases cannot include a right or power to tax goods at the point of their first sale in the State or their last purchase in the State? The mere fact that the purchase cannot be characterised as a last purchase except by reference to the subsequent utilisation of those goods cannot mean that the taxable event is not the purchase but something else. What we are really concerned with in deciding the question of constitutional validity of the levy of a sales tax is to pose the question: "Is the tax levied one with reference to the sale or purchase of goods." The ambit of the power to levy a tax in respect of sale of goods is very wide and will cover any tax which has a nexus with the sale or purchase of goods including a last purchase in the State. This I think is a more appropriate test to be applied in these cases rather than the test of "taxable event" which is somewhat ambiguous in the context. I am not inclined to agree that a tax on the sale or purchase of goods will cease to be so merely because the determination of its character as a last purchase wo....
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....fore, ever ready to learn: great and honest enough to discard all mere pride of opinion and follow truth wherever it may lead: and courageous enough to acknowledge his errors'." For the reasons abovementioned, I agree with my learned brother and hold that the impugned provisions under all the three enactments are intra vires the powers of the concerned State Legislature. B.P. JEEVAN REDDY, J.-Validity of provisions of several States sales tax enactments imposing purchase tax fall for our consideration in this group of appeals and writ petitions. Initially the matters arising from Andhra Pradesh (Writ Petitions Nos. 655--669 of 1983 Hotel Balaji and others v. State of Andhra Pradesh and Civil Appeal Nos. 10753 to 10757 of 1983 Hindustan Milkfood Manufacturers Ltd. v. State of Andhra Pradesh) came up for hearing. During the course of hearing, counsel for the petitioners/appellants relied upon the decision of this Court in Goodyear India Ltd. v. State of Haryana [1990] 76 STC 71; [1990] 2 SCC 71 whereas the counsel for the State of Andhra Pradesh challenged the correctness of the said decision and pleaded for reconsideration of the said judgment. It was then brought to our notic....
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..... It provided for levy of concessional rate of tax in respect of purchase of raw material made by recognised dealers (who are necessarily manufacturers), provided the goods (raw material) purchased by them fell in Schedule II or III (other than prohibited goods). Section 15-B was introduced by Amendment Act of 1986. It provided for levy of an additional purchase tax on raw material purchased by a manufacturing dealer in case he used the said raw material for the manufacture of other goods which he despatched to his own place of business or to his agent's place of business situated outside the State but within India. By an Amendment Act made in 1987, the section was substituted. There was, however, no substantial change in the section. Following upon the decision of this Court in Goodyear [1990] 76 STC 71; [1990] 2 SCC 71, a batch of writ petitions was filed in the Gujarat High Court challenging the validity of section 15-B on the ground that in truth and effect it levied a consignment tax and, hence was outside the competence of the State Legislature. While the said writ petitions were pending, section 15-B was substituted by an Ordinance being Ordinance No. 3 of 1990 issued on Apr....
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....le to entry 54 of List II of the Seventh Schedule to the Constitution. On the other hand, it is argued by Sri. B.K. Mehta, learned counsel appearing for the State of Gujarat that the legislative competence of the Gujarat Legislature to enact section 15-B ought to be determined on its own language and not with reference to a rule made by the Government of Gujarat as the delegate of the Legislature. He submitted that on its own language, section 15B levies a pure and simple purchase tax on raw material purchased by a manufacturer. It is unconcerned with what happens to the manufactured goods. For the purpose of section 15-B, it is immaterial whether the manufactured goods are sold inside the State or despatched to a place outside the State of Gujarat or are dealt with or disposed of otherwise. The principle of Goodyear [1990] 76 STC 71; [1990] 2 SCC 71 has absolutely no application to this provision. Counsel also submitted that when the tax is upon the purchase price of the raw material and is relatable to the act of purchase, it cannot be held to be an excise duty which is levied on the act of manufacture and is levied with reference to the value of such manufactured goods. For a....
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....ods) and he issues a certificate contemplated by section 13(1)(B). Prior to the Amendment Act 9 of 1992, section 15-A read as follows: "15-A. Purchase tax payable on purchases of goods by certain dealers.- Where- (i) a recognised dealer purchases any goods specified in Schedule II or III other than prohibited goods, under a certificate given by him under clause (B) of sub-section (1) of section 13, or (ii) a commission agent holding permit purchases any goods specified in Schedule II or III other than prohibited goods on behalf of his principal who is recognised under a certificate given by him under clause (C) of sub- section (1) of section 13,- there shall be levied a purchase tax on the turnover of such purchase at the rate of two paise in the rupee." Since the amendment of this provision in 1992 is also not retrospective, it is unnecessary to notice the same. We may now set out section 15-B both as it obtained prior to Amendment Act 6 of 1990 and as substituted thereby. Prior to amendment, it read thus: "Where any dealer liable to pay tax under this Act uses any goods other than declared goods purchased by him or through commission agent as raw or proce....
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....evied under section 15-B and payable by a dealer (hereinafter referred to as 'the assessee') the Commissioner shall subject to conditions of rule 47 in so far as they apply, and further conditions specified below, grant him a drawback, set-off or as the case may be, refund of the whole of the purchase tax paid in respect of purchase of goods effected on and from the 1st April, 1986 used by him, as raw materials, processing materials, or consumable stores, in the manufacture of taxable goods. Conditions.-(1) The assessee is a registered dealer, (2) the goods purchased are taxable goods other than declared goods, (3) the said goods have been used by the assessee within the State as raw materials or processing materials or consumable stores in the manufacture of taxable goods, (4) the goods so manufactured have been sold by the assessee in the State of Gujarat." In view of the retrospective amendment of section 15-13, it may not be necessary to refer to section 15-B as it obtained prior to the 1990 amendment except to point out that in material particulars, it was similar to section 13-AA of the Bombay Sales Tax Act, which was considered in Goodyear [1990] 76 STC 71 (SC....
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....tral Sales Tax Act. Similarly the Bombay provision spoke of the manufactured goods being sent to the depots of the manufacturer or his agents outside the State of Maharashtra. It was these features which weighed with this Court in characterising the tax as one in the nature of a consignment tax. (This aspect has been dealt with in Part V). Since the said feature is absent in the impugned provision, we hold, agreeing with the High Court, that the tax imposed by section 15-B cannot be characterised as a consignment tax. The main contention of the appellants, however, is that section 15-B should not be read in isolation but in conjunction with rule 42-E which was introduced in the Rules simultaneously with the amendment of section 15-B and which rule indeed supplements section 15-B. They say that if both the provisions are read together, the effect and consequence is the same as that of section 15-B as it obtained prior to 1990 amendment, which means the tax is really upon the consignment of manufactured goods. We shall first notice what rule 42-E provides. It says that, in assessing the purchase tax levied under section 15-B, the assessee shall be granted a drawback, set-off or....
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....he Act. Sri. Mehta relies upon the following statement of law in Halsbury's Laws of England (3rd Edn.) Vol. 36 at page 401: "Where a statute provides that subordinate legislation made under it is to have effect as if enacted in the statute such legislation may be referred to for the purpose of construing a provision in the statute itself. Where a statute does not contain such a provision, and does not confer any power to modify the application of the statute by subordinate legislation, it is clear that subordinate legislation made under the statute cannot alter or vary the meaning of the statute itself where it is unambiguous, and it is doubtful whether such legislation can be referred to for the purpose of construing an expression in the statute, even if the meaning of the expression is ambiguous." He says that this statement of law has been referred to with approval by Hegde, J., in his opinion in J.K. Steel Ltd. v. Union of India AIR 1970 SC 1173. Though the opinion of Hegde, J., is a dissenting one, he submits, the majority has not held to the contrary on this aspect. He also relies upon the English decisions referred to in the opinion of Hegde, J. and points out that no ....
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....odyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 cannot be accepted as good law for the reasons mentioned in Part V. We are equally not satisfied with the argument that the Gujarat Legislature has resorted to a device, a stratagem to circumvent the decision of this Court or that it is an instance of fraud on power-what is sometimes referred to as "colourable legislation". That a Legislature is empowered to amend a provision to remove the defect pointed out by a court is well- accepted. So far as the Gujarat Act is concerned, it was never the subject- matter of an adverse decision either by this Court or the Gujarat High Court. Writ petitions were no doubt pending challenging the validity of section 15-B as it then stood. It was perfectly open to the Legislature to act to set its house in order to obviate a possible adverse verdict applying the ratio of Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71. The question is whether the provision now enacted, with retrospective effect, is beyond the legislative competence of the Gujarat Legislature? If not, no further question arises. So far as the retrospectivity given to section 15-B by the 1990 Amendment Act is concerned, it is hardly op....
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....feats the manifest object and purpose of the Act". The Legislature must be presumed to know its limitations and acted within those limits. Transgression must be clearly established, and is not to be lightly assumed. For the very same reasons, the argument that it is a use tax also fails. In essence, the provision is akin to the one considered by this Court in Andhra Sugars Ltd. v. State of Andhra Pradesh [1968] 21 STC 212. For the above reasons, the appeals and writ petitions are dismissed with no order as to costs. PART III: (UTTAR PRADESH) These civil appeals and writ petition are filed by the Tribeni Tissues Limited, Varanasi, Uttar Pradesh. The appeals are preferred against the judgment of a learned single Judge of the Allahabad High Court allowing Sales Tax Revisions Nos. 325, 327 and 328 of 1989 preferred by the Commissioner of Sales Tax, Uttar Pradesh, against the orders of the Sales Tax Appellate Tribunal. The assessment years concerned are 1978-79 to 1981-82. The appellant is a dealer registered under the U.P. Sales Tax Act, having an office at Varanasi. It has a paper mill at Calcutta. The appellant purchases sun hemp, raw jute, old hemp rope cutting....
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....turer or importer at the rate of seven per cent: Provided that the State Government may from time to time, by notification in the Gazette modify the rate or point of tax on the turnover in respect of any such goods with effect from such date as may be notified in that behalf, so however, that the rate does not exceed seven per cent." [The goods concerned herein, according to both the parties, fall within sub-section (2-A) of section 3-A]. The State Government issued a Notification dated May 30, 1975, in terms of and as contemplated by the proviso to sub-section (2-A) of section 3-A declaring that with effect from June 1, 1975, the turnover in respect of goods specified in column (2) of the Schedule to the notification shall be liable to tax at the point of sale and at the rate specified respectively in columns (3) and (4) thereof. The Schedule, in so far as relevant may be set out: "SCHEDULE 'M' stands for sale by manufacturer in Uttar Pradesh. 'I' stands for sale by the importer in Uttar Pradesh. ----------------------------------------------------------------------------- Sl.No. Description of goods Point at which Rate of tax tax shall be levie....
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....P. Sales Tax (Amendment) Act 8 of 1992. Section 3-AAAA as substituted by the aforesaid amending Act reads thus: "3-AAAA. Liability to purchase tax on certain transactions- (1) Except as provided in sub-section (2) and subject to the provision of section 3, every dealer, who purchases any goods liable to tax at the point of sale to consumer- (a) from any registered dealer in circumstances in which no tax is payable by such registered dealer, shall be liable to pay tax on the purchase price of such goods at the same rate at which, but for such circumstances, tax would have been payable on the sale of such goods; (b) from any person other than a registered dealer, whether or not tax is payable by such person, shall be liable to pay tax on the purchase price of such goods at the same rate at which tax is payable on the sale of such goods. (2) Exemption shall be granted in the tax payable under sub- section (1) to the extent of the amount of tax,- (a) to which the goods purchased from a registered dealer have already been subjected or may be subjected under any provision of this Act or the Central Sales Tax Act, 1956; (b) already paid in respect of the goods pur....
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....stood prior to the said amendment or with the correctness of the judgment of the Division Bench of the Allahabad High Court declaring the same as beyond the legislative competence of the U.P. Legislature. Suffice it to say that the decision of the Division Bench closely follows and applies the ratio of Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 which according to us does not represent the correct position in law as explained in Part V. Coming to section 3-AAAA as it now stands, an analysis of the section yields the following ingredients: A. (i) A dealer who purchases any goods liable to tax at the point of sale to the consumer, (ii) from any registered dealer in circumstances in which no tax is payable by such registered dealer, (iii) the purchasing dealer shall be liable to pay tax on the purchase price of such goods at the same rate at which the tax would have been payable on the sale of such goods. B. (i) A dealer who purchases any goods liable to tax at the point of sale to consumer, (ii) from any person other than a registered dealer, whether or not such person is liable to pay the tax on such sale, (iii) the purchasing dealer shall be liable to pay t....
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....ects. Sub-section (1) is clear and simple. The tax becomes payable by the purchasing dealer in the two situations contemplated by clauses (a) and (b) of the said sub-section. If he can establish any of the facts mentioned in clauses (a) to (d) of sub-section (2), he gets an appropriate exemption. Otherwise not. We are, therefore, unable to see any room for contending that the tax imposed by the said section is in the nature of consignment tax or a use or consumption tax. Simply because the petitioner chooses to take the goods purchased by him out of the State, in the same form and condition or otherwise, for being used as raw material in his factory at Calcutta, makes no difference to the levy. The validity of the levy cannot depend upon what a particular dealer or person chooses to do with the goods. It was argued for the petitioner that sub-section (2) of section 3-AAAA places a heavy and uncalled for burden upon the purchasing dealer; that it is not practicable for the purchaser to establish that the selling person (other than the registered dealer) has paid the tax or not. It is submitted that the petitioner purchases his goods from hundreds of persons who are not registered....
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....g in view the usual course of business, the normal possibilities seem to be these: 1.. Use and consumption of the goods purchased by the purchasing dealer in the manufacture of some other taxable goods within the State; 2.. Despatch of the manufactured goods, without sale, outside the State otherwise than in the course of inter-State trade and commerce; 3.. Despatch of the goods out of the territory of India pursuant to a contract of sale, i.e., despatch in the course of an export sale. These then are the activities or transactions that constitute the taxable events on the happening of which the tax would be immediately attracted, that is to say, the tax in question becomes exigible at these points. Once these points are reached the possibility of the sale of goods purchased within the State or in the course of inter-State trade and commerce in the same form and condition, shall stand excluded. The fourth and the last condition envisaged by section 3-AAAA set out hereinabove necessary for attracting the levy would also stand fulfilled. It is only on the happening of these events that the taxing authority can reach the conclusion that the purchasing dealer has become liable....
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....annot be ignored. Constitutionality of section 3-AAAA ought to be judged on its own language and so judged, the section, both before and after the 1992 amendment, represents a perfectly valid piece of legislation. It is relatable to and fully warranted by entry 54 of List II of the Seventh Schedule to the Constitution. PART IV: (ANDHRA PRADESH) Writ Petitions Nos. 655 to 669 of 1983 are filed by Hotel Balaji and 14 other hotels/restaurants for issuance of a writ, order or direction directing the respondents, viz., the State of Andhra Pradesh and its sales tax authorities not to levy and collect purchase tax on milk at 4 per cent under section 6-A as also the surcharge tax at 10 per cent of the tax. According to the petitioners, such a levy violates article 14 as also the fundamental right guaranteed to them by sub-clause (g) of clause (1) of article 19 of the Constitution. Civil Appeals Nos. 10753 to 10757 of 1983 are directed against the judgment and order Reported as Hindustan Milkfood Manufacturers Ltd. v. State of Andhra Pradesh in [1982] 51 STC 1 (AP). of a Division Bench of the Andhra Pradesh High Court upholding the validity of section 6-A of the Andhra Pradesh Gene....
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....Dairy Development Corporation from the levy of tax payable under the said Act with effect from the 1st day of May, 1975. In the civil appeals the appellant is Hindustan Milkfood Manufacturers Ltd. They purchased milk mainly from persons other than registered dealers which they utilised in manufacture of various products. Its products are sold not only within the State of Andhra Pradesh but also in other States of the country. It has an office at Dhawaleshwaram in East Godavari District of Andhra Pradesh. It is registered as a dealer under the Act. In the course of their assessment proceedings for the assessment year 1979-80 (among other assessment years) the appellant contended that milk having been exempted by virtue of a notification issued under section 9 is not taxable and that levy of purchase tax is incompetent. They questioned the constitutionality of section 6-A. The assessing authority overruled the said objections and levied the purchase tax on the turnover of milk purchased by the appellant. The matter was brought to the High Court which, as stated above, negatived the challenge to the constitutionality of the provision. So far as the exemption notification in G....
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....purchases any goods (the sale or purchase of which is liable to tax under this Act) from a person other than a registered dealer, and (a) either consumes such goods in the manufacture of other goods for sale or otherwise, or (b) disposes of such goods in any manner other than by way of sale in the State, or (c) despatches them to a place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall pay tax on the turnover relating to purchase aforesaid at the same rate at which but for the existence of the aforementioned circumstances, the tax would have been leviable on such goods under section 5 or section 6." The section has been amended in some particulars by the Amendment Act 18 of 1985 but these amendments do not make a difference to the nature or character of the tax. Be that as it may, we may as well set out the section as it stands now, in view of the fact that the validity of the section as such is questioned before us. It reads: "6-A. Levy of tax on turnover relating to purchase of certain goods.- Every dealer, who in the course of business- (i) purchases any goods (the sale or purchase of which i....
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....d have been payable by the selling dealer." The proviso which governs both the above situations provides that in case of declared goods the total tax shall not exceed 4 per cent of the purchase price of such goods. Broadly speaking, the effect is: Tax payable at sale point becomes the tax payable on the purchase point, in certain circumstances. Because, the seller is not or cannot be taxed for certain reasons, the purchasing dealer is being taxed. Two examples, each illustrating one of the two situations envisaged by the section may be given: (a) Andhra Pradesh Dairy Development Corporation, a registered dealer, is exempted from paying the tax on sale of pasteurised milk. The purchaser of pasteurised milk from the Corporation is taxed provided he satisfies one of the conditions specified in clauses (i) to (iii) Presumably clauses (i) to (iii) refer to clauses (iii), (iv) and (v) of A and B as analysed by the Supreme Court: See page 134 supra.-Ed. mentioned in the section, thereby becoming the last pur- chaser in the State of such milk. (b) Fresh milk is taxable at sale point. But when it is sold by a farmer/agriculturist raising cattle on lands held by him, he cannot be....
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....or otherwise, in a form different from the one in which it was produced after subjecting it to any physical, chemical or any process other than mere cleaning, grading or sorting, he shall be deemed to be a dealer for the purpose of this Act." Section 5 is the charging section. Prior to the Amendment Act 4 of 1989, section 5 had four sub-sections. The first sub-section made all sales/ purchases by dealers within the State of Andhra Pradesh subject to tax. If, however, the goods sold were those mentioned in Schedule I they were taxable at a single point, viz., at the point of sale and at the rate prescribed in the said Schedule. Similarly, if the goods fell in the Second Schedule they too were taxable only at one point, namely, the point of purchase at the rate prescribed [sub-section (2)]. Schedule III comprises of declared goods while Schedule IV sets out goods which are totally exempted from tax under section 8 of the Act. Schedule V deals with jaggery and Schedule VI with liquors. In other words, goods which did not fall in any of the Schedules I to VI, fell under sub-section (1) and were taxed as general goods. In this sense, fresh milk which is not mentioned in any of the Sc....
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....mption is couched. It is not a general exemption but a qualified one. In the light of the specific scheme of section 9 and the language of G.O. Ms. No. 1091, the exemption at the point of sale by a particular category of persons cannot be construed as operating to exempt the purchase tax under section 6-A as well, much less in all cases. For the above reasons, appeals and writ petitions are dismissed with no order as to costs. PART V (Does Goodyear require reconsideration) As mentioned earlier, counsel for all the assessees in these matters strongly rely on the decision of this Court in Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 which invalidated a purchase tax levied by the Haryana and Maharashtra Sales Tax Acts. We may, therefore, notice this decision in some detail. What precisely is the ratio of Goodyear. Provisions relating to purchase tax in the Haryana Sales Tax Act and Bombay Sales Tax Act fell for consideration in this case. Section 9 of the Haryana Act, before it was amended by the Haryana General Sales Tax (Amendment and Validation) Act, 1983, read as follows: "9. Where a dealer liable to pay tax under this Act purchases goods other than those speci....
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....al Sales Tax Act, 1956; or (c) purchases goods, other than those specified in Schedule B, from any source in the State and exports them, in the circumstances in which no tax is payable under any other provision of the Act, there shall be levied, subject to the provisions of section 17 a tax on the purchases of such goods at such rate as may be notified under section 15. (2) Notwithstanding anything contained in this Act or the Rules made thereunder, if the goods leviable to tax under this section are exported in the same condition in which they were purchased, the tax shall be levied, charged and paid at the station of despatch or at any other station before the goods leave the State and the tax so levied, charged and paid shall be provisional and the same shall be adjustable towards the tax due from the dealer on such purchase as a result of assessment or reassessment made in accordance with the provisions of this Act and the rules made thereunder on the production of proof regarding the payment thereof in the State." Again a batch of writ petitions was filed questioning the validity of the amended provision which challenge too was upheld by the High Court in its decision....
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....criptive of the goods liable to tax under section 9(1)(b) in the event of despatch outside the State. If the goods do not answer both the descriptions cumulatively, even though these are despatched outside the State of Haryana, the purchase of those goods would not be put to tax under section 9(1)(b)........ The liability to pay tax in this section does not accrue on purchasing the goods simpliciter, but only when these are despatched or consigned out of the State of Haryana. In all these cases, it is necessary to find out the true nature of the tax. Analysing the section, if one looks to the purchase tax under section 9, one gets the conclusion that the section itself does not provide for imposition of the purchase tax on the transaction of purchase of the taxable goods but when further the said taxable goods are used up and turned into independent taxable goods, losing its original identity, and thereafter when the manufactured goods are despatched outside the State of Haryana and only then tax is levied and liability to pay tax is created". Accordingly, the learned Judge held, the tax is in the nature of a consignment tax which the Parliament alone could impose and not the State....
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....ereon cannot be said to hinder the free-flow of trade within the meaning of article 301 of the Constitution. The question again was which is the taxable event according to section 13-AA. Mukharji, J., on an analysis of the section, held that the taxable event is the despatch of manufactured goods outside the State which means that the levy is beyond the competence of the State Legislature. The attack based upon article 301 of the Constitution was, however, repelled. Though agreeing with the conclusion arrived at by Mukharji, J., Ranganathan, J., made a few pertinent observations in his separate opinion. The learned Judge opined that both section 9 of the Haryana Act and section 13-AA of the Bombay Sales Tax Act "purport only to levy a purchase tax" and further that "the tax, however, becomes exigible not on the occasion or event of purchase but only later. It materialises only if the purchaser (a) utilises the goods purchased in the manufacture of taxable goods and (b) despatches the goods so manufactured (otherwise than by way of sale) to a place of business situated outside the State. The Legislature, however, is careful to impose the tax only on the price at which the raw ....
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....) the goods are purchased (for convenience sake, I may refer to them as raw material) by a dealer liable to pay tax under the Act in the State, (b) the goods so purchased cease to exist as such goods for the reason they are consumed in the manufacture of different commodities and (c) such manufactured commodities are either disposed of within the State otherwise than by way of sale or despatched to a place outside the State otherwise than by way of an inter-State sale or export sale. It is evident that if such manufactured goods are not sold within the State of Haryana, but yet disposed of within the State, no tax is payable on such disposition; similarly, where manufactured goods are despatched out of State as a result of an inter-State sale (sic) or export sale, no tax is payable on such sale. Similarly again where such manufactured goods are taken out of State to manufacturers' own depots or to the depots of his agents, no tax is payable on such removal. Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 takes only the last eventuality and holds that the taxable event is the removal of goods from the State and since such removal is to dealers' own depots/agents o....
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.... put an end to by him by using them in the manufacture of different goods in certain circumstances. The tax is levied upon the purchase price of raw material, not upon the sale price or consignment value of manufactured goods. Would it be right to say that the levy is upon consignment of manufactured goods in such a case? True it is that the levy materialises only when the purchased goods (raw material) is consumed in the manufacture of different goods and those goods are disposed of within the State otherwise than by way of sale or are consigned to the manufacturing dealer's depots/agents outside the State of Haryana. But does that change the nature and character of the levy. Does such postponement-if one can call it as such-convert what is avowedly a purchase tax what is on raw material (levied on the purchase price of such raw material) to a consignment tax on the manufactured goods? We think not. Saying otherwise would defeat the very object and purpose of section 9 and amount to its nullification in effect. The most that can perhaps be said is that it is plausible (as pointed out by Ranganathan, J., in his separate opinion) to characterise the said tax both as purchase tax as ....
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....) disposes of such goods in any manner other than by way of sale in the State; or (c) despatches them to any place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce, shall, whatever be the quantum of the turnover relating to such pur- chase for a year, pay tax on the taxable turnover relating to such purchase for that year at the rates mentioned in section 5." One of the arguments urged against the validity of the said provision was that inasmuch as the tax is levied depending upon the mode in which the goods purchased are consumed, disposed of or despatched, the tax is really one in the nature of consumption tax or use tax, but not sales tax. This argument was answered by the learned Judge in the following words: "According to me, this contention is based on a misconception of the scope of taxation on the sale of goods. It is true that sales tax is a tax imposed on the occasion of the sale of goods. But it has no reference to the point of time at which the sale or purchase takes place. It refers to the connection with the event of purchase or sale and not the point of time at which such purchase or sale takes pl....
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....ased goods are put an end to by their consumption in manufacture of other goods and yet the manufactured goods are dealt with in a manner as to deprive the State of any revenue; in such cases, there is no reason why the State should forego its tax revenue on purchase of raw material. Another observation in Kandaswami [1975] 36 STC 191 (SC) relevant for the present purpose may also be noticed: "It may be remembered that section 7-A is at once a charging as well as a remedial provision. Its main object is to plug leakage and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. The view taken by the High Court is repugnant to this cardinal canon of interpretation." In the light of the above scheme of section 9, it would not be right, in our respectful opinion, to say that the tax is not upon the purchase of raw material but on the consignment of the manufactured goods. It is well- settled that....
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....yment of tax sales or purchases of goods required for specific purposes. Other instances of special treatment of goods required for particular purposes may be given. Section 6 and Schedule I, item 23' of the Bombay Sales Tax Act, 1946, levy tax on fabrics and articles for personal wear. Section 2(j)(a)(ii) of the C.P. and Berar Sales Tax Act, 1947, exempts sales of goods intended for use by a registered dealer as raw materials for the manufacture of goods. Mr. Chatterjee submitted that the tax levied under section 21 was a use tax and referred to McLeod v. Dilworth and Co. [1943] 322 US 327; 88 L Ed. 1305 and C.G. Naidu and Co. v. State of Madras AIR 1953 Mad. 116 at 127-128; [1952] 3 STC 405. He argued that the State Legislature could not levy a use tax which was essentially different from a purchase tax. The assumption of counsel that section 21 levies a use tax is not well-founded. The taxable event under section 21 is the purchase of goods and not the use or enjoyment of what is purchased. The constitutional implication of a use tax in American law is entirely irrelevant......... To appreciate another argument of Mr. Chatterjee, it is necessary to refer to a few facts.....
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.... provision and has the effect of nullifying the very provision. By placing the said interpretation, section 9 has been rendered nugatory; except for the two minor areas pointed out in Murli Manohar & Co. v. State of Haryana [1991] 80 STC 79 (SC); [1991] 1 SCC 377, the section-which has its parallels in all the State enactments-has practically become redundant. This was the main reason we undertook to reconsider the said decision which course we would not have ordinarily agreed to adopt. In our respectful opinion, the tax purports to be and is in truth a purchase tax levied on the purchase price of raw material purchased by a manufacturer. In certain situations (the three situations mentioned above, viz., sale of manufactured goods within the State, inter- State sale and export sale of manufactured goods) it is waived. In other cases, it is not. It is argued for the assessees that apart from Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 a Bench of three Judges of this Court has independently approved and affirmed the correctness of the ratio and reasoning in Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71. Reference is to Mukerian Papers Ltd. v. State of Punjab [1991] 81 STC 15....
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....paragraphs 31 to 34 at page 796 of AIR). We need not dilate on this any more since the correctness of the judgment in Goodyear India Ltd. [1990] 76 STC 71 (SC); [1990] 2 SCC 71 is not canvassed before us." It is, thus, clear that the main argument for the Bench was that the ratio of Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 governs the said case and it was so found. It is equally clear that the correctness of the decision in Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 was not questioned before the Bench and that is why the Bench took care to specifically advert to and record the said circumstance. So far as the decision in Murli Manohar & Co. v. State of Haryana [1991] 80 STC 79 (SC); [1991] 1 SCC 377 is concerned, it arose under the Haryana General Sales Tax Act and explains the meaning of export sale referred to in section 9(1)(b) of the Act. There is no discussion in this decision about the point at issue before us. The same is the position under section 13-AA of the Bombay Sales Tax Act. The said provision, properly analysed, yields the following ingredients: (i) where a dealer who is liable to pay tax under this Act purchases any goods specified in Part I....