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TMI Blog1987 (5) TMI 68X X X X Extracts X X X X X X X X Extracts X X X X ..... rchase tax liabilities to the extent of Rs. 5,12,536 was allowed to be deducted while computing the total income. It is noticed that the assessee did not receive any demand notice from the Sales tax department. In this connection as per the ratio of the Kerala High Court decision in Dy. CST v. Neroth Oil Mills Co. Ltd. [1982] 49 STC 249, the assessee is not liable for any purchase tax at all. In view of this position, the claim allowed by the Income-tax Officer is not in order. Having called for and examined the records, I noticed that the order passed by the Income-tax Officer for the assessment year is erroneous and prejudicial to the interest of revenue. Therefore I propose to revise the above order by giving suitable instructions to the Income-tax Officer to enhance the assessment to the extent noted above." Before the CIT the assessee's counsel argued that purchase tax was not payable only if the items purchased were exported without any manufacturing operations being carried out, that the freezing of the fish involved manufacture and that the amount should be allowed as deduction. Rejecting the arguments advanced by the assessee's counsel, the CIT directed the ITO to modify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Dy. CST v. Neroth Oils Mills Co. Ltd. [1982] 49 STC 249 referred to by the CIT refers the position as it stood before the amendment. The case of Neroth Oil Mills Co. Ltd. is now pending before the Supreme Court on appeal by the Kerala State. Purchase tax is even now in dispute. It is a disputed liability. In order to bring the assessee's case within the ambit of section 5(3) of the Central Sales-tax Act, 1956 (hereinafter referred to as the CST Act) the following conditions have to be fulfilled : (a) the assesses should be an exporter ; (b) the transaction should be in the course of import or export so as to bring it within Article 286(1)(b) of the Constitution of India ; (c) the exporter should have been the owner of the goods before the goods crossed the custom barriers of India or the purchase of goods for export should be supported by anterior purchase orders. The claim of the assessee before the sales-tax authorities was that they did not carry on any manufacturing activity. It was only one of the arguments for exemption. The assessee claimed before the sales-tax authorities that what they purchased was in the course of export by virtue of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the situation favourable to them [nullifying the judgment in Neroth Oil Mills Co. Ltd.'s case] to hold that processed including frozen sea foods are said to be manufacture for the purpose of assessment under sales-tax. It is a fact that purchase tax had not been demanded. The reason for this is that the assessment has not been completed. Since the matter is under dispute the assessee is correct in making the provision. Reference is made to the decision of the Supreme Court in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 and the decision of the Allahabad High Court in the case of Poonam Chand Trilok Chand v. CIT [1982] 136 ITR 537. Disputed liability such as purchase tax etc. is allowable up to the assessment year 1983-84 because section 43B applies only to assessment years 1984-85 onwards. For the sales-tax assessment years 1977-78 and 1978-79 the situation was the same. The Government of Kerala by notification dated 29-3-1979 waived purchase tax in respect of all exporters of sea foods like the assessee for the period from 1-4-77 to 31-3-79. If the Government had no right to levy the purchase tax the question of waiver of the same did not arise. This itself showed that p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Foods' case respectively. Reliance is placed on the order of the CIT. 5. We have considered the rival submissions. The assessee-firm purchases shrimps, prawns, etc., cuts the heads and tails of the same, peels, deveins and cleans them and after freezing and packing them in cartons exports them to foreign countries. Section 5A(1) of the KGST Act reads as under : " 5A. Levy of purchase tax.-(1) Every dealer who, in the course of his business, purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under section 5, and either--- (a) consumes such goods in the manufacture of other goods for sale or otherwise ; or (b) disposes of such goods in any manner other than by way of sale in the State ; or (c) despatches them to any place outside the State except as a direct result of sale or purchase in the course of inter-state trade or commerce, shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchases for the year at the rates mentioned in section 5." The assessee is ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the revenue was that the identity of the goods was lost by reason of the process to which the goods were subjected to. The Sales-tax Appellate Tribunal, following the decision of the Supreme Court in Dy. CST v. Pio Food Packers [1980] 46 STC 63 negatived the contention raised on behalf of the sales-tax department and held that "though prawns were subjected to processing, namely, peeling, cleaning, grading, cooking, freezing, etc. they are only exported as prawns and that, after curing". The sales-tax department went before the High Court in revision u/s 41 of the KGST Act. The Kerala High Court held that commercially prawns which were purchased by the assesses and prawns exported after processing for the purpose of such export were one and the same commodity as rightly held by the Sales-tax Appellate Tribunal. Accordingly the High Court dismissed the revision sought by the sales-tax department. In the case of Sterling Foods the dealer therein claimed exemption from purchase tax of the Karnataka State relying on section 5(3) of the CST Act. The Supreme Court held as under : " Processed or frozen shrimps, prawns and lobsters are commercially regarded the same commodity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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