The Food Corporation of India vs The State of Punjab and Another

Ashok Bhan, J.—Taking a cue from the decision of the Supreme Court in State of Haryana v. Goodyear India Ltd. and others, 1990 (76) S.T.C. 72, in which Section 9(1) of the Haryana General Sales Tax Act, 1973 (which is in para materia with Section 4(b) of the Punjab General Sales Tax Act), was held to be ultra vires the Constitution, this petition has been filed to challenge the vires of Section 2(if) and Section 5(3) (a) (ii) of the Punjab General Sales Tax Act (hereinafter referred to as the State Act), on the plea that levy of purchase tax on the goods mentioned in Schedule ''C'' of the State Act when sent not by way of sale, but on branch transfer/consignment basis outside the State, is ultra vires the legislative competence of the State of Punjab. A further writ of mandamus directing the Respondents to refund all the purchase tax paid to the State of Punjab in pursuance of these sections has also been prayed for.

Facts relevant to the point in issue, are as under:Petitioner-Food Corporation of India (hereinafter referred to as the Petitioner-corporation) is a statutory corporation incorporated under the Food Corporation Act, 1964. The corporation was established with the primary object of safeguarding the interest of the farmers on one hand by providing support price for their produce and the consumers on the other hand by making available the foodgrains at controlled price fixed by the government of India. The main functions of the Petitioner-corporation are purchases, storage, movement,transport, distribution and sale of foodgrains and other food-stuffs. Before the formation of the Petitioner- corporation, these functions were being discharged by the Department of Food, Govt, of India themselves. In order to carry out these objectives, the Petitioner-corporation procures foodgrains in the surplus States and transports the same to the other states for distribution as per the policy of the Govt, of India. In order to carry out these objectives mentioned above, the Petitioner-corporation has its branches in various states. The present petition relates to the operations of the corporation in the State of Punjab, which operations for taxation purposes, are controlled by the Branch of the Petitioner-corporation at Patiala, which is registered under the State Act as well as the Central Sales Tax Act, 1956 (hereinafter referred to as the Central Act) as a dealer.

Goods mentioned in Schedule ''C'' of the State Act, i.e. paddy, rice and wheat are exigible to purchase tax within the State of Punjab which the Petitioner-corporation was paying till the third quarter of the assessment year 1989-90 i.e. till the filing of the present petition. According to the Petitioner-corporation, as per the scheme of the State Act, the purchase tax on ''declared goods'' (in Schedule ''C'') is levied on the stage of purchase of these goods by the last dealer liable to pay tax under the Act but in the present case, this tax is being levied on the Petitioner-corporation due to its becoming the last dealer liable to pay tax under the Act, by virtue of the Petitioner-corporation transferring/consigning these foodgrains to its own branches in other States of India. It is alleged that the Petitioner-corporation becomes liable to pay purchase tax when the Petitioner-corporation purchases goods from within the State of Punjab and then the moment the Petitioner-corporation becomes the last dealer liable to pay tax under the Act, the goods become exigible to the levy of purchase tax. Thus, the taxable event is attracted by the Petitioner-corporation by becoming the last dealer liable to pay tax under the Act on the goods in Schedule ''C on the occasion of its consigning of these goods to its branches in other states outside the State of Punjab. Further, the case of the Petitioner-corporation is that in Goodyear''s case (supra), it has been held by the Supreme Court of India that the levy of tax on such goods/transaction involving inter-State sale or transfer or consignment, in the course of inter-State trade and commerce, is beyond the competence of the State Legislature and it is only the Parliament which has the competence to legislate on the subject. In this judgment, the apex Court inter alia struck down Section 9(l)(b) and 24(3) of the Haryana General Sales Tax Act, 1973 (for short HGSTA), holding that these sections were beyond the competence of the State Legislature and thus ultra vires and void. The basic reasoning given by the Supreme Court is that the field of taxation on the consignment/despatch of goods in the course of inter-State trade or commerce, expressly comes within the purview of the exclusive legislative competence of the Parliament, due to the interaction of a new entry in the Union List in the shape of Entry 92-B, a new sub Clause (b) in Clause (i) of Article 269, as well as the amended Clause (3) of Article 269 of the Constitution.

On this reasoning, it was prayed that in the facts and circumstances of this case, the levy and liability of the purchase tax on the Petitioner-corporation on wheat, paddy and rice consigned outside the State of Punjab to its branches in other states falls within the ratio of the law laid down by the judgment of the Supreme Court in Goodyear''s case (supra); that the levy of purchase tax on the Petitioner-corporation to the extent of liability of tax in respect of those purchases, where purchased goods are despatched/ consigned outside the State by the Petitioner-corporation, is illegal and ultra vires as the same is being imposed by the Legislature of the State of Punjab which is not competent to impose the same. Though it is not apparent but looking into the true nature of the tax, it can be seen that the actual taxable event is the consignment of the goods and not the purchase thereof.

In the written statement filed, one preliminary objection of consequence taken is that vires of Section 5(3) (a)(ii) of the State Act. have already been upheld by the Constitution Bench of Supreme Court of India in the case of Rattan Lal and Company v. Assessing Authority and Ors. (1970) 25 S.T.C. 136. On merits, it has been submitted that the State Legislature was within its jurisdiction in enacting Section 2(if) and Section 5(3)(ax(ii) of the State Act, as it was within its legislative competence. The subject of levying taxes on the sale or purchase of goods falls in List-II under Entry - 54 of the Seventh Schedule of the Constitution. According to the scheme of the State Act, sales tax is leviable on certain items whereas purchase tax is charged on some other goods specified in Schedule ''C'' appended to the above Act. Paddy, Rice and Wheat are Schedule ''C'' goods as well as ''declared goods'' and are taxable at the last stage as per provisions of Section 5(3) of the State Act ibid. The taxable event in respect of such goods is ''purchase'' and not its subsequent despatch or transfer in other States in India, that the Petitioner-corporation is liable to pay the purchase tax unless it shifts its liability to other purchaser within the State by re-selling such goods to a dealer registered under the State Act. Since it did not do so, it is liable to pay the purchase tax as per provisions of Section 5(3) of the State Act. Realisation of the tax was postponed but the real taxable event is ''Purchase'' and not despatch of goods to other states. It was stated that the point in issue in Goodyear''s case (supra) was different than the one involved in the present case. During arguments, it was also submitted that Goodyear''s case (supra) is no longer good law in view of the subsequent judgment of the Supreme Court in Hotel Balaji and Ors. v. State of Andhra Pradesh and Ors. (1993) 88 S.T.C. 98.

To appreciate the controversy between the parties, certain provisions of the State Act may be noticed.

''Dealer'' as defined in Section 2(d) of the State Act reads as under:

(d) "Dealer" means any person including a Department of Government who in the normal course of trade sells or purchases any goods in the State of Punjab, irrespective of the fact that the main place of business of such person is outside the said state and where the main place of business of any such person is not in the said state, "dealer" includes the local manager or agent of such person in Punjab in respect of such business and also includes a person engaged in the business of

(i) transfer otherwise than in pursuance of a contract of property; in any goods for Cash deferred payment or other valuable consideration;

(ii) transfer of property in goods (whether as goods or in some other form) involved in the execution of works contract;

(iii) delivery of the goods in hire-purchase or any system of payment by instalments;

(iv) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration and

(v) supply, by way of or as part of any service or in any other manner whatsoever, of goods being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration.

"Purchase" as defined in Section 2(ff) of the State Act is:

(ff) "Purchases" with all its grammatical or cognate expressions means the acquisition of goods specified in schedule ''C'' or of goods on the purchase whereof tax is payable under any provisions of this Act for cash or deferred payment or other valuable consideration otherwise than under a mortgage, hypothecation, charge or pledge and includes:

(i) transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration;

(ii) transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

(iii) delivery of goods on hire purchase or any system of payment by instalments;

(iv) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration;

(v) supply by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (whether or no intoxicating) where such supply or service is for cash, deferred payment or other valuable consideration;

and such transfer, delivery or supply of any goods shall be deemed to be a purchase of these goods by the person to whom such transfer, delivery or supply is made from the person by whom the transfer delivery or supply is made.

"Turnover" as defined in Section 2(i) of the State Act reads as under:

(i) "Turnover" includes the aggregate of the amounts of sales and purchases and parts of sales and purchases actually made by any dealer during the given period less any sum allowed as cash discount and trade discount according to ordinary trade practice, but including any sum charged for anything done by the dealer in respect of the goods at the time of or before delivery thereof.

Explanation: (i): The proceeds of any sale made outside the State of Punjab by a dealer, who carries on business both inside and outside Punjab shall not be included in the turnover.

Explanation: (2): The turnover of any dealer in respect of transaction of forward contracts, in which goods are actually not delivered, shall not be included in the turnover.

Explanation: (3): In respect of transactions covered under sub Clause (iii) of Clause (ff) and sub Clause (iii) of Clause (h) the amount to be included in the turnover shall be the total sum payable by the hirer under a hire purchase agreement in order to complete the purchase of, or the acquisition of property in the goods to which the agreement relates and includes any sum as payable by the hirer under the hire purchase agreement by way of deposit or other initial payment, or credited or to be credited to him under such agreement on account of any such deposit or payment whether that sum is to be or has been paid to owner or to any person or is to be or has been discharged by way of money or by transfer or delivery of goods or by any other means; but does not included any sum payable as a penalty or as compensation or damages for breach of the agreement.

Explanation: (4): The amount to be included in the turnover in respect of movable goods agreed to be sold under a works contract,

shall be its "sale price".

By presidents''s Act No. 5 of 1991, Section 5(3)(a)(ii) of the State Act was amended and a new Sub-Section 5(3)(a)(iii), was added which reads as under:

(ii) in the case of goods, other than wheat, liable to purchase tax, the stage or purchase of such goods by the last dealer liable to pay tax under this Act;

(iii) in the case of wheat liable to purchase tax, the stage of purchase of wheat by the Ist dealer liable to pay tax under this Act.

Section 5(3) of the State Act was further amended in March 1993. It does not change the taxability of wheat, rice and paddy in any manner so far as the Petitioner-corporation is concerned. The text of this amendment is reproduced below:

5(3)(a): Tax on declared goods shall be leviable and payable at the stage of sale or purchase, as the case may be, and under the circumstances specified against such goods in Schedule ''D''.

(b) The State Government, after giving by notification not less than twenty days'' notice of its intention so to do, may be like notification add to or delete from Schedule ''D'' and declared goods and thereupon Schedule ''D'' shall be deemed to be amended accordingly.

Wheat was added to Schedule ''C'' of the State Act with effect from 1.4.1984. Being the schedule ''C'' item it attracts Section 5(3) of the State Act. By the amending Act of 1991, wheat was made taxable at the hands of first purchaser and this amendment was given retrospective effect from 1.4.1984 i.e. from the date when the wheat was brought in Schedule ''C''. Thus the taxability of the rice and paddy and the wheat till today is covered by Section 5(3) of the State Act. The only difference is that the rice and paddy are taxable at the last stage whereas the wheat is taxable at the first purchase. Entry 54 of the State List-II of the Seventh Schedule reads as under:

Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of Entry 92-A of List I." Entry 92-A and 92-B of Union List-I in the seventh Schedule reads as under:

92-A. Taxes on the sale or purchase of goods other than newspapers where such sale or purchase takes place in the course of inter-State trade or commerce.

92-B, Taxes on the consignment of goods (whether the consignment is to the persons making it or to any other person), where such consignemnt takes place in the course of inter-State trade or commerce.

The basic law point involved in this petition is regarding the power of the State to levy tax on purchase of goods under certain circumstances. Reading of Entry 54 of the State List makes it clear that for the purpose of taxation and the selection of persons as to who should pay the tax on ''sale or purchase'' of goods have been treated as two different transactions. To begin with, the State Legislature imposed tax on the sale of goods and seller of goods was made liable to pay the tax. For the first time in the year 1958 in connection with some transaction the incidence of taxation was imposed on the purchase of goods and the purchaser of goods was made liable to pay the tax.

In the State of Punjab, a system of single point taxation is followed wherein either the sale or purchase of goods is made leviable for taxation; goods once taxed would not be subjected to further levy of any sales tax at any subsequent stage of sale or purchase. The ambit of taxation policy includes tax on sale or purchase. Most of the goods are taxed when sold by the last registered dealer in the State of Punjab i.e. to the consumers. Other items are taxed at the first point of sale. Similarly purchase tax is also levied either on the first registered dealer purchasing in the State or the last registered dealer. In Punjab, Registered dealers are not taxed. The purchasing dealers in such cases are issued a statutory form by the seller on the production of which deduction of cost is allowed from the gross turnover of selling dealer. In the chain of transactions from one registered dealer to another registered dealer only such forms are inter changed and no tax is levied.

A reading of the scheme of levying tax on sale and purchase under the State Act would show that sales tax is leviable on certain items whereas purchase tax is charged on some other goods specified in Schedule ''C'' appended to the Act. Paddy, rice and wheat are Schedule ''C'' goods as well as declared goods and are taxable at the last stage as per provisions of Section 5(3) of the State Act. Taxable event in respect of such goods is the purchase and not its subsequent despatch/transfer to other States in India. A purchaser is liable to pay purchase tax unless he shifts his liability to some other Punjab dealer registered under the Act. Since the Petitioner-corporation did not shift its liability to other purchaser within the State by re-selling such goods and rather sent the goods outside the State then he became the last dealer liable to pay the tax. Goods have not been taxed twice. It has been subjected to single point taxation. From this, it would be clear that the tax has been imposed on the purchase of goods and not on the consignments of the goods to other States on branch transfer basis. A taxable event is thus purchase and not despatch of goods to other States.

The main reliance of the Petitioner was on Goodyear''s case (supra). In Goodyear''s case (supra), the dealer manufactured tyres. For doing so they purchased certain items from within the State of Haryana without the payment of any tax i.e. on the basis of their sales tax registration certificate Out of the goods purchased, dealer manufactured tyres and sent them on consignment basis to other branches in other states in India. State of Haryana used to charge tax on the purchase value of the goods purchased by them form within the State and used in the manufacture of tyres ultimately sent to other states on consignment basis. On these facts, it was held by their lordships of the Supreme Court that the State Govt. was in fact taxing the event of the consignment of the goods. In the present case, the goods purchased are exigible to purchase tax and not such sales tax. Tax becomes payable on the purchase of goods. Petitioner was liable to pay the tax at that stage but he could shift his liability to pay the tax by selling the goods to a registered dealer in the State of Punjab. The levy of tax was postponed. Petitioner exhausted his chance of shifting his liability by sending the goods outside the State and, therefore, became the last dealer to pay the tax. The taxable event in such a case would be the purchase and not the subsequent action of sending the goods outside the State of Punjab. It is not a tax on the consignment/transfer of goods to branches of the Petitioner-corporation outside the State of Punjab and, therefore, the State Legislature was competent to enact the law. The ratio of Goodyear''s case (supra), on facts, is not applicable to the present case.

Goodyear''s case was decided by a Bench consisting of two Hon''ble Judges. The same point was again taken up by their lordships of the Supreme Court in Mukerian Papers Limited v. State of Punjab (1991) 81 STC 152. This case was decided by three Hon''ble Judges of the Supreme Court. This case related to Section 4(b) of the State Act. Correctness of the judgment in Goodyear''s case (supra), was not canvassed in Mukerian Papers'' case (supra). This fact has been noted in the judgment in the last but one paragraph. Since the correctness of the judgment in Goodyear''s case (supra), was not canvassed, their lordships following the judgment in Goodyear''s case (supra) held that the tax was not leviable on the consignment of the goods outside the State.

The point again came up before their lordships of the Supreme Court in Murli Manohar & Co. and v. State of Haryana and Anr. (1991) 80 STC 79. In this case, the Assessees who were registered dealers under HGSTA, purchased raw materials in the State of Haryana without payment of tax thereon by furnishing declaration forms u/s 24 of HGSTA, manufactured certain items of those raw materials and sold the goods to other dealers who in turn exported the goods outside India. The question was whether the Assessee was liable to pay purchase tax on raw materials u/s 9(1) of HGSTA on the basis of subsequent disposal. It was held that the Assessees were not entitled to the exemption u/s 9(1) of HGSTA because the sales made by them were not in the course of export outside the territory of India within the meaning of Section 5(1) of the Central Act. But the Assessees were held not liable to pay purchase tax on the raw material as a result of subsequent disposal because their sales would still be otherwise covered by one or the other of the three exempted categories set out in Section 9(l)(b) i.e. local sales, inter-State sales and export sales.

The matter was again taken up by their lordships of the Supreme Court in Hotel Balaji''s case (supra). The point in issue was the same as in Goodyear''s case (supra). The relevant provisions of Andhra Pradesh and Uttar Pradesh Sales Tax Act were under consideration of the Hon''ble Supreme Court of India. The provisions of Section 6-A of the Andhra Pradesh General Sales Tax Act, are similar to Section 4(b) of the State Act and Section 9(1) of HGSTA, which was declared to be ultra vires the competence of the State Legislature in Goodyear''s case (supra). The Bench in this case consisted of three Hon''ble Judges. Mr. Justice S. Ranganathan, who was on the Bench in Goodyear''s case (supra) was also a member of this Bench. In this case, the reasoning adopted and the correctness of Goodyear''s case (supra), was challenged. Two separate judgments were delivered. The main judgment was written by B.P. Jeevan Reddy, J. with which Mr. Justice V. Ramaswami, agreed. Mr. Justice S. Ranganathan, wrote a separate concurring judgment. In Hotel Balaji''s case (supra), it was held that the reasoning adopted and the law laid down in Goodyear''s case (supra), was not correct. In his judgment, S. Ranganathan, J. in regard to the findings in Goodyear''s case (supra), observed as under:

I am quite conscious that the conclusion I have expressed here as to the vires of the provision impugned is contrary to the conclusion I reached in Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, on somewhat analogous provisions. I need not, for the purposes of the present cases, express any final conclusion as to whether the conclusion in Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, was rightly reached in the context of the provisions of the statutes there considered or would need a second look and fresh consideration in the context of what has been said here. But, I should not, I think, hesitate to accept the point of view now presented to us which appeals to me as more realistic, appropriate and preferable, particularly when I see that the view one way or the other would affect the validity of a large number of similar legislations all over India, merely because it may not be consistent with the view I took in Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, . Consistency, for the mere sake of it, is no virtue. If precedent is needed to justify my change of mind, I may quote Bhagwati, J. (as he then was) in Distributors (Baroda) Pvt. Ltd. Vs. Union of India (UOI) and Others, :

We have given our most anxious consideration to this question, particularly since one of us, namely, P.N. Bhagwati, J; was a party to the decision in Cloth Trader''s case (1979) 118 ITR (SC) . But having regard to the various considerations to which we shall advert in detail when we examine the arguments advanced on behalf of the parties, we are compelled to reach the conclusion that Cloth Traders (P) Ltd. Vs. Additional Commissioner of Income Tax , Gujarat-I, must be regarded as wrongly decided. The view taken in that case in regard to the construction of Section 80M Must be held to be erroneous and it must be corrected. To perpetuate an error is no heroism. To rectify it is the compulsion of the judicial conscience. In this, we derive comfort and strength from the wise and inspiring words of Justice Bronson in Pierce v. Delameter (AMY at page 18):''a judge ought to be wise enough to know that he is fallible and, therefore ever ready to learn: great and honest enough to discard all mere pride of opinion and follow truth wherever it may lead: and courageous enough to acknowledge his errors.

For the reasons aforementioned, I agree with my learned brother and hold that the impugned provisions under all the three enactments are intra vires the powers of the concerned State Legislature.

In Hotel Balaji''s case (supra), it was held by the Supreme court as under:

Broadly speaking, the effect is: Tax payable at sale point becomes the tax payable on the purchase point, in certain circumstances. Because, the seller is not or cannot be taxed for certain reasons, the purchasing dealer is being taxed...." It was further held:

It would, therefore, be clear that the real object of the Clause (i) to (iii) in the section is not to levy a consumption tax, use tax or consignment tax but only to point out that thereby the purchasing dealer converts himself into the last purchaser in the State of such goods. The goods cease to exist or cease to be available in the State for sale or purchase attracting tax. In these circumstances, the purchasing dealer of such goods is taxed, if the seller is not or cannot be taxed. In this connection, observations of P.S. Poti, J. in Malabar Fruit Products Co. v. Sales Tax Officer (1972) 30 STC 537 (Ker) which have been expressly approved by this Court in State of Tamil Nadu v. Kandaswami (1975) 36 STC 191 - discussed in detail in Part v. may be referred to. It is not necessary to set out the said discussion here over again.

In the circumstances, we are unable to see how the tax imposed by Section 6-A can be described either as use tax, consumption tax or consignment tax. Since we are of the opinion, as explained in Part V, that Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, does not interpret Section 9 of the Haryana Act and Section 13-AA of the Bombay Act, correctly, its reasoning cannot be brought in here to contend that Clause (c) of Section 6-A imposes a consignment tax. It is a purchase tax perfectly warranted by entry 54 of List II of the Seventh Schedule to the Constitution.

The correctness of Goodyear''s case (supra) has been discussed in Part-V of Hotel Balaji''s case (supra). While considering the question as to whether the levy of tax is on the purchase of goods or upon consignment of manufactured goods after referring to the provisions of Section 9 of HGSTA and the findings recorded in Goodyear''s case (supra), it was held as under:

... With the greatest respect at our command, we beg to disagree. The levy created by the said provision is a levy on the purchase of raw material purchased within the State which is consumed in the manufacture of other goods within the State. If, however, the manufactured goods are sold within the State, no purchase tax is collected on the raw material, evidently because the State gets larger revenue by taxing the sale of such goods. (The value of manufactured goods is bound to be higher than the value of the raw material). The State Legislature does not wish to - in the interest of trade and general public - tax both the raw material and the finished (manufactured) produced. This is a well-known policy in the field of taxation. But where the manufactured goods are not sold within the State but are yet disposed of or where the manufactured goods are sent outside the State (otherwise than by way of inter-State sale or export sale) the tax has to be paid on the purchase value of the raw material. The reason is simple: if the manufactured goods are disposed of otherwise than by sale within the State or are sent out of the State (i.e. consigned to dealers'' own depots or agents), the State does not get any revenue because no sale of manufactured goods has taken place within Haryana. In such a situation, the State says, it would retain the levy and collect it since there is no reason for waiving the purchase tax in these two situations. Now coming to inter-State sale and export sale, it may be noticed that in the case of inter-State sale, the State of Haryana does get the revenue - may not be to the full extent. Though the central sales tax is levied and collected by the Government of India, Article 269 of the Constitution provides for making over the tax collected to the State in accordance with certain principles. Where, of course, the sale is an export sale within the meaning of Section 5(1) of the Central Sales Tax Act (export sale) the State may not get any revenue but larger national interest is served thereby. It is for these reasons that tax on the purchase of raw material is waived in these two situations. Thus, there is a very sound and consistent policy underlying the provisions. The object is to tax the purchase by a manufacturer of goods whose existence as such goods is put an end to by him by using them in the manufacture of different goods in certain circumstances. The tax is levied upon the purchase price of raw material, not upon the sale price - or consignment value- of manufactured goods. Would it be right to say that the levy is upon consignment of manufactured goods in such a case ? True it is that the levy materialises only when the purchased goods (raw material) is consumed in the manufacture of different goods and those goods are disposed of within the State otherwise than by way of sale or are consigned to the manufacturing dealer''s depots/agents outside the State of Haryana. But does that change the nature and character of the levy ? Does such postponement - if one can call it as such convert what is avowedly a purchase tax what is on raw material (levied on the purchase price of such raw material) to a consignment tax on the manufactured goods ? We think not. Saying otherwise would defeat the very object and purpose of Section 9 and amount to its nullification in effect....

It was further observed as under:

However, we would presently show that merely because the levy attaches on the happening or non-happening of a subsequent event, the nature and character of the levy does not change. In several enactments, for instance, tax is levied at the last sale point or last purchase point, as the case may be. How does one determine the last purchase point in the State ? Only when one knows that no purchase took place within the State thereafter. But that can only be known later. If there is a subsequent purchase within the State, the purchase in question ceases to be the last purchase. As pointed out pertinently by P.S. Poti, J. (as he then was ) in Malabar Fruit Products Company v. Sales Tax Officer (1972) 30 STC 537, applying the logic of the dealers, it would not be possible to tax any goods at the last purchase point in the State, inasmuch as the last purchase point in regard to any goods could be determined only when the goods are sold later and not when the goods are purchased....

The decision in Malabar Fruit Products Company v. Sales Tax Officer (1972) 30 STC 537, rendered by Mr. Justice P.S. Poti of Kerala High Court of which reference is made by their lordships repeatedly in their judgment, was approved by a three Judges Bench of the Supreme Court in the State of Tamil Nadu v. M.K. Kandaswami and Ors. (1975) 36 STC 191. While farther expressing their difficulty to agree with the reasoning of Mr. Justice Sabyasachi Mukharji in Goodyear''s case (supra) it was observed by their lordships of the Supreme Court in Hotel Balaji''s case as under:

... It is also not possible to agree with the learned Judge when he says that "the two conditions specified, before the event of despatch outside the State as mentioned in Section 9(1)(b), namely, (i) purchase of goods in the State and descriptive of the goods liable to tax u/s 9(1)(b) in the event of despatch outside the State". When the tax is levied on the purchase of raw material, on the purchase price-and not on the manufacture of goods or on the consignment value (such a concept is unknown to Haryana Act) or sale price of manufactured goods the above construction, in our respectful opinion, runs against the very grain of the provision and has the effect of nullifying the very provision. By placing the said interpretation, Section 9 has been rendered negatory; except for the two minor areas pointed out in Murli Manohar and Co. and Another Vs. State of Haryana and Another, , the section which has it parallels in all the State enactments has practically become redundant. This was the main reason we undertook to reconsider the said decision which course we would not have ordinarily agreed to adopt. In our respectful opinion, the tax purports to be and is in truth a purchase tax levied on the purchase price of raw material purchased by a manufacturer. In certain situations (the three situations mentioned above, viz; sale of manufactured goods within the State, inter-State sale and export sale of manufactured goods) it is waived. In other cases, it is not.

As mentioned in the earlier part of this case, Goodyear''s case was rendered by two Hon''ble Judges, in which the vires of Section 9(1)(b) and Section 24 of HGSTA, were held ultra vires the constitution. Mukerian Papers'' case (supra) which was a case u/s 4-B of the State Act, was decided by three Hon''ble Judges and in this case, the reasoning adopted in Goodyear''s case (supra) was not canvassed before their lordships while in Hotel Balaji''s case (supra) it was held that Goodyear''s case (supra) does not lay down correct law and in this connection while dealing with Mukerian Papers'' case (supra) in Hotel Balaji''s case (supra), it was observed as under:

It is argued for the Assessees that apart from Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, a Bench of three Judges of this Court has independently approved and affirmed the correctness of the ratio and reasoning in Mukerian Papers Ltd. Vs. State of Punjab, . The case arose under the Punjab General Sales Tax Act and the provision which fell for interpretation was Section 4-B. It levied purchase tax on the raw material used in the manufacture of goods which in turn are sold outside the State otherwise than by way of sale in the course of inter-State trade or commerce or in the course of export out of the territory of India. The argument for the Assessee/Appellant was " that the main question of law involved in this case is concluded by the decision of this Court in Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, which was an appeal arising from the High Court decision in the case of the same Assessee...". It was this contention which was examined by the Bench. Section 4-B of the Punjab Act was analysed and it was found that it is in material particulars, similar to Section 9 of the Haryana Act even though the language was not identical. Ahmadi, J. speaking for the Bench, observed: ''therefore, even though the language of Section 4-B of the Act not identical with the relevant part of Section 9(1) of the Haryana Act, it is in substance similar in certain respects, particularly in respect of the point of time when the liability to pay tax arises. Under that provision, as here, the liability to pay purchase tax on the raw material purchased in the State which was consumed in the manufacture of any other taxable goods arose only on the actual despatch of the goods outside the state. We are, therefore, of the opinion that the ratio of the said decision of this Court in Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, applies on all fours to the main question at issue in this case.'' When the counsel for the Revenue sought to argue that the decision of this Court in Kandaswami (1975) 36 STC 191 (SC) takes a different view the Bench did not permit the same to be urged in view of the fact that the correctness of the judgment in Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, was not canvassed before them. The Bench said ''the decision in Kandaswami though in the context of an analogous provison was distinguished by this Court in Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, on the ground that it did not touch the core of the question at issue in the latter case. This aspect of the matter is elaborately dealt with in pages 96-97 of STC (paragraphs 31 to 34 at page 796 of AIR). We need not dialate on this any more since the correctness of the judgment in Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, is not canvassed before us.

It is thus, clear that the main argument for the Bench was that the ratio of Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, governs the said case and it was so found. It is equally clear that the correctness of the decision in Goodyear India Ltd., Gedore (India) Pvt. Ltd., Kelvinator of India Ltd. and the Food Corporation of India and Another Vs. State of Haryana and Another, was not questioned before the Bench and that is why the Bench took care to specifically advert to and record the said circumstance.

Similar view was expressed about Murli Manohar''s case (supra). Ultimately, for the reasons given, their lordships held the constitutional validity of the impugned provisions to be intra vires.

We have held that Goodyear''s case (supra) is distinguishable on facts. Moreover, the decision in Goodyear''s case (supra), the reasoning of which was adopted in Mukerian Papers'' case (supra), have been held to be no longer good law by the Supreme Court in Hotel Balaji''s case (supra). In view of the findings recorded above, it is held that the tax imposed is on the purchase of goods mentioned in Schedule ''C'' in which tax is exigible on i purchase of goods and not on the consignment/transfer to its own branches by the Petitioner-corporation. The provisions enacted are within the competence of the State Legislature and, therefore, held to be intra vires. The writ petition is accordingly dismissed. No costs.

Sd/- S.S. Sodhi, J.