1990 (8) TMI 365 - HC - VAT and Sales Tax

Summary

Issues:
- Whether the purchase turnover of certain items used in the manufacture of wet grinders is exigible to tax under section 5A of the Kerala General Sales Tax Act.
- Whether the items used in the manufacture of wet grinders can be considered as "consumed" under section 5A(1)(a) of the Act.

Analysis:
1. The judgment pertains to a batch of seven cases where the Revenue challenged the decision of the Sales Tax Appellate Tribunal regarding the taxability of certain items used in the manufacture of wet grinders under section 5A of the Kerala General Sales Tax Act for the assessment years 1976-77 to 1982-83.

2. The Revenue contended that the items in question, such as bearings, crown, belt, fire-clay, drums, cables, hardware, paint, casting iron scrap, were consumed in the manufacture of wet grinders and hence should be taxed under section 5A. The respondent argued that there was no consumption as required by section 5A(1)(a) to attract the levy of tax.

3. The High Court analyzed the provisions of section 5A(1)(a) of the Act in light of previous decisions and held that the items used in the manufacture of wet grinders were indeed consumed in the manufacturing process. The court emphasized that even if the end-product was taxed under section 5, it did not negate the taxability of the components used in its manufacture under section 5A.

4. Referring to precedents and the economic concept of consumption, the court clarified that the term "consumes" in the statute should be understood in an economic sense, encompassing the utilization of goods in the production process. The court highlighted that the items in question were components integral to the end-product and, therefore, were consumed in the manufacturing process.

5. The court disagreed with the Sales Tax Appellate Tribunal's interpretation that the items were not consumed in the manufacture of other goods for sale. It reiterated that the purchase turnover of such goods was exigible to tax under section 5A(1)(a) of the Act, emphasizing that the Tribunal had erred in its understanding of the law.

6. The court dismissed the argument that the items were merely "used" and not "consumed" in the manufacturing process, citing cases from the Madras High Court, and held that those decisions did not align with the Supreme Court's later interpretations on the subject.

7. Ultimately, the court set aside the Tribunal's order and allowed the tax revision cases filed by the Revenue, thereby ruling in favor of taxing the purchase turnover of items used in the manufacture of wet grinders under section 5A of the Kerala General Sales Tax Act.

This comprehensive analysis of the judgment highlights the key legal issues, arguments presented by the parties, the court's interpretation of the law, and the final decision rendered by the High Court in this tax matter.