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PETITIONER: DY. COMMISSIONER OF SALES TAX (LAW)  BOARD OF REVENUE (TAXES

       Vs.

RESPONDENT: PADINJARAKARA AGENCIES

DATE OF JUDGMENT21/01/1985

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. MISRA RANGNATH

CITATION:  1987 AIR 2244            1985 SCR  (2) 851  1985 SCC  (4) 237        1985 SCALE  (2)1216

ACT:       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.

HEADNOTE:      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., [1967] 3 S.C R. 622, referred to.       Seaso  Rubbers v.  State of  Kerala,  48  S.T.C.  256, approved.

JUDGMENT:       CIVIL APPELLATE JURISDICTION: CIVIL Appeal No. 4160 of 1985. 852

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        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) [1967] 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. M.L.A.                                      Appeal dismissed      (1) 38 S.T.C. 256 854

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