MUKERIAN PAPERS LTD- vs STATE OF PUNJAB

The Supreme Court held that under Section 4B of the Punjab General Sales Tax Act, 1948, the tax on raw materials becomes exigible only when the manufactured goods are dispatched outside the State, not at the time of purchase or manufacture. The Court clarified that the tax, although termed as purchase tax, is effectively a tax on consignment, which is beyond the State's competence to levy as per Article 269(1)(h) of the Constitution. Consequently, the appeals were allowed, and the imposition of tax, interest, and penalty was deemed invalid.