HOTEL BALAJI AND OTHERS ETC. ETC. versus STATE OF ANDHRA PRADESH AND ORS. ETC. ETC.

Citation: [1992] SUPP. 2 S.C.R. 182 · Decided: 22-10-1992 · Supreme Court of India · Bench: S. RANGANATHAN · Disposal: Dismissed

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Judgment (excerpt)

A 
B 
HOTEL BALAJI AND OTHERS ETC. ETC. 
v. 
STATE OF ANDHRA PRADESH AND ORS. ETC. ETC. 
OCTOBER 22, 1922 
[S. RANGANATHAN, V. RAMASWAMI AND 
B.P. JEEVAN REDDY, JJ.] 
Andhra Pradesh General Sales Tax Act, 1957: 
C 
Section 6-A-Levy of tax on turnover relating to purchase of certain 
goods-Nature of tax-Neither use tax, consumption tax nor consignment 
tax-Hence valid. 
Gujarat Sales Tax Act, 1969: 
D 
Section !SB r/w Rule 42-E-Levy of purchase tax-Nanire of tax on 
purchase price of raw materials and not on manufactured products-Not a 
tax on consignment-Legislature competent to levy such tax as long as the 
levy retains the character of tax on sale-Validity of the provision upheld. 
E 
F 
Uttar Pradesh Sales Tax Act, 1948: 
Section 3-AAAA--Purchase lax-Levy of-Nature of levy-Legisla-
ture-Whether competent to levy such a tax. 
Constitution of India, 1950 : 
Seventh Schedule-List II-Entry 54-Sales Tax Acts of Gujarat, 
Andhra Pradesh and Uttar Pradesh-Sections: 6-A, 15-B and 3-AAAA 
respectively-Legislative competence of and validity of the provisions. 
Interpretation of Statutes : 
G 
Liberal Construction-To be avoided if it defeats the manifest object 
and purpose of the statute-Reasonable construction to be followed-Where 
two constructions possible, the one which sustains constitutionality to be 
prefemd. 
The constitutional validity of S.158 of Gujarat Sales Tax Act, S.3-
H AAAA of Uttar Pradesh Sales Tax Act and S.6A of the Andhra Pradesh 
182 
' 
HOTEL BALAJI v. STATE OF AP. 
183 
General Sales Tax Act was challenged in the present Appeals, Writ Peti· A 
tions SLPs and Transferred case. 
S.15-B of the Gujarat Sales Tax Act, 1969 was introduced by Amend· 
ment Act, 1986. It provided for levy of additional purchase tax on raw 
materials purchased by a manufacturing dealer in case he used the said raw 
material for the manufacture of other goods which he despatched to his own 
place of business or to his agent's place of business outside the State but 
within India. By the Amendment Act, 1987, the section was substituted. 
Writ Petitions were filed before the High Court challenging the 
validity of unamended S.15-B on the ground that it levied a consignment 
tax and hence was outside the competence of State Legislature. During the 
pendency of the writ petitions, S.15-B was subsitituted by an Ordinance. 
Subsequently the Gujarat Sales Tax Amendment Act 6 of 1990 was enacted 
in terms of and replacing the Ordinance. S.15-B was given retrospective 
effect from 1.4.1986, the date on which it first came into force. In view of 
B 
c 
the said Amendment Act, the Writ Petitions came to be dismissed as D 
infructuous. A fresh batch of Writ Petitions were filed challenging the 
validity of substituted S. 15-B on the ground that it continued to be a 
consignment tax. The High Court having dismissed the Writ Petitions, 
the matter has come up before this Court. 
Section 3-AAAA of the U.P. Sales Tax subjected the purchase of 
E 
"goods liable to tax at the point of sale to the consumer" to purchase tax 
payable by the purchasing dealer, in a case where the selling dealer was 
not liable to pay the sales tax on such sale. Purchase tax was payable at 
the same rate as the sales tax. If, however, the purchasing dealer resold 
such goods within the State or in the course of inter-State trade or 
F 
commerce, he was not liable to pay the purchase tax. While the Civil 
Appeals were pending in this Court as regards the validity of S.3-AAAA, 
the High Court, while deciding some Writ Petitions, applied the ratio in 
Good Year and held that section was ultra vires the legislative competence 
of the State Legislature. It held that under the said provision the taxable 
event was not the purchase of the goods by the purchasing dealer but the G 
subsequent event namely use of the said goods in the manufacture of other 
goods and their despatch without effecting a sale within the State of U.P. 
to a place outside U.P. To overcome this decision an Ordinance was issued 
which was later replaced by the U.P. Sales Tax (Amendment) Act, 1992, the 
constitutional validity of which has been challenged before this Court. 
H 
184 
SUPREME COURT REPORTS [1992J SUPP. 2 S.C.R. 
A 
In the A.P. Sales Tax Act Section 6-A was inserted by the Andhra 
B 
Pradesh General Sales Tax (Amendment) Act of 1976 with effect from 
1.9.76. The effect was that tax payable at sale point became tax payable on 
purchase point in certain circumstances. Writ Petitions were f

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