2001 (8) TMI 1143 - SC - VAT and Sales Tax

EXEMPTIONS NEW INDUSTRIAL UNITS OF SMALL-SCALE INDUSTRIES - EXEMPTION ONLY OF GOODS TAXABLE UNDER ACT AT POINT OF LAST PURCHASE NOT TO GOODS WHICH BY CIRCUMSTANCES ARE TAXED AT POINT OF LAST PURCHASE

Summary

Issues:
1. Interpretation of a notification under the Kerala General Sales Tax Act, 1963 regarding exemption from purchase tax.
2. Application of the notification to the turnover of goods taxable at the point of last purchase in the State.
3. Assessment of exemption eligibility for the purchase of copper scrap used in the manufacture of copper sulphate.

Issue 1: Interpretation of Notification
The judgment involved the interpretation of a notification (S.R.O. No. 499/90) under the Kerala General Sales Tax Act, 1963. The notification granted exemption from tax payable under the Act to new and existing industrial units engaging in diversification, expansion, or modernization. The key point of contention was whether the exemption applied to the turnover of goods taxable at the point of last purchase in the State used in the manufacture of goods for sale.

Issue 2: Application of Notification
The Kerala Sales Tax Appellate Tribunal held that the exemption under the notification was limited to goods taxable at the point of last purchase in the State. The Tribunal emphasized that the notification did not cover goods like copper scrap, which were not taxable at the point of last purchase. The High Court of Kerala failed to consider this specific requirement of the notification, leading to a misinterpretation of its scope.

Issue 3: Assessment of Exemption Eligibility
The case involved an assessee who purchased copper scrap for manufacturing copper sulphate. The contention was that since the copper scrap was bought from unregistered dealers, it became taxable at the point of last purchase in the State and should be eligible for the exemption. However, the court clarified that the exemption applied to goods of a specific description taxable at the point of last purchase under the Act. As copper scrap did not fall into this category, the particular copper scrap purchased was not entitled to the exemption.

In conclusion, the Supreme Court upheld the interpretation that the exemption notification was limited to goods taxable at the point of last purchase in the State. The court ruled in favor of the strict interpretation of the notification's language, emphasizing that external aids for construction were unnecessary due to the clarity of the notification. The judgment set aside the lower authorities' decisions, granting the assessee exemption from purchase tax based on the notification's criteria.