2011 (5) TMI 737 - HC - VAT and Sales Tax

Applicability of section 5A Held that - since section 5A of the Act is subject to section 5(3) of the CST Act, liability has to be considered keeping in view of the exemption available to the purchaser/exporter under section 5(3) of the CST Act. Since the purchases of tags and labels were the penultimate purchases for export falling under section 5(3) of the CST Act, the petitioner was not liable to be assessed under section 5A of the Act, revision allowed cases by cancelling section 5A assessments, revision cases are allowed

Summary

Issues:
Whether the petitioner is liable to pay purchase tax under section 5A of the Kerala General Sales Tax Act on purchases of tags and labels from exempted dealers attached to coir products exported outside India.

Analysis:
The petitioner, engaged in manufacturing and exporting coir products, purchased tags and labels from printing presses with sales tax exemption. The assessing officer levied purchase tax under section 5A of the Act, considering these purchases as consumed in the manufacture of coir products exported. The first appellate authority and the Tribunal confirmed this decision for the years 1998-99 and 1999-2000, leading to the filing of revision cases.

The petitioner argued for exemption under section 5(3) of the CST Act based on the Supreme Court decision in State of Karnataka v. Azad Coach Builders Pvt. Ltd. The Government Pleader contended that the purchased commodity was used in manufacturing final products for export, not exported as such, thus not qualifying for exemption under section 5(3) of the CST Act. Citing a previous court decision, the Government Pleader supported the Tribunal's decision that all conditions of section 5A were met, justifying the tax liability.

The Court noted that taxable turnover excludes export turnover under section 2(xxv) of the KGST Act, which includes deemed export turnover under section 5(3) of the CST Act. Referring to the Supreme Court decision, the Court emphasized that when a purchased commodity is exported without change of identity, it falls within the scope of section 5(3) of the CST Act. Since the tags and labels were printed for export orders and attached to products without alteration, the Court found the Supreme Court decision applicable.

While acknowledging the applicability of section 5A due to the use of purchased goods in manufacturing, the Court highlighted that section 5A is subject to section 5(3) of the CST Act. As the purchases of tags and labels were penultimate for export under section 5(3) of the CST Act, the petitioner was not liable under section 5A. Consequently, the Court allowed the revision cases, canceling the assessments under section 5A and reversing the orders disallowing exemption.

In conclusion, the Court allowed the revision cases, ruling in favor of the petitioner by canceling the assessments made under section 5A on the purchase turnover of tags and labels attached to products exported outside India.