1990 (10) TMI 329 - SC - VAT and Sales Tax

Liability to pay purchase tax - Held that - Appeal allowed. The purchases of raw materials by the assessees are not chargeable to tax either under section 9(1) or section 6 or section 24(3).

Issues Involved:

1. Interpretation of Section 9(1) of the Haryana General Sales Tax Act, 1973.
2. Applicability of Section 5(1) and Section 5(3) of the Central Sales Tax Act, 1956.
3. Validity of tax levied on the purchase of raw materials used for manufacturing goods exported outside India.
4. Retrospective amendments to the Haryana General Sales Tax Act.
5. Constitutional validity of Section 9(1)(b) and Section 24(3) of the Haryana General Sales Tax Act.

Issue-wise Detailed Analysis:

1. Interpretation of Section 9(1) of the Haryana General Sales Tax Act, 1973:

The primary issue in these appeals and writ petitions was the interpretation of Section 9(1) of the Haryana General Sales Tax Act, 1973. The assessees, registered dealers in Haryana, purchased raw materials without paying tax under Section 24 of the Act. They manufactured goods using these raw materials and sold them to dealers who exported the goods. The assessees claimed they were not liable to pay purchase tax on the raw materials under Section 9(1). The taxing authorities and the High Court rejected this claim, leading to the appeals.

2. Applicability of Section 5(1) and Section 5(3) of the Central Sales Tax Act, 1956:

The court examined Section 5(1) and Section 5(3) of the Central Sales Tax Act, 1956. Section 5(1) defines when a sale or purchase is deemed to take place in the course of export out of India. The assessees argued that their sales fell under Section 5(3), which includes penultimate sales preceding the export. The court, however, agreed with the High Court that Section 9(1) of the Haryana Act only exempts sales under Section 5(1) of the Central Sales Tax Act, not under Section 5(3).

3. Validity of tax levied on the purchase of raw materials used for manufacturing goods exported outside India:

The court considered whether the assessees' sales could be categorized as local sales, inter-State sales, or export sales. It concluded that the sales must fall into one of these categories, exempting the assessees from the purchase tax under Section 9(1). The court also noted that the assessees' sales were either local or inter-State sales, both of which are exempt under Section 9(1).

4. Retrospective amendments to the Haryana General Sales Tax Act:

The court examined various amendments to the Haryana General Sales Tax Act, including those made by Act 1 of 1990, which omitted certain words from Section 2(p) and amended Section 6 retrospectively. The court noted that these amendments did not affect the assessees' exemption under Section 9(1).

5. Constitutional validity of Section 9(1)(b) and Section 24(3) of the Haryana General Sales Tax Act:

The court addressed the argument that Section 9(1)(b) had been declared unconstitutional in the Goodyear case. It clarified that the Goodyear case only invalidated the levy of tax on raw materials used to manufacture goods consigned outside the State without sale. The court held that the other aspects of Section 9(1)(b), including exemptions for local and inter-State sales, remained valid. The court also examined Section 24(3), which imposes tax on raw materials if not used for the specified purposes, and found it inapplicable to the assessees' case.

Conclusion:

The court concluded that the assessees' purchases of raw materials were not chargeable to tax under Section 9(1), Section 6, or Section 24(3) of the Haryana General Sales Tax Act. The appeals and petitions were allowed, and the relevant assessments were to be modified accordingly. No order regarding costs was made.

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