1981 (7) TMI 217 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Determination of the applicable tax rate for goods purchased before a tax rate change but disposed of after the change.
2. Interpretation of the "last purchase" concept under the Sales Tax Act.
3. Examination of relevant case law and its applicability to the current cases.

Issue-wise Detailed Analysis:

1. Determination of the applicable tax rate for goods purchased before a tax rate change but disposed of after the change:
The core issue was whether the tax rate applicable to goods should be the rate at the time of purchase or the rate at the time of disposal when the goods attain the character of the last purchase. The Sales Tax Department argued that the rate at the time of disposal should apply, while the assessees contended that the rate at the time of purchase should be relevant. The court held that the rate of tax would be that prevalent on the date of the purchases, which are identified as last purchases subsequently. Therefore, in T.R.C. No. 68 of 1980, the purchases prior to 1st July 1974, are liable to be taxed at 3%, and in T.R.C. No. 121 of 1980, the purchases prior to 1st July 1974, are exempt from tax.

2. Interpretation of the "last purchase" concept under the Sales Tax Act:
The court examined the concept of "last purchase" under the Sales Tax Act, which specifies that certain goods are taxable at the last point of purchase in the State. The court clarified that the liability to tax arises when the purchase acquires the character of the last purchase due to a subsequent event. However, the court emphasized that the tax is on the transaction of purchase itself, not on the event that determines it as the last purchase. The court distinguished between the time at which the tax liability arises and the rate of tax applicable, concluding that the rate should be that prevalent at the time of the original purchase.

3. Examination of relevant case law and its applicability to the current cases:
The court reviewed several precedents, including the Supreme Court decision in State of Madras v. Narayanaswami Naidu, which supported the principle that the tax liability arises when the purchase acquires the quality of the last purchase. However, the court noted that the Supreme Court did not address the rate of tax applicable in such situations. The court also referred to decisions from the Andhra High Court and the Madras High Court, which supported the view that the taxable event is the purchase, and the rate should be that prevalent at the time of purchase. The court disagreed with the Division Bench decision in T.R.C. No. 88 of 1977, which had applied the rate at the time of the subsequent event, and overruled it.

Conclusion:
The court concluded that the applicable tax rate for goods should be the rate prevalent at the time of purchase, irrespective of when the goods are determined to be the last purchase. The tax revision cases were allowed, and the assessments were ordered to be modified accordingly. The purchases prior to 1st July 1974, in T.R.C. No. 68 of 1980, were to be taxed at 3%, and those in T.R.C. No. 121 of 1980 were exempt from tax. The petitions were allowed, and no costs were awarded.