Supreme Court of India

M/S JAGATJIT SUGAR MILLS ETC.versusSTATE OF PUNJAB AND ANR.

Citation: 1994 INSC 430
Decided: 4 October 1994
Disposal: Dismissed
Bench: B P JEEVAN REDDY

Holding

The purchase of sugarcane is subject to tax under Section 4(1); the exemption under Section 6 applies only to the sale of Schedule‑B goods, not to their purchase.

Summary

Jagatjit Sugar Mills Co. Ltd. purchased sugarcane from growers and cooperative societies for sugar production. The Assessing Authority issued a notice demanding purchase tax and a penalty, alleging the mill had failed to pay tax under the Punjab General Sales Tax Act, 1948. The mill contended that sugarcane, being agricultural produce listed in Schedule‑B, was exempt from both sales tax and purchase tax under Section 6. The Supreme Court examined the interplay of Sections 4(1), 4‑B, 6 and the definition of "purchase" in Section 2(ff), holding that Section 6 exempts only the sale of Schedule‑B goods and does not shield their purchase from tax. Purchase tax is levied by Section 4(1); Section 4‑B does not apply to Schedule‑B goods. Consequently, the mill is liable to pay purchase tax on sugarcane, and the penalty notice stands. The writ petitions were dismissed.

Issues considered

Whether the exemption from sales tax granted under Section 6 of the Punjab General Sales Tax Act, 1948 for Schedule‑B goods extends to purchase tax.
Which provision of the Act levies purchase tax on sugarcane purchased by the mill.
Interpretation of Section 4‑B and its applicability to Schedule‑B goods.
Whether a dealer dealing exclusively in goods declared tax‑free under Section 6 is exempt from purchase tax.

Legislation cited

Punjab General Sales Tax Act, 1948s. 10(4), s. 10(6), s. 2(ff), s. 4(1), s. 4(2-A), s. 4-B, s. 5, s. 6

Subjects

purchase taxsales taxexemptionagricultural producesugarcanePunjab General Sales Tax ActSection 6Section 4(1)Section 4-Bdefinition of purchasedealer

Judgment

A MIS JAGATJIT SUGAR MILLS ETC.
v.
STATE OF PUNJAB AND ANR.

OCTOBER 4, 1994

R (B.P. JEEVAN REDDY, SUHAS C. SEN AND
K.S. PARIPOORNAN, JJ.]

Punjab General Sales Tax Act, 1948 :

C Sections 2(ff), 4(2-A) (As inserted by amendment in 1960), 4-B(As
introduced by Amendment Act 3 of 1973), 5,6, 10(4) and 10(6}-Schedule-
B-ftem 39-Schedule-C.

Sales T~rchase T~Sugar Mill-l'urchase of sugar cane from
canegrowers and co-operative societies comprised of canegrowers-Liability
D to pay !~Sugarcane being agricultural produce held exempt from tax on
sale by virtue of section 6 read with Schedu/e-B-But held liable to tax on
its purchase by virtue of section 4(1)-0bject of Section 4-B and essential
requirements of levy of purchase tax discussed.

E The Petitioner-Mill was manufacturing sugar and for that purpose
it was purchasing sugarcane from the cane growers and cooperative
societies comprised of cane growers. The Assessing Authority under the
Punjab Sales Tax Act issued notice to it proposing levy of penalty under
Section 10(6) of Punjab General Sales Tax Act, 1948 for its failure to pay
tax doe under Section 10(4) of the Act. The petitioner denied its liability
F to pay tax and filed a writ petition in this Court seeking directions to
restrain the respondents from giving effect to the notice. In the connected
petitions also the same question is involved.

On behalf of the petitioners it was contended that (i) sugarcane
G being an agricultural produce within the meaning of Item 39 of Schedule·B
of the Act was exempt from tax; (ii) Schedule-B goods are exempt from tax
on their sale by virtue of Section 6 and exempt from Purchase tax on their
purchase by virtue of Section 4-B; (iii) in view of the expression "dealing
exclusively in goods declared tax free under Section 6" the goods referred
to by Section 6 and as mentioned in Schedule Bare exempt both from sales
H tax and purchase tax; and (iv) the definition of purchase under Section
194
J. SUGAR MILLS v. STATE 195

2(11) supports the view that only the goods mentioned in Scbedule-C are A
subject to purchase tax and no other goods.

Dismissing the petitions, this Court

HELD : 1. Section 6 of the Punjab General Sales Tax Act, 1948
exempts the sale of goods mentioned in Schedule-B from tax, subject to the B
conditions and exceptions, if any, set out in the corresponding entry in the
second column· of the said Schedule. Undoubtedly, sugarcane is an agricul-
tural produce within the meaning of ltem-39 of Scbedule-B and it is exempt
from tax on its sale when its is sold by a person or a member of bis family
who bad grown the said produce himself or has grown it on any land on C
which be has any interest whether as a owner or usufructary mortgagee,
tenant or otherwise. Item 39 of Scbedule-B operates to exempt the sale of
agricultural produce from tax only where it is sold by the grower himself.
Therefore, sugarcane is exempt from tax on its sale. (201-H, 202-A, BJ

2. Under Section 4(1), the tax is levied both on sales and purchases. D
It is, however, unreasonable to presume that the Legislature wanted to tax
both the seller and purchaser in respect of the same transaction - an
aspect mainfested in part by sub-section (2-A). The policy of law is to tax
every transaction of sale, either at the point of sale or at the point of
purchase, uniess specifically exempted from the tax altogether. Where the E
seller Is not taxed, the purchaser is taxed. By the same token, where the
seller is taxed, the purchaser is not. (201-F, GI

3. It is, therefore, obvious that where the sale of certain goods is
exempt from tax by virtue of Section 6, their purchase wm be taxed aud
conversely where the Act expressly taxes the purchase of certain goods F
their sale simultaneously will be not be taxed - subject, of course, to any
express provision providing exemptions. In the case of sugarcane, it being
an agricultural produce - and in cases it is sold by the grower himself •
such sale is exempt from tax by virtue of Section 6 read with Scbednle-B.
If so, the purchaser thereof is liable to pay tax on its purchase by virtue G
of Section 4(1). (205-H, 206-A, BJ

4. It is idle to contend that Section 4-B imposes purchase tax or is
the only provision imposing purchase tax. Section 4-B is mainly designed
to affirm or exempt, as the case may be, the purchase of certain goods from
purchase tax in certain specified situations. It, of course, does not deal H
196 SUPREME COURT REPORTS [1994] SUPP. 4 S.C.R.

A with the goods specified in Schedule-8. Its object is to ensure inter alia that
purchase of raw material is not taxed where the sale of manufactured
goods brings in tax to the State or serves the national interest. If, however,
manufactured goods are so disposed of as not to bring in tax to the State
nor so as to serve national interest then the purchase of goods, broadly
referred to as raw material, the State retains and collects the purchase tax
B
on raw material. Similarly, where the very gods are sold in such a manner
as to bring in revenue to State by way of tax on their sale, i.e. sale within
the State, inter-state sale or export sale, as the case may be, then again the
purchase of such goods is exempt from tax. [205-D to Fl

C 5. Clause (IT) in Section 2 is not a charging section. It only defines
"purchase". Further the definition not only includes the purchase of
Schedule-C goods but purchase of other goods which are subject to pur-
chase tax under any other provisions of the Act. The fact that the words "or
of goods on the purchase whereof tax is payable under any provisions of
this Act" were inserted in this definition by the same Amendment which
D introduces Section 4-B into the Act does not mean that the said words are
confined to Section 4-B. If that were the intention, the Legislature would
have used appropriate words to that effect. The said definition cannot,
therefore, be read in derogation of Section 4(1) nor can the levy created by
Section 4(1) be curtailed or cut-down in any manner by the said definition.
E [206-E-F]
6. To determine what precisely Is exempted under Section 6, one must
have regard to Its language. This Section only exempts the sale of the goods
in Schedule·B from tax thereon. There are no words in section 6 which serve
to exempt the purchase of such goods also from tax. It, therefore, follows
that when Section 4 ·speaks of "every dealer except one who is dealing
F
exclusively in goods declared tax free under Section 6", the exception refers
to a dealer who is engaged exclusively in the sale of goods mentioned in
Section 6 read with Schedule·B and not to any other dealer.
[206·H, 207-A, B]
G Hotel Ba/aji v. State of Andhra Pradesh, (1993) 88 S.T.C. 98 and Devi
Das Gopal Krishan v. State of Punjab, (1994) 3 J.T. 239, referred to.

Des Raj Parshotam Lal v. State of Punjab, 42 S.T.C. 429; Babu Ram
Jagdish Kumar and Co. v. State of Punjab, 38 S.T.C. 259; approved and
Malwa Sugar Mills Co. Ltd. v. Assessing Authority, 38 S.T.C. 39, disap·
H proved.
J. SUGAR MILLS v. STATE (JEEVAN REDDY, J.] 197

CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 382 of A
.1979.

With

W.P. (C) Nos. 846n9 and 7015/82.
B
(Under Article 32 of the Constitution of India.)

H.N. Salve, Vineet Kumar, Tripurari Ray, Rajiv Dutta for the
Petitioner (in W.P. No. 382n9).

Ms. Rama Chandran, P.V. Kapoor, Rajiv Dutta, Tripurari Ray aod C
N.K. Aggarwal for the Peti!ioner. (in WP No. 846n9)

V.C. Mahajao, Raobir Yadav, S.C. Patel, R.S. Sodhi, G.K. Baosal,
Anil Kr. Sharma aod R.S. Suri for the Respondents.

The Judgment of the Court was delivered by D

B.P. JEEVAN REDDY, J. Writ Petition (C) No. 382 of 1979 is
instituted by Jagatjit Sugar Mills Co. Ltd. for the issuance of ao appropriate
writ, order OT direction restraining the respondents (State of Punjab aod
the Assessing Authority, Sales Tax, Kapurthala) from giving effect to E
Annexure-C notice whereunder the second respondent has called upon the
petitioner to show cause why penalty should not be levied upon it under
Section 10{6) of the Punjab General Sales Tax Act, 1948 on account of its
failure to pay the tax due under Section 10(4) of the Act.

The petitioner's case is: for the purpose of maoufacturing sugar, it F
purchases sugarcane from the cane-growers and cooperative societies com-
prised of caoe-growers. Sugarcane is an agricultural produce within the
meaning of Item-39 of Schedule-B to the Act aod, therefore, exempt from
tax. Inasmuch as the said sugarcaoe is sold to the petitioner's mills by
growers of sugarcane themselves, no sales tax or purchase tax is leviable G
on the sale or purchase of sugarcane. This position has been affirmed by
a learned Single Judge of the Punjab aod Haryana High Court in Malwa
Sugar Mills Co. Ltd. v. Assessing Authority, 38 S.T.C. 39. The decision was
affirmed in Letters Patent Appeal. A Special Leave Petition preferred by
the State was also dismissed. Though the subsequent decision of the
Division Bench in Babu Ram Jagdish Kumar & Co. v. State of Punjab, 38 H
198 SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.

A S.T.C. 259 was not concerned with sugarcane - but with paddy alone which
is one of the items mentioned in Schedule- C and though the said decision
did not even refer to the decision in Malwa Sugar Mills, it was held
erroneously by a Full Bench of the Punjab and Haryana High Court in
Desh Raj Parshotam Lal v. State of Punjab, 42 S.T.C. 429 that the said
Division Bench had the effect of overruling the decision of the learned
B
Single Judge in Malwa Sugar Mills. This holding the Full Bench is incorrect
as a fact and untenable in law. No purchase tax is payable under the Act
on the purchase of sugarcane by the petitioner's mills and hence, there is
no question of the petitioner failing to pay the tax due within the meaning
of Section 10.
c
The State of Punjab has filed a counter-affidavit denying and disput-
ing the correctness of the several allegations made by the petitioner. The
State maintains·th~t purchase tax is leviable on the purchase of sugarcane
by the petitioner under the provisions of the Act and that the impugned
D notice was rightly issued to it for its failure to pay the tax due.

The question that squarely arises in this writ petition is whether the
petitioner-sugar mills is liable to pay the purchase tax on the sugarcane
purchased by it from the growers of sugarcane?

E For answering this question, it is necessary to refer to a few relevant
provisions of Punjab General Sales Tax Act, 1948. Section 2 of the Act
defines certain expressions occurring in the Act. Clause ( d) defines "dealer"
to mean "any person including a department of Government who in the
normal course of trade sells or purchases any goods in the State of
F Punjab ......." (The rest of the definition need not be set out herein, not being
relevant for the purpose of this case.) The expression "goods" is defined by
clause (e) to mean, "all kinds of movable property and goods consumed at
business premises other than newspapers, actionable claims, stocks, shares
or securities and includes all materials, commodities and articles including
the goods (whether as goods or in some other form) involved in the
G execution of a works contract or those goods which are used in the fitting
out, improvement or repair of movable property''. The expression "pur-
chase" is defined in clause (ft). Insofar as it is relevant, it reads: "purchase
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
H payable under any provision of this Act for cash or deferred payment or
J. SUGAR MILLS v. STATE [JEEVAN REDDY,J.] 199

other valuable consideration or other wise ..., ....'. The expression "sale' is A
defined in clause (h). Insofar as it is relevant, it reads: 'sale means any
transfer of property in goods other than goods specified in Schedule C for
cash, deferred payment or other valuable considerations and in-
cludes ............. ". "Turnover" is defined in clause (i)_.It is an inclusive defini-
tion. Insofar as it is relevant, the definition reads : ' turnover includes the
B
aggregate of the amount 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'.
c
Section 4 is the first and the main charging section. Sub-section (1)
reads thus:

"(1) Subject to the provisions of sections 5 and 6, every dealer
except one dealing exclusively in goods declared tax-free under D
section 6 whose gross turnover during the year immediately
preceding the commencement of this Act exceeded the taxable
quantum shall be liable to pay tax under this Act on all sales
effected after the coming into force of this Act and purchases made
after the commencement of the East Punjab General Sales Tax
(Amendment) Act, 1958.............." E

Sub-section (2-A) [inserted by way of Amendment in 1960] says that
"notwithstanding anything contained in sub-sections (1) and (2), no tax on
the sale of any goods shall be levied if a tax on their purchase is payable
under this Act. " Sub-section (5) defines the expression "taxable quantum" F
occurring in sub-section (1). Section 5 prescribes the rates of tax. Sub-sec-
tion (1) says that "subject to the provisions of this Act, there shall.be levied
on the taxable tlirnover of a dealer a tax at such rates not exceeding seven
paise in a rupee as the State Government may by notification direct'. (The·
rate earlier was six paise. Later, it appears to have been enhanced to eight G
paise.) Proviso to sub-section (1) says that in case of goods specified in
Schedule- A, which were at one time called 'luxury goods', the tax can go
upto ten paise in a rupee. Sub-section (2) of Section 5 defines the expres-
sion "taxable turnover". Sub-section (3) prescribes the rate in the case of
declared goods. Section 6 carries the heading "tax-free goods". Sub-section
( 1) says that "no tax shall be payable on the sale of goods specified in the H
200 SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.

A first column of Schedule B subject to the conditions and exceptions, if any,
set out in the corresponding entry in the second column thereof and no
dealer shall charge sales tax on the sale of goods which are declared
tax-free from time to time under this section". Sub- section (2) empowers
the State Government to make additions to or to effect deletions from
B Schedule-B in the prescribed manner.

Item -39 of Schedule-B reads as follows :

"SCHEDULE B
(1) (2)
c 39. Agricultural or horticultural
produce sold by a person or a
member of his family grown by
himself or grown on any land in
which he has an interest whether as
D owner or usufructary mortgagee,
tenant or otherwise."
Jtem-62 in Schedule-B is 'sugarcane'. Column (2) against Item-62 is
blank just as in the case of ltem-39.

E Section 4-B was introduced by Amendment Act 3 of 1973 with effect
from November 15, 1972. It is necessary to set out the section in full :

"4-B. Levy ofpurchase tax on cettain goods. - Where a dealer who
is liable to pay tax under this Act purchases any goods other than
those specified in Schedule B from any source and -
F
(i) uses them within the State in the manufacture of goods
specified in Schedule B, or

(ii) uses them within the State in the manufacture of any
goods, other than those specified in Schedule B and sends
G the goods so manufactured outside the State in any manner
other 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, or

H (iii) uses such goods for a purpose other than that of resale
J.SUGAR MILLSv. STATE (JEEVAN REDDY,J.] 201

within the State or sale in the course of inter-State trade or A
commerce or in the course of export out of the territory of
India or

(iv) sends them outside the State other than by way of sale
in the course of inter-State trade or commerce or the course
of export out of the territory of India. B

and no tax is payable on the purchase of such goods under any
other provision of this Act, there shall be levied a tax on the
purchase of such goods at such rate not exceeding the rate
specified under sub-section (1) of section 5 as the State Govern-
ment may direct. 11
c
Schedule-C specifies certain goods for the purpose of Section 2(ff).
Item-9 in this schedule is paddy while ltem-8 is rice.

It is on the above provisions that we have to determine the question D
at issue in this writ petition. Section 4(1) makes it clear that subject to the
provisions of Sections 5 and 6, every dealer (except a dealer dealing
exclusively in goods declared tax-free under Section 6) whose gross turn-
over during the preceding year exceeds the taxable quantum, shall be liable
to pay tax under the Act "on all sales effected after the coming into force
of this Act and purchases made after the commencement of the East E
Punjab General Sales Tax (Amendment) Act, 1958". The tax is thus levied
both on sales and purchases. It is, however, unreasonable to presume that
the Legislature wanted to tax both the seller and purchaser in respect of
the same transaction - an aspect manifested in the part by sub-section
(2-A) which says that notwithstanding anything contained in sub-section
(1), no tax on the sale of any goods shall be levied if a tax on the purchase F
is payable under the Act. The policy of law is to tax every transaction of
sale, either at the point of sale or at the point of purchase, unless specifi-
cally exempted from the tax altogether. Where the seller is not taxed, the
purchaser is taxed. By the same token, where the seller is taxed, the
purchaser is not. G
Section 6 exempts the sale of goods mentioned in Schedule- B from
tax, subject to the conditions and exceptions, if any, set out in the cor-
responding entry in the second column of the said Schedule. Undoubtedly,
sugarcane is an agricultural produce within the meaniog of Item-39 of
Schedule-B. Such agricultural produce is exeinpt from tax on its sale when H
202 SUPREME COURT REPORTS (1994] SUPP. 4 s:c.R.

A it is sold by a person or a member of this family who had grown the said
produce himself or has grown it on any land on which he has any interest
whether as .• owner or usufructary mortgagee, tenant or otherwise. The writ
petitioner no doubt says that the entire sugarcane purchased by him is sold
by growers of sugarcane themselves but that is a matter upon which no
opinion can be expressed in this writ petition since it is a question of fact.
B It is sufficient to clarify that ltem-39 of Schedule-B operates to exempt the
sale of agricultural produce from tax only where it is sold by the grower
himself. This means that sugarcane is exempt_ from tax on its sale. The
question is whether its purchase is also exempt from tax?

c The contention of the learned counsel for the petitioner is this :
Section 4-B, which levies purchase tax, expressly excludes the goods men-
tioned in Schedule-B from its purview. In other words, Schedule-B goods
are exempt from tax on their sale by virtue of Section 6 and exempt from
tax on their purchase by virtue of Section 4-R The emphasis is upon the
D opening words of Section 4- B which read: '\mere a dealer who is liable
to pay tax under this Act purchases any goods other than those specified in
Schedule-B from any source .............. ". We fmd it difficult to agree. The said
argument, in our opinion, is based upon an incorrect premise that purchase
tax is levied by Section 4-B in the Act and not by any other provision. The
E said argument also ignores the fact that Section 4 levies tax not only upon
"all sales effected" but also on "purchases made". If the assumption under-
lying the argument of the learned counsel for the petitioner were to be
accepted then no purchase tax was leviable on Schedule-C goods prior to
introduction of Section 4-B. Similarly, no purchase tax should be leviable
even now on Schedule-C goods (Schedule-C, even according to the counsel
F for petitioners, mentions subject to purchase tax) inasmuch as Section 4-B
does not refer to Schedule-C nor does Section 4-B levy purchas~ tax on
the purchase of goods in Schedule-C. In our opinion, the purpose of
Section 4-B is altogether different. It is designed really to identify and affirm
- in a broad sense, create - the levy of purchase tax in some cases and to
G provide for exemption from purchase tax in certain other specified situa-
tions. This is done in the interest of manufacturers-dealers, consuming
public and other dealers - a common feature in almost all the sales tax
enactments, as we sball presently demonstrate. To explain what we say, Jet
us analyse the section. For attracting the levy of purchase tax under Section
H 4-B, the following requirements must be satisfied :
J. SUGARMILI.Sv. STATE[JEEVAN REDDY,J.) 203

(a) a dealer (liable to pay tax under the Act) porchases goods other A
than those specified in Schedule-B from any sonrce;

(b) no tax is payable on the purchase of such goods under any other
provisions of the Act;

(c) the goods so purchased are used/disposed of etc. io one of the B
modes mentioned in clauses (i), (ii), (iii) or (iv).

Now let us take each of the clauses (i) to (iv) and see what do they
say:

Clause (i) says that porchase tax shall be Ieviable on the porchase of C
goods (other than those in Schedule-B) if such goods are used io the
manufacture of goods specified io Schedule-B. Schedule-B goods are not
taxable at sale poiot. Since the goods manufactored by the dealer are
exempt from tax on their sale, the Legislature sees no reason to exempt
the raw material (goods purchased by such manufactuier-dealer) from the D
liability to purchase tax. Accordiogly, Section 4-B retaios and affirms the
tax on the goods porchased by such manufactorer-dealer i.e., it taxes the
raw material io the hands of the purchaser-manufactorer-dealer.

Clause (ii) - which contioues the idea behiod clause (i) - says that E
where the manufacturer-dealer uses the goods porchased by him (raw
material) io manufacture of goods other than the goods io Schedule-B (i.e.,
where the manufactured goods are taxable at the sale poiot) but sends the
goods so manufactured outside the State io any manner other than by way
of ioter-State sale or export sale, he shall be liable to pay tax on the
purchase of raw material. The object is agaio the same. If the manufactored F
goods, which are taxable on sale poiot are sent out of the State, the State
does not get any income. If, on the other hand, they are taken out of the
State as a result of ioter-state sale, the State gets the tax by virtue of Arti.cle
269 of the Constitution. In case of export sale, the State forgoes the tax but
it does so because it serves the ·national ioterest of promotion exports. See G
Hotel Ba/aji v. State of Andhra Pradesh, (1993) 88 S.T.C. 98 io this regard.
In other words, according to this clause, if the manufactured goods are
taken out of the State in such a manner that State does not derive any tax
(nor the national ioterest aforesaid is served) the purchase of raw material
is taxed. Conversely, if the manufactured goods are sold withio the State
or sold in the course of inter-state trade or commerce or sold in the course · H
204 SUPREME COURT REPORTS (1994] SUPP. 4 S.C.R.

A of export sale, the raw material is exempted from purchase tax. In case,
however, the manufactured goods are those mentioned in Schedule-B - not
taxable on sale point - clause (i) does not concern itself with their manner
of disposal. From the point of revenue, it makes no difference whether such
goods are sold within the State or sold in the course of interstate trade or
commerce or sold in the course of export; in any of the situations, the State
B does not derive any revenue.

Clause (iii) says that where the goods purchased are used for a
purpose other than resale within the State or in the course of inter-state
sale or export sale, tax shall be levied on the purchase of such goods. This
C means that if the very goods purchased are resold within the State, no
purchase tax shall be leviable on their purchase. Similarly, if the goods
purchased are sold in the course of inter-state trade/commerce or in the
course of export sale, again no tax will be levied on the purchase of such
goods by the purchasing dealer. The idea is again the same. In the case of
D resale within the State and inter-state sale, the State gets the tax and,
· therefore, purchase of such goods is exempted from tax. Where goods are
sold in the course of export, though the State does not get any tax, national
interest is served. In these three situations, the purchase of such goods is
not taxed.

E Clause (iv) reiterates more or less the same idea as in clause (iii).
According to it, if the goods purchased are sent out of the State otherwise
than by way of inter-state sale or export sale, then the purchase of such
goods will be taxed.

F The above analysis shows up the object and purpose underlying
Section 4-B. Clauses (i) and (ii) deal with situations where the goods
purchased are used as raw material while clauses (iii) and (iv) provide for
situations where the very goods purchased are dealt with in certain
specified modes. Though put in a negative form, Section 4-B is really
intended (a) to avoid taxing the raw material where the manufactured
G goods are taxable and are sold within the State or sold in the course of
inter-state trade or commerce in both of which situations, they fetch
revenue to the State or where they are sold in the course of export, which
does not fetch any revenue to the State but promotes national interest in
promoting exports; and (b) to avoid taxing the purchase of the goods where
H the very goods are resold within the State so as to fetch tax on their sale
J. SUGAR MILLS v. STATE [JEEVAN REDDY, J.] 205

(it must be remembered that the goods dealt with by Section 4 are goods A
other than the goods in Schedule-B and hence taxable at sale point) or are
sold in the course of inter-state sale (in which event too the Sfate gets the
revenue by virtue of Article 269) or where they are sold in export trade (in
which event though no tax is realised by State, yet the national interest
aforesaid is served.)
B
It would be thus clear that Section 4-B is, broadly speaking, actuated
by the same idea as is underlying Section 6-A of the Andhra Pradesh
General Sales Tax Act, Section 7-A of the Tamil Nadu General Sales Tax
Act, Section 5-A of the Kerala General Sales Tax Act and Section 7 of
Madhya fradesh General Sales Tax Act among others, all of which are C
dealt with and explained in Hotel Balaji and Devi Das Gopal Krishan v.
State of Punjab, (1994) 3 J.T. 239. Indeed, Section 4-B was so understood
in the latter decision.

It is, therefore, idle to contend that Section 4-B imposes purchase D
tax or is the only provision imposing purchase tax. As analysed herein-
before, it is mainly designed to affirm or exempt, as the case may be, the
purchase of certain goods from purchase tax in certain specified situations.
It, of course, does not deal with the goods specified in Schedule-B. Its
object is to ensure inter alia that purchase of raw material is not taxed
where the sale of manufactured goods brings in tax to the State or serves E
the national interest, as explained hereinbefore. If, however, manufactured
goods are so disposed of as not to bring in tax to the State nor so as to
serve national interest aforementioned, then the purchase of goods (broad-
ly referred to as raw material in this judgment), the State retrains and
collects the purchase tax on raw material. Similarly, where the very goods F
are sold in such a manner as to bring in revenue to State by way of tax on
their sale, (i.e., sale within the State, inter-state sale of export sale, as the
case may be) then again the purchase of such goods is exempt from tax as
explained and elaborated hereinabove.

If so, the question arises which is the provision which levies the G
purchase tax? The answer is : Section 4(1) itself. Section 4(1) not only
levies tax on all sales but also levies tax on all purchases as well. Of course,
in no case will both the sale point and purchase point of the same
transaction be taxed, which feature is indicated in sub-section (2-A) of
Section 4 also. It is, therefore, obvious that where the sale of certain goods H
206 SUPREME COURT REPORTS [1994) SUPP. 4 S.C.R.

A is exempt from tax by virtue of Section 6, their purchase will be taxed and
conversely where the Act expressly taxes the purchase of certain goods
their sale simultaneously will be not be taxed - subject, of. course, to any
express provisions providing exemptions. In the case of sugarcane, it being
an agricultural produce - and in cases where it is sold by the grower himself
- such sale is exempt from tax by virtue of section 6 read with Schedule-B.
B
If so, the purchaser thereof is liable to pay tax on its purchase by virtue of
Section 4(1). That is the position in the cases before us. Since Section 4-B
does not apply to Schedule-B goods, the said provision is not relevant to
the petitioner. The purchase tax on sugarcane is levied by Section 4(1),
since it being an agricultural produce, and said to be sold by growers
c themselves, is exempt from tax on its sale under Section 6.

The learned counsel for the petitioner sought to argue that only the
goods mentioned in Schedule-C are subject to purchase tax and no other
goods. This argument is sought to be sustained with reference to the
D definition of 'purchase" in Section 2(ff). The said definition, which we have
set out hereinbefore, defines the purchase as meaning "acquisition of goods
specified in Schedule-C or of goods on the purchase whereof tax is payable
under any provisions of this Act'. Firstly, clause (ff) in Section 2 is not a
charging section. It only defines 'purchase". Secondly, the definition not
only includes the purchase of Schedule-C goods but purchase of other
E goods which are subject to purchase tax under any other provisions of the
Act. The fact that the words "or of foods on the purchase whereof tax is
payable under any provisions of this Act" were inserted in this definition
by the same Amendment which introduced Section 4-B into the Act does
not mean that the said words are confined to Section 4-B. If that were the
intention, the Legislature would have used appropriate words to that effect.
F
Moreover, as explained by us hereinbefore, Section 4-B is designed for a
different ·purpose. The said definition cannot, therefore, be read in deroga-
tion of Section 4(1) nor can the levy created by Section 4(1) be curtailed
or cut-down in any manner by the said definition.

G A subsidiary question arises why does Section 4(1) exempt a dealer
"dealing exclusively in goods declared tax free under Section 6" from its
operation. On the basis of these words, it was suggested that the goods
referred to by Section 6 and mentioned in Schedule-B are exempt both
sales tax and purchase tax. We do not think that the said contention is well
H founded. To determine what precisely is exempted under Section 6, one
J. SUGAR MILLS v. STATE (JEEVAN REDDY, J.) 207

must have regard to the language of Section 6. Section 6, as pointed out A
hereinbefore, only exempts the sale of the goods in Schedule-B from tax
thereon. There are no words in Section 6 which serve to exempt the
purchase of such goods also from tax. It, therefore, follows that when
Section 4 speaks of "every dealer except one who is dealing exclusively in
goods declared tax free under Section 6'', the exception refers to a dealer B
who is engaged exclusively in the sale of goods mentioned in Section 6 read
with Schedule-B and not to any other dealer.

The view taken by us accords with the view taken by the Punjab and
Haryana High Court over the last two decades as indicated in the Full
Bench decision in Desh Raj Parshotam Lal. A discordant note was no C
doubt struck in Ma/wa Sugar Mills (decided in December, 1975) but the
-· decision of the Division Bench soon thereafter in Babu Ram Jagdish Prasad
and _other decisions referred to in the aforesaid Full Bench decision had
always taken the view consistent with the one indicated by us hereinabove.
As matter of fact, this was how Section 4-B was understood by this Court
in Devi Das Gopa/ Krishan. D
In Writ Petition (C) Nos. 846 of 1979 and 7015of1982, the very same
question arises and, therefore, they too are covered by this decision.

The writ petitions are accordingly dismissed with costs. Respondent's
costs quantified at Rs. 10,000 consolidated. E
The interim orders made in these writ petitions are vacated. The tax,
the collection whereof may have been stayed by interim orders of this
Court, can now be collected according to law by the State. The bank
guarantees and securities furnished, if any, can be encashed and enforced
F
for the said purpose, if necessary.

T.N.A. Petitions dismissed.

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