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TMI Blog1981 (7) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... f such disposal is different from the rate of tax prevailing at the date of purchase at what rate should tax be levied? If there is no change of rate of tax in the meanwhile this question may not arise. But if there is, one or other of the two rates will have to be applied. The sales tax department has taken the stand that the rate to be applied is the rate prevailing at the time the purchase qualifies to be the last purchase by reason of the subsequent event which gives the earlier purchase the character of last purchase. The goods purchased may be sold inside the State again and if that happens the earlier purchase will not be the last purchase in the State. If the goods become unavailable by being consumed either in manufacture or otherwise or if the goods are exported outside the State, or if the goods are destroyed the earlier purchase becomes the last purchase in the State. According to the assessees, tax being on the purchase despite the fact that the purchase attains the character of last purchase later, it is the rate prevalent at the time of purchase that would be relevant. This stand taken by the assessees has not been accepted by the assessing authority, the Appellate A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit. A similar view was expressed by the Mysore High Court in Hormusji Hirjibhoy Co. v. Commercial Tax Officer[1962] 13 S.T.C. 773. The Madras High Court dissented from these decisions in State of Madras v. Narayanaswami Naidu[1965] 16 S.T.C. 29. The case before the Supreme Court in State of Madras v. Narayanaswami Naidu[1968] 21 S.T.C. 1 (S.C.). was an appeal against the Madras decision at the instance of the State of Madras. The counsel for the appellant contended before the Supreme Court that the tax under the Madras General Sales Tax Act being a yearly tax what happens to the goods in subsequent years cannot be taken into consideration for determining the taxability of any purchase of declared goods inside the State. According to counsel the taxable event is the last purchase in the State during the assessment year and if stocks were held at the end of the assessment year it followed that the assessee holding the stocks was the last purchaser in the State and such last purchaser must be taxed in that year. The Supreme Court did not approve of this reasoning. The court was of the view that in view of the liability to tax being limited to the sale or purchase inside the State o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arises then because the earlier purchases had an undetermined character till then and the character is determined only by the subsequent event. On such determination the tax liability arises. To that extent the Supreme Court decision certainly supports the case of the State. But the question here cannot be resolved merely by determining the time at which the liability to tax arises. The liability to tax nevertheless is on the transaction of purchase. The sales tax itself is a tax which the State is authorised to impose by entry 54 of List II in the Seventh Schedule to the Constitution of India. It is a tax on sale or purchase of goods. Section 5 of the Sales Tax Act provides for tax liability on the taxable turnover of a dealer. In the case of goods specified in the First and Second Schedules such tax liability arises at the rates and only at the points specified against such goods in the First and Second Schedules, as the case may be. In the case of other goods it arises on all points of sale at the specified rate. The point specified in the case of goods with which we are concerned in this case is the point of the last purchase by a dealer who is liable to tax under section 5. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was so authorised the Act and the Rules are repugnant to article 286(1)(b) of the Constitution. Dealing with this question the Andhra High Court observed thus: "The single point is selected by making the last purchaser in the series of sales liable for the tax and it is only when the stage of export is reached in the series of sales by successive dealers, that the tax becomes exigible. But it is not the transaction of export sale on which the tax is levied. The tax is levied on the purchase which precedes the export sale. The taxable event is really the purchase and this is shown by fixing the quantum of the turnover at the price paid by the dealer for the purchase and not the price realised by him on the export sale. The fact that unless the goods were exported, liability to tax would not fasten does not lead to the inference that what is taxed is the export sale. " The court further said in that case thus: "The export by the dealer merely marks the final stage of series of purchases by one licensed dealer from another and it is at that stage that the taxable event, namely, the last purchase, and the person who is liable to pay the tax, namely, the last purchaser, are both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 31st July, 1963, in accordance with the proviso as it stood prior to its amendment and in respect of the period subsequent to 31st July, 1963, at a different rate as provided for in the substituted proviso. Dealing with this question the Full Bench at page 409 said thus: "It was, however, contended that the new proviso uses the words 'for the year' and since assessment is made at the end of the assessment year, the provisions of the new proviso would apply to the whole year because it is that provision of law which was in force at that time. What is, however, overlooked in advancing this argument is that the change which has been brought about in the rates and in the manner of their application are substantive rights and liabilities which are accrued or incurred. The moment the transactions are completed, under the Act rights are accrued and they are not affected by the amended proviso. If the unaffected transactions have already attracted particular rates of tax and the manner in which those rates are to be made applicable, then if the new proviso is to be applied which involve new rates and a new manner of applying them, it will affect the vested rights and liabilities which ..... 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