1993 (10) TMI 321 - HC - VAT and Sales Tax

Issues Involved:
1. Constitutional validity of Section 4-B of the Punjab General Sales Tax Act, 1948.
2. Competence of the Punjab State Legislature to impose and collect purchase tax on goods consigned outside Punjab.
3. Applicability of precedents set by the Supreme Court in Goodyear India Ltd. v. State of Haryana and Mukerian Papers Ltd. v. State of Punjab.
4. Relevance of the subsequent Supreme Court judgment in Hotel Balaji v. State of Andhra Pradesh.

Detailed Analysis:

1. Constitutional Validity of Section 4-B:
The petitioner challenged Section 4-B of the Punjab General Sales Tax Act, 1948, arguing it was ultra vires the Constitution and beyond the competence of the State Legislature. The petitioner contended that the taxable event was the consignment of goods outside Punjab, which falls under the exclusive legislative competence of Parliament as per Entry 92-B of the Union List and Article 269 of the Constitution.

2. Competence of the Punjab State Legislature:
The petitioner argued that the Punjab State Legislature lacked the authority to impose a tax on the consignment of goods, asserting that such taxation is within the exclusive domain of Parliament. The petitioner relied heavily on the Supreme Court's judgments in Goodyear India Ltd. v. State of Haryana and Mukerian Papers Ltd. v. State of Punjab, which held similar provisions in other state acts to be ultra vires.

3. Applicability of Supreme Court Precedents:
The petitioner cited Goodyear India Ltd. v. State of Haryana, where the Supreme Court ruled that Sections 9(1)(b) and 24(3) of the Haryana General Sales Tax Act, 1973, were ultra vires. The petitioner also referenced Mukerian Papers Ltd. v. State of Punjab, where Section 4-B of the Punjab Act was similarly questioned, and the Supreme Court followed the reasoning in Goodyear's case.

4. Relevance of Hotel Balaji v. State of Andhra Pradesh:
The respondents argued that the judgments in Goodyear and Mukerian Papers were no longer good law in light of the Supreme Court's later decision in Hotel Balaji v. State of Andhra Pradesh. In Hotel Balaji, the Supreme Court held that similar provisions in the Andhra Pradesh General Sales Tax Act and Uttar Pradesh Sales Tax Act were intra vires, thereby overruling the reasoning in Goodyear.

Judgment Summary:

Constitutional Validity and Legislative Competence:
The court upheld the constitutional validity of Section 4-B of the Punjab General Sales Tax Act, 1948, ruling that the State Legislature was competent to enact the provision. The court distinguished the facts of the present case from those in Goodyear, noting that the tax in question was a purchase tax, not a consignment tax. The taxable event was the purchase of goods within Punjab, and the tax liability was only postponed until the goods were consigned outside the state.

Reliance on Supreme Court Precedents:
The court acknowledged the petitioner's reliance on Goodyear and Mukerian Papers but found these cases distinguishable. It emphasized that the Supreme Court in Hotel Balaji had revisited and overruled the reasoning in Goodyear, affirming the legislative competence of states to impose purchase tax on goods under certain conditions.

Final Ruling:
The court held that Section 4-B of the Punjab General Sales Tax Act, 1948, was intra vires the Constitution. The tax imposed was on the purchase of goods within Punjab, not on their consignment outside the state. Consequently, the writ petition was dismissed, and the court affirmed the competence of the Punjab State Legislature to enact and enforce the provision.

Writ petition dismissed. No costs.

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