PURCHASE TAX - LEVY - VALIDITY - PURCHASE TAX LEVIED UNDER SECTION 9(1)(B) OF HARYANA GENERAL SALES TAX ACT, 1973 - WHETHER TAX ON CONSIGNMENT OR PURCHASE OF RAW MATERIAL - WHETHER ULTRA VIRES TO ARTICLE 301 OF THE CONSTITUTION - WHETHER BARRED BY LIMITATION - SECTIONS 9(1)(B), 31 AND 32 OF HARYANA GENERAL SALES TAX ACT, 1973 - ARTICLES 301, 304(A) AND 304(B) OF THE CONSTITUTION OF INDIA.

Fact of the Case:

The petitioners, engaged in the manufacture and sale of automobile tyres and tubes, challenged the levy of purchase tax on raw materials purchased by them. The High Court declared the levy of purchase tax to be ultra vires to Section 9 of the Haryana General Sales Tax Act, 1973. The State of Haryana filed petitions for Special Leave to Appeal against the judgments of the High Court. During the pendency of the Special Leave Petitions, the respondents issued notices to the petitioners Under Section 50 of the Haryana General Sales Tax Act, 1973. The petitioners challenged these notices by filing writ petitions on the ground that the Government had no jurisdiction to take action Under Section 50 in the face of the decisions of the High Court. Before these petitions could be decided by the High Court, the Governor of Haryana issued the Haryana General Sales Tax (Amendment and Validation) Act, 1984. The petitioners amended the pending writ petitions and challenged the constitutional validity of the Amendment Ordinance No. 2 of 1984 and Amendment Act No. 11 of 1984. A learned single Judge (M.M Punchhi, J.) as he then was, who heard the writ petitions expressed serious doubts about the correctness of the view taken in Bata India Limited v. State of Haryana, 54 STC 226. Therefore, the matter was placed before a Full Bench of this court. Vide its judgment in Desh Raj Pushap Kumar Gulati v. State of Punjab, (1985) 58 STC 393, the Full Bench overruled the judgment pf the Division Bench in Bata India Limiteds case and upheld the validity of Section 9(1) of the Haryana Act as well as the levy of purchase tax. The petitioner company preferred Special Leave Petitions against the judgment of the Full Bench. On 21st July, 1986, the respondent No. 2 passed assessment order for the years 1973-74 to 1977-78 and 1980-81 and directed the petitioners to pay Rs. 22,15,269/- as would appear from notice Annexure P-5 issued in form ST-28. On 10.9.1986 the Assessing Authority issued fresh notices for levy of purchase tax Under Section 9 of the Haryana Act. The petitioners objected these notices by filing written reply dated 14.10.1986 wherein it referred to the two decisions of the High Court in Good-year India Limited v. State of Haryana, 53 STC 163 and Bata India Limited v. State of Haryana, 54 STC 226. The Assessing Authority rejected the objections raised by the petitioners by making reference to the judgment of the Full Bench in Desh Raj Pushap Kumar Gulatis case (supra) and levied purchase tax for the years 1973-74 to 1977-78 vide separate orders dated 20th October, 1986. Immediately thereafter demand notice dated 12.11.1986 came to be issued by the Assessing Authority under Form-28 requiring the petitioners to deposit the amount of tax.

Finding of the Court:

1. The levy of purchase tax under Section 9(1)(b) of the Haryana General Sales Tax Act, 1973 is not a tax on consignment but a tax on the purchase of raw material. 2. The levy of purchase tax under Section 9(1)(b) of the Haryana General Sales Tax Act, 1973 is not ultra vires to Article 301 of the Constitution. 3. The impugned orders of assessment are not barred by limitation as the period of limitation specified in Section 31 of the Haryana General Sales Tax Act, 1973 does not apply in view of the provisions of Section 32 of the Act.

Issues: 1. Whether the levy of purchase tax under Section 9(1)(b) of the Haryana General Sales Tax Act, 1973 is a tax on consignment or a tax on the purchase of raw material? 2. Whether the levy of purchase tax under Section 9(1)(b) of the Haryana General Sales Tax Act, 1973 is ultra vires to Article 301 of the Constitution? 3. Whether the impugned orders of assessment are barred by limitation?

Ratio Decidendi: 1. The scheme of Section 9 of the Haryana General Sales Tax Act, 1973 is to levy the tax on purchase of raw material and not to forego it where the goods manufactured out of them are disposed of (or despatched, as the case may be) in a manner not yielding any revenue to the State nor serving the interests of nation and its economy, as explained herein before. The purchased goods are put an end to by their consumption in manufacture of other goods and yet the manufactured goods are dealt with in a manner as to deprive the State of any revenue; in such cases, there is no reason why, the State should forego its tax revenue on purchase of raw material. 2. The tax imposed by the State would become ultra vires to Article 301 only if it directly impedes the free movement of goods within or outside the State. If the tax is on the sale of goods and the movement is only incidental or in consequence of sale the imposition of tax cannot be treated as ultra vires to Article 301 of the Constitution. 3. The non-obstante clause contained in Section 32(1) of the Haryana General Sales Tax Act, 1973 unequivocally brings about the legislative intendment, namely, that there should be no period of limitation for assessment or re-assessment which is required to be made in consequence of or with a view to give effect to any order made by the Court or other authority under the provisions of the Act.

Final Decision: The writ petitions were dismissed with costs of Rs. 10,000/- (each petition). The interim orders passed by the Court automatically stood vacated and the respondents were directed to recover the amount of tax alongwith interest from the petitioners.