Purchase tax exemption on soft wood survives partial use for wood-wool where finished goods remain taxable.

An exemption notification granting relief from purchase tax on soft wood bought by manufacturers of splints and veneers was construed by reference to the taxability of the finished goods, not by requiring exclusive use of the raw material for that manufacture. Because the notification turned on whether the splints and veneers produced were liable to tax under the relevant sales tax laws, use of some leftover soft wood to make wood-wool did not defeat the exemption. The assessee remained entitled to relief under section 5A, and purchase tax on the soft wood so diverted was not exigible.

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Issues: Whether the exemption under Notification S.R.O. No. 148/72, granting relief from purchase tax under section 5A on soft wood purchased by manufacturers of splints and veneers, is available when part of the soft wood is used for making wood-wool.

Analysis: The notification exempted purchase tax on soft wood bought by manufacturers of splints and veneers, provided the splints and veneers manufactured by them were liable to tax either under the Kerala General Sales Tax Act or under the Central Sales Tax Act. The decisive requirement was the liability of the splints and veneers to tax, and not that the entire quantity of soft wood purchased must be consumed only in the manufacture of splints and veneers. On a plain reading of the notification, use of the leftover soft wood for wood-wool did not take away the exemption.

Conclusion: The assessee remained entitled to the exemption under section 5A, and the purchase tax on the soft wood used for wood-wool was not exigible.

Final Conclusion: The revision failed and the Tribunal's deletion of the purchase tax was sustained.

Ratio Decidendi: Where an exemption notification conditions relief on the status and taxability of the goods manufactured, exemption cannot be denied merely because a portion of the raw material is used for an allied product, unless the notification expressly requires exclusive use for the exempted manufacture.

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