Exemption on inter-State purchases requires real attribution of the claimed source; ignoring that material fact vitiates the decision.

Entitlement to exemption on alleged inter-State purchases depended on whether the claimed Mahe source was a material and credible circumstance. The High Court found the Tribunal erred in treating that question as irrelevant, because the factual attribution of the purchases to Mahe went to the deductibility of the turnover exemption claim. By excluding that material circumstance from consideration, the Tribunal's decision was vitiated. The order was set aside and the matter remitted for fresh consideration in accordance with law.

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Issues: Whether the Tribunal erred in treating as irrelevant the question whether the alleged purchases could reasonably be said to have been made from Mahe for the purpose of claiming exemption on the ground of inter-State purchases.

Analysis: The dispute turned on whether the claimed source of purchase was a material circumstance bearing on deductibility of the turnover. The appellate authorities had considered the improbability of the claimed Mahe transactions and disallowed the exemption, whereas the Tribunal excluded that circumstance from consideration as irrelevant. The Court held that this approach was erroneous because the very entitlement to exemption depended on whether the purchases could in fact and in reason be attributed to Mahe. By ignoring that material circumstance, the Tribunal vitiated its decision and the matter required reconsideration.

Conclusion: The Tribunal's order was set aside and the appeal was remitted for fresh consideration in accordance with law.

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