TaxTMI 
TaxTMI 
1993 (10) TMI 331
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....he State of Punjab in pursuance of these sections has also been prayed for. Facts relevant to the point in issue, are as under: Petitioner-Food Corporation of India (hereinafter referred to as "the petitionercorporation") is a statutory corporation incorporated under the Food Corporation Act, 1964. The corporation was established with the primary object of safeguarding the interest of the farmers on one hand by providing support price for their produce and the consumers on the other hand by making available the foodgrains at controlled price fixed by the Government of India. The main functions of the petitioner-corporation are purchases, storage, movement, transport, distribution and sale of foodgrains and other food-stuffs. Before the formation of the petitioner-corporation, these functions were being discharged by the Department of Food, Government of India themselves. In order to carry out these objectives, the petitioner-corporation procures foodgrains in the surplus States and transports the same to the other States for distribution as per the policy of the Government of India. In order to carry out these objectives mentioned above, the petitioner-corporation has its bra....
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....re and thus ultra vires and void. The basic reasoning given by the Supreme Court is that the field of taxation on the consignment/despatch of goods in the course of inter-State trade or commerce, expressly comes within the purview of the exclusive legislative competence of the Parliament, due to the insertion of a new entry in the Union List in the shape of entry 92B, a new sub-clause (h) in clause (1) of article 269, as well as the amended clause (3) of article 269 of the Constitution. On this reasoning, it was prayed that in the facts and circumstances of this case, the levy and liability of the purchase tax on the petitioner-corporation on wheat, paddy and rice consigned outside the State of Punjab to its branches in other States falls within the ratio of the law laid down by the judgment of the Supreme Court in Goodyear's case [1990] 76 STC 71; that the levy of purchase tax on the petitioner-corporation to the extent of liability of tax in respect of those purchases, where purchased goods are despatched/consigned outside the State by the petitioner-corporation, is illegal and ultra vires as the same is being imposed by the Legislature of the State of Punjab which is not comp....
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....urchases any goods in the State of Punjab, irrespective of the fact that the main place of business of such person is outside the said State and where the main place of business of any such person is not in the said State, 'dealer' includes the local manager or agent of such person in Punjab in respect of such business and also includes a person engaged in the business of- (i) transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (ii) transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract; (iii) delivery of goods on hire-purchase or any system of payment by instalments; (iv) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration and (v) supply, by way of or as part of any service or in any other manner, whatsoever, of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration." "Purchase" as ....
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....e amount to be included in the turnover shall be the total sum payable by the hirer under a hire-purchase agreement in order to complete the purchase of, or the acquisition of property in the goods to which the agreement relates and includes any sum as payable by the hirer under the hire-purchase agreement by way of deposit or other initial payment, or credited or to be credited to him under such agreement on account of any such deposit or payment whether that sum is to be or has been paid to owner or to any person or is to be or has been discharged by payment of money or by transfer or delivery of goods or by any other means; but does not include any sum payable as a penalty or as compensation or damages for breach of the agreement. Explanation (4).-The amount to be included in the turnover in respect of movable goods agreed to be sold under a works contract, shall be its 'sale price'. " By President's Act No. 5 of 1991, section 5(3)(a)(ii) of the State Act was amended and a new sub-section 5(3)(a)(iii), was added which reads as under: "(ii) in the case of goods, other than wheat, liable to purchase tax, the stage or purchase of such goods by the last dealer liable to pay....
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....sale or purchase" of goods have been treated as two different transactions. To begin with, the State Legislature imposed tax on the sale of goods and seller of goods was made liable to pay the tax. For the first time in the year 1958 in connection with some transaction the incidence of taxation was imposed on the purchase of goods and the purchaser of goods was made liable to pay the tax. In the State of Punjab, a system of single point taxation is followed wherein either the sale or purchase of goods is made liable for taxation; goods once taxed would not be subjected to further levy of any sales tax at any subsequent stage of sale or purchase. The ambit of taxation policy includes tax on sale or purchase. Most of the goods are taxed when sold by the last registered dealer in the State of Punjab, i.e., to the consumers. Other items are taxed at the first point of sale. Similarly purchase tax is also levied either on the first registered dealer purchasing in the State or the last registered dealer. In Punjab, registered dealers are not taxed. The purchasing dealers in such cases are issued a statutory form by the seller on the production of which deduction of cost is allowed fro....
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....bility to pay the tax by selling the goods to a registered dealer in the State of Punjab. The levy of tax was postponed. Petitioner exhausted his chance of shifting his liability by sending the goods outside the State and, therefore, became the last dealer to pay the tax. The taxable event in such a case would be the purchase and not the subsequent action of sending the goods outside the State of Punjab. It is not a tax on the consignment/transfer of goods to branches of the petitioner-corporation outside the State of Punjab and, therefore, the State Legislature was competent to enact the law. The ratio of Goodyear's case [1990] 76 STC 71 (SC), on facts, is not applicable to the present case. Goodyear's case [1990] 76 STC 71 (SC) was decided by a Bench consisting of two honourable Judges. The same point was again taken up by their Lordships of the Supreme Court in Mukerian Papers Ltd. v. State of Punjab [1991] 81 STC 152. This case was decided by three honourable Judges of the Supreme Court. This case related to section 4-B of the State Act. Correctness of the judgment in Goodyear's case [1990] 76 STC 71 (SC), was not canvassed in Mukerian Papers' case [1991] 81 STC 152. This fa....
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....oodyear's case [1990] 76 STC 71 (SC), was challenged. Two separate judgments were delivered. The main judgment was written by B.P. Jeevan Reddy, J., with which Mr. Justice V. Ramaswami, agreed. Mr. Justice S. Ranganathan, wrote a separate concurring judgment. In Hotel Balaji's case [1993] 88 STC 98 (SC), it was held that the reasoning adopted and the law laid down in Goodyear's case [1990] 76 STC 71 (SC), was not correct. In his judgment, S. Ranganathan, J., in regard to the findings in Goodyear's case [1990] 76 STC 71 (SC), observed as under: "I am quite conscious that the conclusion I have expressed here as to the vires of the provision impugned is contrary to the conclusion I reached in Goodyear [1990] 76 STC 71 (SC); (1990) 2 SCC 71 on somewhat analogous provisions. I need not, for the purposes of the present cases, express any final conclusion as to whether the conclusion in Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 was rightly reached in the context of the provisions of the statutes there considered or would need a second look and fresh consideration in the context of what has been said here. But, I should not, I think, hesitate to accept the point of view now presen....
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....urchasing dealer converts himself into the last purchaser in the State of such goods. The goods cease to exist or cease to be available in the State for sale or purchase attracting tax. In these circumstances, the purchasing dealer of such goods is taxed, if the seller is not or cannot be taxed. In this connection, observations of P.S. Poti, J., in Malabar Fruit Products Co. v. Sales Tax Officer [1972] 30 STC 537 (Ker) which have been expressly approved by this Court in State of Tamil Nadu v. Kandaswami [1975] 36 STC 191-discussed in detail in Part V may be referred to. It is not necessary to set out the said discussion here over again. In the circumstances, we are unable to see how the tax imposed by section 6-A can be described either as use tax, consumption tax or consignment tax. Since we are of the opinion, as explained in Part V, that Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 does not interpret section 9 of the Haryana Act and section 13-AA of the Bombay Act, correctly, its reasoning cannot be brought in here to contend that clause (c) of section 6-A imposes a consignment tax. It is a purchase tax perfectly warranted by entry 54 of List II of the Seventh Schedule to ....
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....ort sale) the State may not get any revenue but larger national interest is served thereby. It is for these reasons that tax on the purchase of raw material is waived in these two situations. Thus, there is a very sound and consistent policy underlying the provision. The object is to tax the purchase by a manufacturer of goods whose existence as such goods is 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 postponementif 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 ra....
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....ue (such a concept is unknown to Haryana Act) or sale price of the manufactured goods-the above construction, in our respectful opinion, runs against the very grain of the provision and has the effect of nullifying the very provision. By placing the said interpretation, section 9 has been rendered negatory; 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." As mentioned in the earlier part of this case, Goodyear's case [1990] 76 STC 71 (SC) was rendered by two honourable Judges, in which the vires of section 9(1)(b) and sec....
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....ay purchase tax on the raw material purchased in the State which was consumed in the manufacture of any other taxable goods arose only on the despatch of the goods outside the State. We are, therefore, of the opinion that the ratio of the said decision of this Court in Goodyear India Ltd. [1990] 76 STC 71 (SC); [1990] 2 SCC 71 applies on all fours to the main question at issue in this case'. When the counsel for the Revenue sought to argue that the decision of this Court in Kandaswami [1975] 36 STC 191 (SC) takes a different view the Bench did not permit the same to be urged in the view of the fact that the correctness of the judgment in Goodyear [1990] 76 STC 71 (SC); [1990] 2 SCC 71 was not canvassed before them. The Bench said 'the decision in Kandaswami though in the context of an analogous provision was distinguished by this Court in Goodyear India Ltd. [1990] 76 STC 71 (SC); AIR 1990 SC 781 on the ground that it did not touch the core of the question at issue in the latter case. This aspect of the matter is elaborately dealt with in pages 96-97 of STC (paragraphs 31 to 34 at page 796 of AIR). We need not dilate on this any more since the correctness of the judgment in Goodyea....