Deputy Commissioner of Sales Tax (Law)
Board of Revenue Vs. Mis. Padinjarkara Agencies  INSC 9 (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 interest at trade of commerce Whether revised rate of
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 conse- quently exigible 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. [1075E; G-H; 1076B] State of Madras v. Shri T. Narayanaswami Naidu
and Anr, (1967) 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 1985 From the Judgment and Order dated 25. 6. 1984 of the Kerala
High Court in T. R. C. No. 19 of 1984.
1075 V. J. Francis for the Appellant. A R.M.
Ansari ,Markose Vellpally 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 C 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 s the purchases acquired the quality of being last purchases in
It was pointed out by this Court in State of
Madras v. Shri T. Naral anaswami Naidu & Anr.  3 S. C. R. 622 when
the assessee ' files a return and declares the stock in hand, the stock in hand
cannot be said to have been ac- quired 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
undetermined; in the light of subsequent vents 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.
But the question remains as to what is the
rate at which 1076 the 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 that 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, 48 S. T. C. 256. 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.