LAWS(BOM)-1990-3-3

WIPRO LIMITED Vs. STATE OF MAHARASHTRA

Decided On March 22, 1990
WIPRO LIMITED Appellant
V/S
STATE OF MAHARASHTRA Respondents

JUDGEMENT

(1.) UNDER old section 13aa which was incorporated in the Bombay Sales Tax Act, 1959, with effect from 1st July, 1982, it was provided as follows : " Where a dealer who is liable to pay tax under this Act, purchases any goods specified in Part I of Schedule C, directly or through commission agent, from a person who is or is not a registered dealer and uses such goods in the manufacture of taxable goods and despatches the goods, so manufactured, to his own place of business or to his agent's place of business situated outside the State within India, then such dealer shall be liable to pay, in addition to the sales tax paid or payable or as the case may be, the purchase tax levied or leviable, under the other provisions of this Act in respect of purchases of such goods, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufacture and accordingly the dealer shall include purchase price of such goods in his turnover of purchases in his return under section 32, which he is to furnish next thereafter. "

(2.) THIS section as well as a similar section in the sales tax legislation of the State of Haryana was challenged in a number of writ petitions. The writ petitions were finally decided by the Supreme Court by its judgment and order dated 19th October, 1989, in the case of Goodyear India Ltd. v. State of Haryana and a number of other writ petitions and Civil Appeals, [1990] 76 STC 71, which were heard together. The judgment is annexed as exhibit "a" to Writ Petition No.587 of 1990. Sabyasachi Mukharji, J. (as he then was) by the said judgment, struck down, inter alia, the old section 13aa of the Bombay Sales Tax Act, 1959, as well as a similar section of the Haryana Sales Tax legislation on the ground, inter alia, that the tax was beyond the legislative competence of the two States. He negatived the contention of the States concerned that the taxable event was the purchase of goods which were used in the manufacture of taxable goods and which were despatched outside the State. He observed (internal page 34 of the judgment, exhibit "a" and pages 94 and 95 of 76 STC ). "it is well-settled that the main test for determining the taxable event is that on the happening of which the charge is affixed. . . . . . Analysing the section it appears to us that the two conditions specified, before the event of despatch outside the State as mentioned in section 9 (i) (b), namely, (i) purchase of goods in the State and (ii) using them for the manufacture of any other goods in the State, are only descriptive of the goods. . . . . . Analysing the section, if one looks to the purchase tax under section 9, one gets the conclusion that the section itself does not provide for imposition of the purchase tax on the transaction of purchase of the taxable goods but when further the said taxable goods are used up and turned into independent taxable goods, losing their original identity, and thereafter when the manufactured goods are despatched outside the State of Haryana and only then tax is levied and liability to pay tax is created. " He goes on to say, "in this series of transactions the original transaction is completely eclipsed or ceases to exist when the levy is imposed at the third stage of despatch of manufacture. " The Supreme Court held that the charging event was that event the occurrence of which immediately attracted the charge. It held that the tax which was levied under the old section 13aa was a tax on despatch of goods. The Supreme Court invalidated the old section 13aa on the ground that looking to the pith and substance of the section, it was beyond the legislative competence of the State inasmuch as it was only the Central Government which could, under entry 92b of List I of the Seventh Schedule to the Constitution, levy a tax on consignment of goods. Old section 13aa did not impose a tax on the sale or purchase of goods. The section therefore did not fall within the legislative competence of the State.

(3.) THE State Government has now sought to nullify the effect of the Supreme Court judgment by enacting the Bombay Sales Tax (Amendment) Ordinance, 1989, which is subsequently converted into an Act. As a result, instead of the old section 13aa a new section 13aa has been substituted and is deemed to have been substituted with effect from July, 1982. This new section 13aa is as follows : " 13aa. (1) Where a dealer, who is liable to pay tax under this Act, purchases any goods specified in Part I of Schedule C, directly or through commission agent, from a person who is or is not a registered dealer and uses such goods in the manufacture of taxable goods, then, unless the goods so manufactured are sold by the dealer, there shall be levied, in addition to the sales tax, paid or payable, if any, or as the case may be, the purchase tax levied or leviable, if any, under the other provisions of this Act in respect of purchases of such goods, a purchase tax at the rate of two paise in the rupee on the purchase price of the goods so used in the manufacture, and accordingly the dealer shall include purchase price of such goods in his turnover of purchases in his return under section 32, which he is to furnish next thereafter. "