Declared goods and single-point levy: exemption at first sale does not justify a second-stage purchase tax.

Declared goods under a single-point sales tax scheme remain subject to the restriction that State tax cannot exceed four per cent and cannot be levied at more than one stage. An exemption from payment at the first-sale point does not extinguish the underlying levy; it only relieves the seller from collection or payment. Because levy and collection are distinct, a later purchase tax on the purchaser would create a second taxable stage and breach section 15 of the Central Sales Tax Act, 1956, read with article 286(3) of the Constitution. On that basis, section 5A could not validly impose purchase tax in these circumstances.

---

---

Issues: Whether purchase tax under section 5A of the Kerala General Sales Tax Act, 1963 could be levied on declared goods when the first sale of the same goods was exempted under section 10 of that Act, consistently with section 15 of the Central Sales Tax Act, 1956 and article 286(3) of the Constitution of India.

Analysis: Declared goods are subject to the constitutional and statutory restrictions that the tax on sale or purchase inside the State shall not exceed four per cent and shall not be levied at more than one stage. The scheme of section 5 of the State Act fixed the point of levy for the goods concerned at the first sale, while the exemption notification under section 10 only relieved the seller from payment. Exemption, however, operates after a valid levy and does not extinguish the underlying liability to tax. The distinction between levy and collection was decisive: levy denotes the charging or imposition of tax, whereas collection is only the realization of the amount and is not an essential ingredient of levy. The earlier authorities on single-point taxation and declared goods showed that where the first point fixed by the statute is exempted, no later stage can be subjected to a fresh levy.

Conclusion: Section 5A could not validly be used to impose purchase tax on the purchaser of the declared goods in these circumstances, because that would amount to a second-stage levy contrary to section 15 of the Central Sales Tax Act, 1956. The challenge succeeded.

Final Conclusion: The statutory exemption did not remove the original taxability of the goods, and the State could not shift the tax burden to a later stage in breach of the single-point restriction for declared goods.

Ratio Decidendi: For declared goods governed by a single-point levy, an exemption from payment at the fixed first stage does not negate the levy or permit a second-stage purchase tax; levy and collection are distinct, and a subsequent levy that creates a second taxable stage is impermissible.

---