2003 (9) TMI 716 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Liability to pay purchase tax under section 5A of the Kerala General Sales Tax Act, 1963.
2. Whether the conversion of animals into meat constitutes a manufacturing process.
3. Applicability of tax exemptions under Notification S.R.O. No. 342 of 1963.
4. Consideration of whether the sale or purchase of goods is liable to tax under the Act.

Issue-wise Detailed Analysis:

1. Liability to pay purchase tax under section 5A of the Kerala General Sales Tax Act, 1963:
The petitioner, a State Government undertaking involved in the sale of livestock and meat, contested the liability to pay purchase tax under section 5A of the Act on the purchase turnover of cattle, sheep, and pigs. The assessing authority, relying on the Supreme Court decision in Deputy Commissioner of Sales Tax v. A.B. Ismail [1986] 62 STC 394, rejected the petitioner's claim of non-liability. The Tribunal upheld this decision, distinguishing it from other Supreme Court rulings such as Sterling Foods v. State of Karnataka [1986] 63 STC 239.

2. Whether the conversion of animals into meat constitutes a manufacturing process:
The petitioner argued that converting animals into meat by slaughtering does not involve a manufacturing process. However, the Supreme Court in A.B. Ismail's case [1986] 62 STC 394 held that the conversion of goats and sheep into meat involves consumption and manufacture, leading to the creation of a different commercial commodity. The Tribunal followed this precedent, affirming that the conversion of livestock into meat constitutes a manufacturing process, thereby attracting section 5A.

3. Applicability of tax exemptions under Notification S.R.O. No. 342 of 1963:
The petitioner claimed that meat is an exempted commodity under Notification S.R.O. No. 342 of 1963 and that the purchase of animals for conversion into meat should be treated as the purchase of meat. The Supreme Court in Chiranjit Lal Anand v. State of Assam [1985] 60 STC 89 was cited, where "meat on hoof" was considered exempt due to the specific contractual and factual circumstances. However, the Tribunal and the Supreme Court in A.B. Ismail's case distinguished these circumstances, stating that the exemption applied only to the specific facts of Chiranjit Lal Anand's case and not as a general principle.

4. Consideration of whether the sale or purchase of goods is liable to tax under the Act:
The petitioner argued that the authorities failed to consider whether the main part of section 5A was attracted, specifically whether the sale or purchase of goods was liable to tax under the Act. The decision in Kerala Premo Pipe Factory Ltd. v. State of Kerala [1984] 57 STC 84 was referenced, which held that section 5A applies only if the transaction is not liable to tax under section 5. The Tribunal, however, found no evidence that the petitioner raised this issue before the lower authorities. The Tribunal concluded that since the petitioner did not provide evidence that the sellers' turnover exceeded the non-taxable limit, section 5A was applicable.

Conclusion:
The High Court dismissed the revisions, affirming the Tribunal's decision that the petitioner is liable to pay purchase tax under section 5A. The conversion of livestock into meat constitutes a manufacturing process, and the exemptions under Notification S.R.O. No. 342 of 1963 do not apply to the petitioner's transactions. The authorities and the Tribunal adequately considered the applicability of section 5A, and the petitioner's failure to provide necessary evidence regarding the sellers' taxable status justified the tax imposition.