Holding

The assessee is liable to purchase tax on pre‑30 June 1974 purchases once they are determined to be last purchases, but the tax must be levied at the rate prevailing at the time of purchase (3%).

Summary

The respondent, Padinjara Kara Agencies, had purchased goods before 30 June 1974 and later sold them in inter‑state trade. The Kerala General Sales Tax Act increased the purchase tax rate from 3% to 5% effective 1 July 1974. The issue before the Supreme Court was whether the respondent could be taxed on those pre‑June purchases and, if so, at which rate. The Court held that the respondent became liable to purchase tax as soon as the goods were determined to be "last purchases" within the State, but the applicable rate is the one in force at the time of purchase, i.e., 3%. Consequently, the appeal by the Commissioner of Sales Tax was dismissed, affirming the High Court's decision.

Issues considered

What is the appropriate rate of purchase tax for goods purchased before 30 June 1974 but later deemed "last purchases" within the State?
Can the assessee be liable to purchase tax for pre‑June purchases that were later identified as last purchases?

Legislation cited

Kerala General Sales Tax Acts. Item 71 of First Schedule

Subjects

purchase taxlast purchasetax rateinter‑state tradeKerala General Sales Tax Acttax liability

Judgment

1
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DY. COMMISSIONER OF SALES TAX (LAW)
A
BOARD OF REVENU~ (TAXES)
v.
PADINJARAKARA AGENCIES
n
January 21, -1985

(P. N. BHAGWATI AND RANGANATH MISRA, JJ.J

Kerala General Sal~s Tax Act, Item 71 of First Schedui~-Liabili<yro
"purbhase tax" as last purchase, w!ren arises--Rate of tax enhanud aft~r a
ctrtafrr date-Goods in stock acqt.lr~d prlor to such date and sold subrequently
c
In inter-state-trade or commerce-Whetlter revised rate of tax app/icuble.

The r~spondent-assessec had made certain purchases before 30th Juno,
1974 and sold them subsequently io the course of inter-state trad.: or
commerce. Tbc rate of purchase tax under Item 71 of the First Schedule
to tbe Kerala Ocnoral Sales Tax was increased from 3% to 5% with effect
from 1st July, 1974. Tho High Court held that tho 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 E
PUrchases made by it prior to 30th June, 1974, unl.:ss the purchases acquired
the quality of bcina last purchases in tbc State,. In the instant case there
can bo no doubt that tbe assessee became liable to pay tax on the purchases
made by it prior to 30th June, 19 74, as soon as it became determined
though subsequent to 30th June, 1974, that these_ ~urchascs were .last pur.
chases inside tbe State and were subsequently exog1ble to tax. Soncc tbc
PUrchases look place before 30th Juno, 1974, ~~c assessee wo~ld bo h~ble to F
be taxed at the rate of 3% which wlls prcva•hng at the lime wbcn tbo
PUrchases were made. {8$2P-H; 8S3B]

State of Madras v. T. NOI'ayauaswamf Naida <h. Anr., (1967] .3 S.C.R.
622, rcr~rred to. G
s~aso Rubbers v. Stat~ of Kamla, 48 S.T.C. 2 ' 6• approved.
Civ.il Appeal No. 4160 of
CIVIL APPELLATB JUR~'iDICTJON :
1985.
SUPREME COURT REPORTS
8.52 (1985! i S.C.R,•

A . From the Judgment and Ord~r dated· 25.6.1984 of the
High Court in T.R.C. No. 19 of l9iS4. K.crala ,;
i)
·. PI
- V. J, Fra11cis for the Appellant.

T. M. Ansari, Markose Vellcipally and D. N. Misra for the
Respondent.
B
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
c 30-6·74 were assessable to purchase tax when the purchases were -· 1
found to be last purchases as a result of events which took place sub-
sequent to 30.6.1974. This question has become material since the
rate of purchase tax was increased from 3% to 5% with effect from
l st July, 1974. Now it is no• disputed in the present case that the.
purchases of goods effected by the assessee prior to 30-6-74 were last
D purchases withi~ 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 wert-
not sold within the Stat'c and hence the assessee was clearly the last
purchaser within the State and as such was Hable to pay purchase tax
under Item 71 of the First Scheduk to the Kerala General Sales Tax ·
E Act. Equally it is clear that th:: 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 Madraj v. Shri T. Nora·
yanaswami Naidu & Anr.(l) when the assessee "files a return and ·
. . b 'dtohave
F declares the stock m hand, the stock m hand cannot c sm ·t
. .11 d ·0 o the nex
been acquned by last purchase because he may st1 un o ds ..,
asicssment year, sell it or he may consume it himself or the go~hc ·
may be destroyed, etc. He would be entitled to claim bebfore tock
· · · of t _c s or
-assessing authorities that the character of acqutsttloll
. . . . t vents 1t o1aY
m hand was undcrmmcd; m the light of subsequen c, .h e can
may not become the last purchase inside the State.
1 ~ecame
G therefore be no doubt that the assessee in the prc~:nt ca;~th June.
liable to pay tax on the purchases made by it pnor to t to 30th
. I
1974, as soon as it bccam" dettrmined though subscqucn h State
·ns•de t c
June: 1974, that these purchases were last purchases 1
and were consequently exigible to tax.

(I (l) [1967] 3 S.C.R. 622.

i
'1. .
. .• ·.. . . ~
c. S, T. v. PAD~NJARAKARA AGENCIES (Bhagwatl. J.) . 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 pur-
. chases made by the assessee prior to 30th June 1974 were taxable at the B
rate of 3%. We may point out that a similar view has lieen taken by
the Kerala High Court in Seaso Rubbers v. State of Kerala(l). 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. C

M.L;A. , Appeal dismissed
..

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•

(1) 38 S.T.C. 2S(i