A tax on consignment of goods not involving sale would be within the exclusive field of legislation reserved to Parliament under entry 92b of List I.

This group of petitions raises the much debated issue, viz. , whether section 3-AAAA of the U. P. Sales Tax Act, 1948, in pith and substance, imposes a tax on the consignment of goods and, therefore, beyond the legislative competence of the State Legislature.

Let us straightway have the provision before us in order to appreciate the controversy leaving out the explanation which is not relevant for our purpose. Section 3-AAAA reads thus :

" 3-AAAA. Liability to purchase tax on certain transaction.- Where any goods liable to tax at the point of sale to the consumer are sold to a dealer but in view of any provision of this Act no sales tax is payable by the seller and the purchasing dealer does not resell such goods within the State or in the course of inter-State trade or commerce, in the same form and condition in which he had purchased them, the purchasing dealer shall subject to the provisions of section 3, be liable to pay tax on such purchases at the rate at which tax is leviable on sale of such goods to the consumer within the State :

Provided that if it is proved to the satisfaction of the assessing authority that the goods so purchased had already been subjected to tax or may be subjected to tax under section 3-AAA, no tax under the section shall be payable. "

The main point urged in support of the challenge to the provision by the learned counsel for the petitioners was that the taxable event is not the purchase of the goods described in the provision but the utilization of the goods purchased within the State for manufacturing some other goods and thereupon their despatch outside the State by way of stock transfer or consignment or by way of despatch of the goods in the course of export. In effect, it was urged the impugned tax is (i) on consumption of the goods purchased within the State, (ii) on consignment of the goods in the course of inter-State trade or commerce and (iii) on the export of the goods. In each of these contingencies, it was argued, the levy of the tax would be beyond the legislative competence of the State.

Before examining these contentions, we may briefly set out the essential facts of the leading case - Writ Petition No. 168 of 1983. The pattern of facts of other connected petitions is materially the same. The petitioners are engaged in the business of purchasing raw hides, converting them into dressed hides which are then sold by them within the State as well as outside it and also out of the territory of the country. During the assessment year 1979-80, the petitioners received orders from foreign buyers for sale of dressed hides and in pursuance of such orders they purchased raw hides, converted them into dressed hides and thereafter despatched them in the course of export to foreign buyers, it is alleged, on the basis of pre-existing orders of those buyers.

Apart from these export sales, the petitioners also sell dressed hides converted by them from raw hides, both within the State as well as in the course of inter-State trade and commerce. In some cases, the petitioners purchased raw hides from registered dealers within the State of Uttar Pradesh after furnishing form 3-A and thereafter exports the tanned hides to foreign buyers outside India. Such sales, it is urged, would be wholly beyond the legislative reach of the State Legislature.

Despite the protests of the petitioners, however, the Sales Tax Officers have been assessing the petitioners to tax. Thus for the assessment year 1978-79 on the turnover of such purchases of raw hides the Sales Tax Officers have imposed purchase tax amounting to Rs. 1,52,000. The petitioners contend that their turnovers comprising wholly of purchases made of raw hides and dressed hides within the State and despatched in the course of export after dressing the raw hides are being illegally subjected to the levy of purchase tax under section 3-AAAA on the basis of a circular dated September 12, 1981, issued by the Commissioner asking all the