1981 (7) TMI 214 - HC - VAT and Sales Tax

Summary

Issues:
- Assessment to sales tax for the years 1974-75 and 1970-71
- Exemption of sale of water by Cochin Corporation under section 10(1)(ii)
- Controversy over taxation of purchase turnover of water by the assessee
- Interpretation of section 5A of the General Sales Tax Act
- Challenge to the decision of the Sales Tax Appellate Tribunal

Analysis:
1. The judgment addresses two revisions arising from sales tax assessment orders for the years 1974-75 and 1970-71. The common issue in both cases is the taxation of the purchase turnover of water by an assessee who manufactures and sells ice. The assessee argued that water, purchased allegedly from Cochin Corporation, should not be taxed under section 5A of the General Sales Tax Act as it is not goods liable to tax. The controversy revolves around whether the sale of water to the assessee is exempt under section 10(1)(ii) due to Cochin Corporation's exemption from taxation on water sales by local authorities.

2. The judgment references a previous case, Govindarajulu's case, where the interpretation of "goods the sale or purchase of which is liable to tax under this Act" was discussed. The State contended that goods taxable under the Act, even if exempted under section 10, should still be considered taxable. However, the Division Bench in Govindarajulu's case held that goods exempted under section 10 fall within the scope of section 5A. In the present case, the exemption of water sales by Cochin Corporation under section 10(1)(ii) does not render water non-taxable under the Act. Water remains taxable unless sold by exempted entities. The Tribunal erred in applying Govindarajulu's case to the current scenario, leading to the decision's reversal.

3. The judgment clarifies that other contentions, such as the absence of a sale of water to the assessee, were raised but not addressed in this ruling. The matter is remitted back to the Tribunal for a fresh disposal of the appeals based on the court's decision. The parties are not awarded costs in this instance.

In conclusion, the High Court of Kerala ruled in favor of the assessee, setting aside the Sales Tax Appellate Tribunal's decision and remitting the matter for further consideration. The judgment provides a detailed analysis of the interpretation of relevant sections of the General Sales Tax Act and the implications of exemptions on the taxation of goods like water.