CIVIL Appeal No 4160 of 1985
852 From the Judgment and Order dated 2561984 of the Kerala High Court in TRC No 19 of 1984
V J Francis for the Appellant
T M Ansari Markose Vellapally and D N Misra for the Respondent
The Judgment of the Court was delivered by BHAGWATI J
The sole question which arises for determination in this appeal is as to what is the rate at which the goods which had been purchased earlier and which were in stock with the assessee on 30 6 74 were assessable to purchase tax when the purchases were found to be last purchases as a result of events which took place subsequent to 3061974
This question has become material since the rate of purchase tax was increased from 3 to 5 with effect from 1st July 1974
Now it is not disputed in the present case that the purchases of goods effected by the assessee prior to 30 6 74 were last purchases within the State because the goods purchased which were in stock on 30674 were subsequently sold by the assessee in the course of inter state trade or commerce which means that they were not sold within the State and hence the assessee was clearly the last purchaser within the State and as such was liable to pay purchase tax under Item 71 of the First Schedule to the Kerala General Sales Tax Act
Equally it is clear that the assessee could not be made liable to tax on the purchases made by it prior to 30th June 1974 unless the purchases acquired the quality of being last purchases in the State
It was pointed out by this Court in State of Madras vs Shri T Narayanaswami Naidu  Anr1 when the assessee files a return and declares the stock in hand the stock in hand cannot be said to have been acquired by last purchase because he may still during the next assessment year sell it or he may consume it himself or the goods may be destroyed etc
He would be entitled to claim before the assessing authorities that the character of acquisition of the stock in hand was undermined in the light of subsequent events it may or may not become the last purchase inside the State
 There can therefore be no doubt that the assessee in the present case became liable to pay tax on the purchases made by it prior to 30th June 1974 as soon as it became determined though subsequent to 30th June 1974 that these purchases were last purchases inside the State and were consequently exigible to tax
1  853 But the question remains as to what is the rate at which the A assessee was liable to be taxed in respect of these purchases
Since the purchases took place before 30th June 1974 the assessee would in our opinion liable to be taxed at the rate prevailing at the time when the purchases were made and since the rate at the time was 3 of the sale price the High Court was right in taking the view that the purchases made by the assessee prior to 30th June 1974 were taxable at the rate of 3
We may point out that a similar view has been taken by the Kerala High Court in Seaso Rubbers vs State of Kerala1
We find ourselves in agreement with the reasoning adopted by the Full Bench of the High Court in that case
We accordingly reject the appeal but with no order as to costs


Summary:
The respondent assessee had made certain purchases before 30th June 1974 and sold them subsequently in the course of inter state trade or commerce
The rate of purchase tax under Item 71 of the First Schedule to the Kerala General Sales Tax was increased from 3 to 5 with effect from 1st July 1974
The High Court held that the purchases made by the respondent prior to 30th June 1974 were taxable at the rate of 3 
Dismissing the appeal to this Court  HELD The assessee could not be made liable to tax on the purchases made by it prior to 30th June 1974 unless the purchases acquired the quality of being last purchases in the State In the instant case there can be no doubt that the assessee became liable to pay tax on the purchases made by it prior to 30th June 1974 as soon as it became determined though subsequent to 30th June 1974 that these purchases were last purchases inside the State and were subsequently eligible to tax
Since the purchases took place before 30th June 1974 the assessee would be liable to be taxed at the rate of 3 which was prevailing at the time when the purchases were made
8S2F H 853B State of Madras vs T Narayanaswami Naidu  Anr   referred to
Seaso Rubbers vs State of Kerala 48 STC 256 approved