Kerala General Sales Tax Act, 1963 – s.5A – Tamil Nadu General Sales Tax Act, 1959 – s.7A – Levy of purchase tax – Constitutional validity of purchase tax under the Acts – Purchase tax, as imposed by s.5A of the Kerala Act or s.7A of the Tamil Nadu Act, is a tax in the nature of manufacture or consignment tax or an inter-state levy – Purchase of goods by the assessee from dealers exempted from payment of tax under the Kerala Act or Tamil Nadu Act, if a purchase “which is liable to tax” within the meaning of s.5A of the Kerala Act or s.7A of the Tamil Nadu Act – Assessee who had purchased goods, that were exempt from payment of sales tax or from the dealers who were exempt from payment of sales tax, if liable to pay purchase tax:
Held: Constitutional validity of s.7A of the Tamil Nadu Act and s.5A of the Kerala Act upheld – Levy of purchase tax is governed by the provisions and stipulations of ss.5A or 7A – They are independent and in a way constitute charging sections – ss.5A or 7A, impose purchase tax specifically in situations where the seller is granted exemption from payment of tax – Exemption from payment of tax at the time of sale is a pre-condition for attracting ss.5A and 7A respectively – It cannot be said that s.7A of the Tamil Nadu Act and s.5A of the Kerala Act would have no application when tax is exempt at the hands of the seller, or for that matter, the tax u/s.3 or s.5 of the Acts at the hands of the seller is payable at the point of first sale – The fact that the goods were not exempt from payment of tax at the time of sale and the goods would have attracted tax at the first point of sale, is immaterial – Purchase tax is leviable on and payable by the purchaser – However, the legislations do not levy the purchase tax to tax the transaction of the sale and purchase twice – Instead, it levies purchase tax only where no sales tax was payable on the sale – Purchase tax is levied on the purchase of goods on which no tax has been paid on account of any exemption as a result of which the seller is not required to collect and pay sales tax – Decision whether or not to levy purchase tax is a prerogative and power of the State Legislature – It cannot be said that purchase tax is leviable when there is cross- border or inter-State movement of the goods or is a consignment tax – What is granted is exemption from payment of sales tax and not the purchase tax – Grant of exemption being for the purpose of payment of sales tax, it does not follow that purchase tax would not be payable when conditions of s.7A are satisfied – Furthermore, it cannot be said that the applicable rate of tax on purchase would be nil as the tax payable on the sale in view of the exemption from payment of sales tax is nil – Thus, the judgments /orders of High Courts upheld. [Paras 31, 32, 35, 37-39]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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