1986 (12) TMI 351 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 5A(1)(a) of the Kerala General Sales Tax Act, 1963 regarding the liability of purchase tax on goods consumed in the manufacture of other goods for sale or otherwise.

Analysis:
The High Court of Kerala addressed the issue of whether the purchase of granite by an assessee for the erection and repair of sea walls was liable to tax under section 5A of the Kerala General Sales Tax Act, 1963. The Kerala Sales Tax Appellate Tribunal had ruled that the granite purchased was not used in the manufacture of other goods for sale or otherwise, hence section 5A(1)(a) was not applicable.

The Court agreed with the Tribunal's decision, emphasizing that the assessee, a contractor, was not manufacturing goods but constructing sea walls. Referring to the Supreme Court's interpretation in Deputy Commissioner of Sales Tax v. Pio Food Packers, the Court clarified that goods must be consumed in the manufacture of other goods for sale or other purposes to attract section 5A(1)(a). When a contractor constructs buildings or structures, the materials become part of immovable property, not goods for sale.

The Revenue argued that the decision in Ganesh Prasad Dixit v. Commissioner of Sales Tax supported their position that any consumption of goods brings them within the purview of section 5A(1)(a). However, the Court distinguished this case from the current scenario, emphasizing that the interpretation of "or otherwise" in Pio Food Packers was more relevant and directly applicable.

Furthermore, the Court highlighted that the later decision in Pio Food Packers held more weight than the earlier decision in Ganesh Prasad Dixit, especially considering they were both rendered by Benches of equal strength. The Court also cited decisions from other High Courts, such as Andhra Pradesh and Madras, which supported the interpretation that goods used in the construction of immovable property were not subject to tax under section 5A.

Ultimately, the High Court of Kerala concluded that the purchase of materials by the contractor for sea wall construction/repair was not liable to tax under section 5A. As a result, the revision petitions were dismissed, with no order as to costs.