1980 (12) TMI 168 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of Notification S.R.O. No. 41/69 regarding tax liability under the Kerala General Sales Tax Act, 1963.
2. Determination of the taxable turnover for the assessment year 1974-75 in relation to sales of dried ginger, pepper, and kacholam.
3. Assessment of whether the revision petitioner was the last purchaser of the goods within the State.
4. Applicability of the exemption granted to pharmacies under the notification.
5. Validity of the assessing authority's decision to treat the revision petitioner as liable to tax for the disputed turnover.

Analysis:
The revision petitioner, a dealer in country drugs, contested the assessment of taxable turnover for the year 1974-75, specifically related to sales of dried ginger, pepper, and kacholam to two pharmaceuticals. The assessing authority rejected the petitioner's claim of not being the last purchaser based on declarations from the pharmaceuticals, stating that the last purchaser did not accept tax liability. The petitioner's appeals to the Deputy Commissioner and Sales Tax Appellate Tribunal were dismissed, upholding the assessing authority's decision (Para 1).

The Tribunal relied on Notification S.R.O. No. 41/69 to determine that the pharmaceuticals were not liable to tax under section 5, shifting the taxable point to the petitioner's purchase. However, the notification only granted a conditional exemption to pharmacies for specific goods subject to use in manufacturing or preparation for sale, not absolute exemption from tax liability. Thus, the Tribunal's interpretation was incorrect, and the purchases by the pharmaceuticals were indeed taxable under the Act (Para 3).

Consequently, the High Court allowed the revision petition, setting aside the lower authorities' orders and directing the Sales Tax Officer to recompute the tax liability by excluding the disputed turnover from the petitioner's assessment. The Court emphasized that the purchases made by the pharmaceuticals were the last taxable purchases within the State, invalidating the assessing authority's decision to tax the revision petitioner for the disputed turnover (Para 3).

In conclusion, the judgment clarified the application of the notification, affirmed the tax liability of the pharmaceuticals, and overturned the assessing authority's decision, providing relief to the revision petitioner by excluding the disputed turnover from taxation (Para 3).