Holding

Purchase tax can be levied on raw material used for a penultimate sale (the fourth category) and the factual determination of the sale category is for the appropriate authority, not the Supreme Court in a writ petition.

Summary

The petitioners, manufacturers of handicrafts in Haryana, purchased raw material within the state and sold the finished goods to dealers in Delhi who exported them. They claimed exemption from purchase tax under Section 9 of the Haryana General Sales Tax Act, relying on the declaration form ST‑15. The Haryana Sales Tax Authority levied purchase tax on the raw material, prompting a writ petition under Article 32. The Supreme Court examined earlier decisions (Murli Manohar, Goodyear, Hotel Balaji) and held that, besides intra‑state, inter‑state and export sales, a fourth category exists where goods are taken out of the state without a sale (a penultimate sale under Section 5(3) of the Central Sales Tax Act) and that purchase tax may be levied on raw material used for such sales. The Court clarified that determining the exact category of a sale is a factual question for the appropriate authority, not for the Supreme Court in a writ petition, and directed the authorities to decide the matters accordingly. The writ petitions were dismissed with no costs.

Issues considered

Whether the sale of goods manufactured in Haryana and sold to dealers in Delhi who export constitutes an intra‑state, inter‑state, export or penultimate sale for purposes of purchase tax under Section 9 of the Haryana General Sales Tax Act.
Whether purchase tax can be levied on raw material used for such sales.
Whether the Supreme Court can adjudicate the factual classification of the sale in a writ petition under Article 32.

Legislation cited

Central Sales Tax Acts. 5(1), s. 5(3)
Central Sales Tax Rules
Haryana General Sales Tax Act, 1973s. 24, s. 5, s. 9
Haryana General Sales Tax Ruless. Rule 21

Subjects

purchase taxsales taxintra‑state saleinter‑state saleexport salepenultimate saleSection 9 Haryana ActArticle 32writ petitionSupreme Court

Judgment

A K.B. HANDICRAFfS EMPORIUM AND ORS. ETC.

v.

STATEOFHARYANA AND ORS.

APRIL 28, 1993
B
[B.P. JEEVAN REDDY AND N. VENKA TACHALA, JJ.]

. Haryana General Sales Tax Ac~ 1973:
Sections 9. 24 read with Rule 21, ST Form-15, the Haryana General Sales
Tax Rules and read with Section 5 (1) of the Central Sales Tax Act and Form A of
C the General Sales Tax Rules-Raw material purchased within Haryana-Sale of
manufactured goods ow of such raw material to dealers at Delhi, who exports
them-Purchase tax whether leviable.

Constitution of India. 1950:
D
Article 32-Writ Petition-Whether a particular sale is intra-State sale;
inter-State sale or export sale-Supreme Court cannot determine in writ jurisdic-
tion.

W.P.(C) No. 983511983
E
Petitioners-firms were registered sales tax dealers. They manufactured
and sold·handicraft items. As they purchased raw material within the State
against declaration forms ST-15 prescribed under Rule 21 of the Haryana
General Sales Tax Rul~ read with Section 24 of the Haryana General Sales
Tax Act, p~rchase tax was not paid.
F
The petitioners sold the items of handicrafts to dealers in Delhi who
exported the same out of India. As the Delhi dealers issued Form H, pre-
scribed under the Cectral Sales Tax Rules, they did not pay tax on the said
sale/purchase.

G Following the High court decision in M/s, Murli Manohar and Company,
---'
Panipat& ors. v.State o/Haryana& Ors. C.W. P. No.1227 of1980. The Sales
Tax Authorities levied purchase tax u/s 9 of the Haryana General Sales Tax
Act for the assessmment years in question on the purchase of raw material
made by the petitioners, computing the tax with reference' to the purchase
value of the goods exported against Form H.
H Hence the present writ petition before this Court was filed challenging
454
HANDICRAFfS EMPORIUM l'. STATEOFHARYANA iss

- the impugned order of levying purchase tax.

Meanwhile this court allowed the appeals preferred against the decision
A

of the High Court in Murli Manohar and Company's case, setting aside the
judgment of the High Court.

B
As a common question arose in this batch of writ petitions, all petitions
heard together.

The petitioners contended that in view of the decision of this Court in
Murli Manohar 1991 [1] SCC 377, the writ petitions were to be allowed.
c
.
Disposing of the writ petitions, this Court,
"
HELD: 1.1.. The decision in Murli Manohar says that there can be only
three types of sales, namely, intra-State sales, inter~state sales and export
sales and no other. A sale to an exporter would be either aQ, ilitra-state sale or
D
an inter-state sale; in either case, the decision says, it does not attract the
purchase tax (on raw material) under Section 9 of the Haryana General Sales
Tax Act. However, in the light of the decision in Hotel Balaji, it must be held
that there is one more category in addition to the three categories mentioned
a hove. The fourth category is where a dealer in Haryana takes his goods out
of' Haryana (without effecting a sale, within the State), and effects the sale in E
the other State. According to Section 9 of the Hary:.ma Act, as explained in
Hotel Balaji, purchase tax can be levied and collected on the raw material
purchased by the manufacture within Haryana, . which was utilised for
manufacturing the goods so sold in the other State. (458-D-F)

Mur/i Manohar case. [1991) 1 S.C.C. 377, followed. F

Good year India l.Jd. and Ors. v. State ofHaryana and Anr. (1990] 2 S.C.C.
7l, referred to.

· HotelBalajiandOrs. etc. etc. v.StateofAndhraPradesh & ors. etc. etc.J.T. G
(1992) 6'S.C.182 explained

2.1. In a petition under article 3'.2° of the Constitution it is not the
province of the Supreme Court to go into facts. As repeatedly emphasised
by this Court, the question whether a particular sale is an intra-State sale,
H
an inter state sale, an export sale within the mealiing of Section 5(1) or a
SUPREME COURT REPORTS (1993) 3 S.C.R.
456

A penultimate sale within the meaning of section 5(3), or otherwise, is always a
question of fact to be decided by the appropriate authority in the light of the
principles enunciated by Courts. (459-C)
-
2.2. In these circumstances, it is directed that the matters be disposed of
by the authorities under the Act in the light of the law declared by this Court
B in Murli Manohar, Hotel Balaji and in this judgment. (459-D)

ORIGINAL JURISDICTION: Writ Petition (c) Nos. 9835-38of1983.

(Under Article 32 of the Constitution of India)
c
WITH

W.P. (C) Nos. 7468-7469/81, 3838-39/83, 5398/85, 5435/85, 386/84, 1489/
86, 12691/85, 489-90/83, 81/83, 68/86 & 1065/87

D Lakshmi Chandra Goyal, B.B. Sahni and Serve Mitter for the Petitioners

D.P. Gupta, Solicitor General, Ms. lndu Malhotra.Ms. AyshaKhatri, Ms. V.
Mohana and Ms. Nisha Bagchi for the Respondents.

The Judgment of the Court was delivered by
E
8.P. JEEVAN REDDY.J. A common question arises in this batch of writ
petitions. We may take the facts in writ petition (C) No. 9835 of 1983 filed by
M/s K.B. Handicrafts Emporium & Ors .• as representative of the facts in all the
cases. The petitioners are firms engaged in the manufacture and sale of handicrafts
F items. They are registered Sales Tax Dealers in the State of Haryana. They
---
purchased raw material within the State against declaration forms ST-15 pre-
scribed under Rule 21 of the Haryana General Sales Tax Rules read with Section
24 of the Act. By issuing Form S.T.15, the petitioners undertook that the goods
manufactured by them out of the said raw material would be sold by them either
within the State or in the course of inter-state trade and commerce or in the course
G of export within the meaning of Section 5(1) of the Central Sales Tax Act. A dealer
issuing the said Form need not pay the purchase tax on such raw material. After
manufacturing the items of handicrafts, the petitioners say, they sold them to
dealers in Delhi who, in tum, exported them out of India. At the time of sale of
handicrafts to Delhi dealers, the Delhi dealers issued Form-H, prescribed under the
Central Sales Tax Rules which means that the goods purchased were meant for
ff export. Neither party paid tax on the said sale/purchase.
HANDICRAFfS EMPORIUM "· STA TE OF HAR YANA [B.P. JEEWAN REDDY]" 457 .

For the assessment years in question, the Sales Tax Authorities of Haryana A
levied purchase tax on the purchase of -raw material made by tb~ petitioner,
following the decision of the Punjab and Haryana Higp Court in Mis ..Murli.
Manohar and Company, Panipat & Ors. v..State of Haryana &: oi-s.. (Civil Writ·
Petition No. l 227of 1980), under section 9 of the Haryana General~ 1.les Tax.Act,
1973. However, the assessing authority compute(i the taxwitb _reference to the·
purchase value of the goods exported against Form~H. The pc:titioners· dicl. not B
choose to file an appeal but directiyapproached this Court :by way of this writ
petition on the ground that in view of the decision of the Punjab ~d Haryana.High
Court in M11rli Manolwr there was no point in their pursuing "t'1e rem~d_ies under
the Act in that State.

-· Appeals were preferred in this court against the decision:of the Punjab and
Haryana High Court in Murli manohar which have qeen dispqsed of by this Court
c

on October.is. f990 (reported in [1991] l S.C.C. 377). Tbis.¢ourt.allowed the
appeal and set aside the judgment of the High Cou.rt. . . .

When these writ petitions came up for heai"i:ng, it was· urged by the learned· D ·
counsel for the petitioners th.at in view 6f the decision of this Cou_~l"in Mu rli
0

Mano/Jar the writ petitions must be allowed striaghtway. This was demurred to by
the learned Solicitor General appearing for the resporicJent-State. ·

We are of the opinion that the decision of thi~ :Court in Murli Ma,;ohardoes . E
cover the point raised in these appeals but it is necesary to acid a clarification. ·
Before we do that, it is necessary to state a little backg·round. Earlier io the.
rendering of the decision in Murli Manohar, a Be_nch of this Court cornparising
Sabyasachi Mukharji and Ranganathan, JJ. held in Goodyear India Ltd, and Ors.
v. State ofHaryanaandAnr. [ 19_90] 2 S.C.C:7 lthatwhere the goods manufactured·
are taken out of Hary(lna (without effecting a sale)to the br~ch office'or depot of .F
the Manufacturer or to the office or depot of his agent, no purchase tai\ can be
levied under section 9 of the Act. on the raw material purchased withln t'1e State
anG m;ed in the manufacture of such goods~ I_t was ·he\d that imposing· sucti tax.
would amount to levying tax on consignment. which the State Leg"islaiure was not·
competent to do. Section 9, as it then stood, stated·express!y that no such pur~~ase
tax on raw material was. Jeviable, if the goods rrianufaetured out o.f -such raw G
material were sold either \Vi thin the State or were sold in th~
. course
.
of.inter--st~te.
.
Trade and Commerce or were sold in the course of export "'.'ithin the meaning· or
. Section 5(l)oftheCentral Sales Tax Act. MurliManoharwas decided in tile lighi ·
of the law declared in Goodyear. Later, However'. a Bench of three· Judges
comprising S. Ranganathan, V. Ramaswami,JJ. andoneofus(B.P. Jeevan.Rec)dy,
H
J.) held that Goodyear does not lay down the correct Jaw-vide Hotel Balaji and
458 SUPREME COURT REPORTS (199313 S.C.R.

A Ors. etc. ttc. v. State ofAndlfra Pradesh & Ors. etc. etc. JT (1992) 6 S.C. I8i It
was tieTd.in Hotel Balaji that having regard to the scheme of and the objective
.·underlying section 9 ii was C;ompetent for
the State Legislature to levy purchase
. :tax ori raw rpaterial purchased Within the State. where the goods manufaciured out
of such raw material .are t~en out of the State (without effecting a sale within the
State. or otherwise than by way of an Inter-state sale or by way of an export-sale
B . within' the "meaning of Section S(l)ofthe Central Sales Tax Act). It was held that
SIJCh a tax does not amount to consignment tax. It is this decision in Balajithat calls
for a:~ertai,n clanftcation of the principles enunciated in M1irli Manohar.
. . ~ .

The fads·in MurliManohar were substantially similar to the facts herein.
c . Thti·dealers within the State. of Haryana purchased raw material with.out paying .
. ·tax. manufactured .goods out O.f the same and sold the manufactured goods to
dealers woo.in tumexporte4 those goods out oflndia. On these facts it was held
· by the Punjab and I-faryana High Court that inas~u~h as the sale to exporters was
. a penultimate sale falliHg under section 5(3) of the Central Sales Tax Act and
further !nasmuch as SecliQ-n 9 of the State Act. exempted only export sales within
· D ·. the ·meaning of section.5(l)·of the Central Saies Tax Act but not the penultimate
saJ.e. fal.ling under Section 5(3), tax under Section 9 was Ieviable. On appeal, this
'Court affirmed that Sec.tion 9·of the· Haryaria Act (before it was amended by
Haryana Act I of 1988) dtd not exempt as sale failing under Section 5(3) but
exempted
.. : .
only a sale . falling .under section
~ . .
5( I). Even so, the. appeal was allowed
E on. t~e (ollowing reasoning: "the sales made by the assesses can only fall within
.. one of the three categ0ries: They are either local sales or inter-state sales or export
sales ........ :.... We are unable to conceive of a fourth category of sale which could.
be neilher a local sale nor a~ inte~-Staie sale nor an export sale." In other words,
. the _d~cisi~n .says that there can be only thre~ types of sales, namely, intra-state
sales,. inter~state sal~s.and export sales and no other. A sale to an exporter would
. F · be either an iptfa-stat~ ~aie or an ii;iter-state sale; in either case.it does not attract
the purchase tax. (on raw material) under Section 9 of the Haryana Act, says the
·decision,_ It is:on th\s.reaso.ning that the appeals were. allowed inspite of the clear
eiluncfation ~hat lhe sales falling under Section 5(3) of the Central Sales Tax Act
.. were:not exempt u.nder Section 9 of.the Haryana Act, as it then stood .

.G
The _aboYe7holdi:ng is e~idently influenced by the decision in .Goodyear,
w)lich was good law ac the tiin.eMurliManoharwas decided. However, in the light
Of the decision of Hotez Balaji, it must be held that there is one more category in
addition· to. the three categories mentioned above. The fourth category is where a ·
dealer in· Haryana takes:his goods out of the Haryana without effecting a sale. An
. H .illustratio~ woufo serve to highlight what we say: a Haryana manufacturer takes
his goods to Delhi withput effecting a sale. In Delhi, if he finds it more profitable,
HAND.ICRAFTS EMPORIUM''· STAlEOFJiARYANA [B.P.}EEWAN REDO)']. 459

he w\ll sell it to a dealer in Delhi. Or if he finds it more profitable to' sell it. to an .A.
exporter in Delhi he will sell the same to such exporter. These two sales'are neither
intra-state sales nor inter-state sales, nor export sal~s w.ithin the meaning of.
Section 5( I) of the Central Sales Tax Act. In one case, it is a sale in Delhi and. in~ .
the other, it is a punultimate sale within the meaning of Sect.km 5(3) ofth"e Ce.ntrli!
Sales Tax Ad. According to Section 9 of ·theHaryai;ia Act, as explained in Hoiei .
Balaji and Murli Manohqr, purchase tax can be levied and ~ollected on tbe r&:w B
material purchased by the manufacturer within HaryaI).a, which was uti~ised for.
manufacturing the goods so sold in these two situations ..

We inust make it clear that in a petition u11der Article 32 of the ConsVtutlon~ ·

- it is notou.r province to go into facts. As repeatedlly emiJhasised,8.Y this Cour~. ~he : c
a
question whether particular sale is an intra~stateSale, an ipter-state sale, ari e?'pOrt ·
sale within the meaning o(section 5(1) or a penultimate.s·itle within the ipe~nin_g
of section. 5(3), or otherwise, is always a question of fact to be decided b"y the·
apporiate authority in.the light of.the principles enun~iatei;t by Cll!urts.·In these.
circumstances, we content ourselves by declaring the \aw and leave it to be applied
by the appropriate authorities. Counsel for thepetitioners says that all the sales D
effected by all the petitioners are inter-State sales. May be, or may not be. We leave
the matters.to b·~ disposed of by the authorities under the Act in the light o(.thi,! law
- '

declared by tt.is Court iii Murli Manohi:ir, Hotel Balaji and in this judgment

· llte writ petitions are disposed of with theaforemeritioned clarification and. . E
observations. No costs.

V.P.R. J>etitio,os disposed oL .