The assessee is not liable to pay a tax on the purchases until the purchases acquire the quality of being the last purchases inside the State.

Headnote:
SALES TAX - Madras General Sales Tax Act, 1959 - S. 4 - Central Sales Tax Act, 1956 - S. 15 - Meaning of "at the point of last purchase in the State" - Deduction of value of stock in hand as purchases other than last purchases of cotton - Whether permissible.
Fact of the Case:

The assessee, a dealer in cotton and cotton seeds, claimed to deduct the sum of Rs. 12,32,756.45 as the value of purchases other than the last purchases of cotton. The Commercial Tax Officer exempted Rs. 10,11,534.40 but disallowed the remaining amount on the ground that cotton worth Rs. 2,27,250.00 was in stock on March 81, 1961. He found that subsequent disposal in the next year had not been proved and, therefore, it was liable to be taxed as a last purchase.
Finding of the Court:

The court held that the assessee was entitled to claim deduction in respect of the value of the stock of Rs. 2,27,250 as being the purchases other than last purchases of cotton.
Issues: Whether the assessee was entitled to claim deduction in respect of the value of the stock of Rs. 2,27,250 as being the purchases other than last purchases of cotton.
Ratio Decidendi: The court held that a dealer is not liable to pay a tax on the purchases until the purchases acquire the quality of being the last purchases inside the State. In other words, when he 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 undetermined; in the light of subsequent events it may or may not become the last purchase inside the State.
Final Decision: The appeal was dismissed with costs.

Judgement

SIKRI, J. :- These appeals by special leave are directed against the judgment of the Madras High Court in Tax Cases Nos. 105 and 125 of 1963. The High Court by its common judgment dated August 11, 1964 confirmed the orders of the Sales Tax Appellate Tribunal.

2. A common point of law is involved in both the cases and it will suffice if we give facts in Tax Case No. 105 of 1963 (Civil Appeal No. 633 of l966) in which the respondent was one T. Narayansawami Naidu, hereinafter referred to as the assessee. The assessee is a dealer in cotton and cotton seeds. Before the Additional Commercial Tax Officer, Coimbatore, he claimed to deduct the sum of Rs. 12,32,756.45 as the value of purchases other than the last purchases of cotton. The Commercial Tax Officer exempted Rs. 10,11,534.40 but disallowed the remaining amount on the ground that cotton worth Rs. 2,27,250.00 was in stock on March 81, 1961. He found that subsequent disposal in the next year had not been proved and, therefore, it was liable to be taxed as a last purchase. In holding this he followed the decision of the Kerala High Court in Abdulsalam Rowther v. State of Kerala, 1961-12 STC 98 (Ker). The Appellate Assistant Commissioner (Commercial Taxes) upheld the order, but the Sales Tax Appellate Tribunal, dissenting from the decision of the Kerala High Court in 1961-12 STC 98 (Ker) accepted the appeal of the assessee and remanded the case to the Appellate Assistant Commissioner for disposal afresh in the light of observations made by it. The Department filed a revision under S. 38 of the Madras General Sales Tax Act, hereinafter referred to as the Madras Act, and the High Court dismissed the revision. The State of Madras having obtained special leave, the appeal is now before us.

3. The learned counsel for the appellant Mr. Ramanujam, urges that the decision of the Kerala High Court in 1961-12 STC 98 (Ker) and of the Mysore High Court in Hormusji Hirjibhoy v. Commercial Tax Officer, 1962-13 STC-773 (Mys) laid down the law correctly, and the Madras High Court erred in dissenting from these decisions in the present case (now reported as State of Madras v. T. Narayanaswami Naidu, 1956-16 STC 29

4. Section 4 of the Madras Act provides :

"4 Notwithstanding anything contained in S. 3, the tax under this Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the Second Schedule on the turnover in such goods in each year, whatever be the quantum of turnover in that year."

In other words, this Section lays down that in respect of declared goods we have to look at the Second Schedule in order to find out the point at which the tax would be payable by the dealer. The Second Schedule describes the declared goods in respect of which a single point tax only is leviable under S. 4. Item 2 of the Second Schedule is "Cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but excluding cotton waste" The point of levy is stated as "at the point of last purchase in the State".

5. The question that arises is : what is the exact meaning of the expression "at the point of last purchase in the State"? In this connection it may be mentioned that S 14 of the Central Sales Tax Act, 1956, hereinafter referred to as the Central Act, declares certain goods as of special importance in inter-State trade and commerce, and cotton is one of the goods included in S. 14.

Section 15 provides :

"15. Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely

(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed two per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one

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