1986 (7) TMI 360 - HC - VAT and Sales Tax

Summary

Issues:
- Interpretation of tax liability under the Kerala General Sales Tax Act, 1963 regarding goods sent outside the State on consignment basis.
- Determination of whether goods sent outside the State by an assessee to agents on consignment basis acquire the quality of last purchase within the State for tax purposes.
- Application of legal principles regarding the liability to pay tax on purchases when they acquire the quality of being the last purchases inside the State.

Analysis:
The judgment delivered by the Kerala High Court involved multiple tax revision cases filed by the Revenue, with the main case being T.R.C. No. 12 of 1985. The issue at hand revolved around the tax liability under the Kerala General Sales Tax Act, 1963 concerning goods like arecanut and copra sent outside the State on consignment basis by the assessee to agents. The Appellate Tribunal had held that such goods did not acquire the quality of last purchase within the State, thus not subject to tax. The Revenue challenged this decision, arguing that once goods move outside the State, they become liable to tax as the last purchase. The assessee-respondent contended that a dealer is not liable to pay tax on purchases until they acquire the quality of last purchases inside the State, citing legal precedents.

The Court analyzed the contentions of both parties and referred to the Supreme Court decision in State of Madras v. Narayanaswami Naidu [1968] 21 STC I (SC) which clarified that a dealer is not liable to pay tax on purchases until they become the last purchases inside the State. The Court rejected the Revenue's argument that goods sent outside the State for consignment sales became exigible to tax. It emphasized that whether goods are held inside or outside the State, they remain the property of the assessee, and the character of last purchase is crucial for tax liability. The Court also cited the Full Bench decision in Season Rubbers v. State of Kerala [1981] 48 STC 256 (FB) which supported the view that the liability to tax is on the transaction of purchase and the rate applicable is at the time of purchase, not at the time of disposal.

Based on the legal principles discussed and the precedents cited, the Court held that the tax revision cases lacked merit, upholding the decision of the Appellate Tribunal. It dismissed the cases with costs. Additionally, in another case (T.R.C. No. 127 of 1984), the Court found that the Appellate Tribunal's order for remit was unnecessary, as the closing stock sought to be taxed was not exigible to tax. The judgment was issued to counsel for the parties, and the petitions were dismissed.