1992 (10) TMI 240 - SC - VAT and Sales Tax

Whether the learned Judge was not right in holding that the taxable event under the section is not the purchase of goods used in the manufacture of end-products but the despatch of manufactured goods to out-State destinations? Held that - Appeal dismissed. The levy is waived where the manufactured goods are sold within the State, or sold in the course of inter-State trade or commerce or sold in the course of export. It is retained and collected where the goods are taken out of Maharashtra State by way of consignment, in which event the State sees no reason not to retain and collect the levy on purchase of raw material. The provision is substantially similar to section 9 of the Haryana Act. Whatever we have said with respect to the Haryana provision applies equally to this provision of the Bombay Sales Tax Act.

Issues Involved:

1. Constitutionality of purchase tax provisions in Gujarat, Uttar Pradesh, and Andhra Pradesh Sales Tax Acts.
2. Interpretation and application of the Goodyear judgment.
3. Analysis of the taxable event under the respective state acts.
4. Legislative competence of the state legislatures to levy purchase tax.
5. Validity of retrospective amendments to the tax provisions.

Issue-wise Detailed Analysis:

1. Constitutionality of purchase tax provisions in Gujarat, Uttar Pradesh, and Andhra Pradesh Sales Tax Acts:

Gujarat:
Section 15-B of the Gujarat Sales Tax Act was challenged on the grounds that it imposes a consignment tax. The court held that Section 15-B levies a purchase tax on raw materials used in manufacturing taxable goods, irrespective of the subsequent use or disposal of the manufactured goods. The court found that the provision is within the legislative competence of the State Legislature and does not constitute a consignment tax.

Uttar Pradesh:
Section 3-AAAA of the U.P. Sales Tax Act was challenged for being ultra vires. The court upheld the provision, stating that it imposes a purchase tax on goods liable to tax at the point of sale to the consumer. The tax is levied on the purchasing dealer when the selling dealer is not liable to pay the tax. The court found that the provision is within the legislative competence of the State Legislature.

Andhra Pradesh:
Section 6-A of the Andhra Pradesh General Sales Tax Act was challenged on the grounds that it imposes a use or consumption tax. The court held that the provision imposes a purchase tax on goods used in manufacturing other goods or disposed of in certain ways. The court found that the provision is within the legislative competence of the State Legislature and does not constitute a use or consumption tax.

2. Interpretation and application of the Goodyear judgment:

The court examined the Goodyear judgment, which invalidated purchase tax provisions in Haryana and Maharashtra Acts, and found that the ratio of Goodyear does not apply to the provisions in Gujarat, Uttar Pradesh, and Andhra Pradesh. The court noted that the provisions in these states do not make the tax conditional on the use or disposal of the manufactured goods, unlike the provisions invalidated in Goodyear.

3. Analysis of the taxable event under the respective state acts:

Gujarat:
The taxable event under Section 15-B is the purchase of raw materials used in manufacturing taxable goods. The tax is levied on the purchase price of the raw materials, irrespective of the subsequent use or disposal of the manufactured goods.

Uttar Pradesh:
The taxable event under Section 3-AAAA is the purchase of goods liable to tax at the point of sale to the consumer. The tax is levied on the purchasing dealer when the selling dealer is not liable to pay the tax.

Andhra Pradesh:
The taxable event under Section 6-A is the purchase of goods used in manufacturing other goods or disposed of in certain ways. The tax is levied on the purchase price of the goods, irrespective of the subsequent use or disposal of the manufactured goods.

4. Legislative competence of the state legislatures to levy purchase tax:

The court upheld the legislative competence of the state legislatures to levy purchase tax under Entry 54 of List II of the Seventh Schedule to the Constitution. The court found that the provisions in Gujarat, Uttar Pradesh, and Andhra Pradesh impose a purchase tax on the purchase of goods and are within the legislative competence of the respective state legislatures.

5. Validity of retrospective amendments to the tax provisions:

The court upheld the validity of retrospective amendments to the tax provisions in Gujarat and Uttar Pradesh. The court found that the retrospective amendments were made to remove defects pointed out by the courts and to ensure that no transaction of sale goes untaxed. The court held that the retrospective amendments are within the legislative competence of the state legislatures.

Conclusion:

The court upheld the constitutional validity of the impugned provisions in the Gujarat, Uttar Pradesh, and Andhra Pradesh Sales Tax Acts. The court found that the provisions impose a purchase tax on the purchase of goods and are within the legislative competence of the respective state legislatures. The court also upheld the validity of retrospective amendments to the tax provisions in Gujarat and Uttar Pradesh. The appeals, writ petitions, S.L.Ps, and T.C. were accordingly dismissed.

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