Dy. Commissioner of Sales Tax (Law)
Board of Revenue Vs. Padinjarakara Agencies  INSC 10 (21 January 1985)
BHAGWATI, P.N. BHAGWATI, P.N.
CITATION: 1987 AIR 2244 1985 SCR (2) 851 1985
SCC (4) 237 1985 SCALE (2)1216
Kerala General Sales Tax Act, Item 71 of
First Schedule-Liability to "purchase tax" as last purchase, when
arises-Rate of tax enhanced After a certain date-Goods in stock acquired prior
to such date and sold subsequently in inter-state trade or commerce-Whether
revised rate of tax applicable.
The respondent-assessee had made certain
purchases before 30th June, 1974 and sold them subsequently in the course of
inter-state trade or commerce. The rate of purchase tax under Item 71 of the
First Schedule to the Kerala General Sales Tax was increased from 3% to 5% with
effect from 1st July, 1974. The High Court held that the purchases made by the
respondent prior to 30th June, 1974 were taxable at the rate of 3 %.
Dismissing the appeal to this Court, ^
HELD: The assessee could not be made liable
to tax on the purchases made by it prior to 30th June, 1974, unless the
purchases acquired the quality of being last purchases in the State In the
instant case there can be no doubt that the assessee became liable to pay tax
on the purchases made by it prior to 30th June, 1974, as soon as it became
determined though subsequent to 30th June, 1974, that these purchases were last
purchases inside the State and were subsequently eligible to tax. Since the
purchases took place before 30th June, 1974, the assessee would be liable to be
taxed at the rate of 3% which was prevailing at the time when the purchases
were made. [8S2F-H; 853B] State of Madras v. T. Narayanaswami Naidu & Anr.,
 3 S.C R. 622, referred to.
Seaso Rubbers v. State of Kerala, 48 S.T.C.
CIVIL APPELLATE JURISDICTION: CIVIL Appeal No. 4160 of
852 From the Judgment and Order dated
25.6.1984 of the Kerala High Court in T.R.C. No. 19 of 1984.
V. J. Francis for the Appellant.
T. M. Ansari, Markose Vellapally and D. N.
Misra for the Respondent.
The Judgment of the Court was delivered by
BHAGWATI, J. The sole question which arises for determination in this appeal is
as to what is the rate at which the goods which had been purchased earlier and
which were in stock with the assessee on 30-6-74 were assessable to purchase
tax when the purchases were found to be last purchases as a result of events
which took place subsequent to 30.6.1974. This question has become material
since the rate of purchase tax was increased from 3% to 5% with effect from 1st
July, 1974. Now it is not disputed in the present case that the purchases of
goods effected by the assessee prior to 30-6-74 were last purchases within the
State because the goods purchased which were in stock on 30.6.74 were
subsequently sold by the assessee in the course of inter-state trade or
commerce which means that they were not sold within the State and hence the
assessee was clearly the last purchaser within the State and as such was liable
to pay purchase tax under Item 71 of the First Schedule to the Kerala General
Sales Tax Act. Equally it is clear that the assessee could not be made liable
to tax on the purchases made by it prior to 30th June 1974, unless the
purchases acquired the quality of being last purchases in the State.
It was pointed out by this Court in State of
Madras v. Shri T. Narayanaswami Naidu & Anr.(1) when the assessee
"files a return and declares the stock in hand, the stock in hand cannot
be said to have been acquired by last purchase because he may still during the
next assessment year, sell it or he may consume it himself or the goods may be
destroyed, etc. He would be entitled to claim before the assessing authorities
that the character of acquisition of the stock in hand was undermined; in the
light of subsequent events it may or may not become the last purchase inside
the State." There can therefore be no doubt that the assessee in the
present case became liable to pay tax on the purchases made by it prior to 30th
June, 1974, as soon as it became determined though subsequent to 30th June
1974, that these purchases were last purchases inside the State and were
consequently exigible to tax.
(1)  3 S.C.R. 622.
853 But the question remains as to what is
the rate at which the A assessee was liable to be taxed in respect of these
purchases. Since the purchases took place before 30th June 1974, the assessee
would, in our opinion, liable to be taxed at the rate prevailing at the time
when the purchases were made and since the rate at the time was 3% of the sale
price, the High Court was right in taking the view that the purchases made by
the assessee prior to 30th June 1974 were taxable at the rate of 3%. We may
point out that a similar view has been taken by the Kerala High Court in Seaso
Rubbers v. State of Kerala(1). We find ourselves in agreement with the
reasoning adopted by the Full Bench of the High Court in that case.
We accordingly reject the appeal but with no
order as to costs.