Purchase tax on fuel and maintenance inputs fails where goods are not consumed in manufacture or transferred by disposal.

Goods used only as fuel in a kiln or for maintenance of the factory are not treated as goods consumed in the manufacture of other goods for sale under section 5A(1)(a) of the Kerala General Sales Tax Act, 1963, because they do not enter into the making of the end-product. The same items are also outside section 5A(1)(b) where there is no transfer of title to another person; mere consumption by the assessee does not amount to disposal otherwise than by sale. On that reasoning, cashew shells, lime shells and consumed stores were held not to attract purchase tax.

---

---

Issues: (i) Whether the purchase turnover of cashew shells, used as fuel in the kiln, and lime shells and consumed stores, used in the maintenance of the kiln and factory, was liable to tax under section 5A(1)(a) of the Kerala General Sales Tax Act, 1963. (ii) Whether those goods were liable to tax under section 5A(1)(b) on the ground that they were disposed of otherwise than by way of sale within the State.

Issue (i): Whether the purchase turnover of cashew shells, used as fuel in the kiln, and lime shells and consumed stores, used in the maintenance of the kiln and factory, was liable to tax under section 5A(1)(a) of the Kerala General Sales Tax Act, 1963.

Analysis: Section 5A(1)(a) applies to goods consumed in the manufacture of other goods for sale, meaning raw materials or components that enter into the making of the end-product. Goods used only as an aid to manufacture, such as fuel used in the kiln, are not goods consumed in the manufacture within the meaning of the provision. The lime shells and consumed stores were similarly used only for maintenance of the factory and kiln and not as inputs in manufacture.

Conclusion: The purchase of cashew shells, lime shells and consumed stores did not attract tax under section 5A(1)(a).

Issue (ii): Whether those goods were liable to tax under section 5A(1)(b) on the ground that they were disposed of otherwise than by way of sale within the State.

Analysis: Disposal under section 5A(1)(b) requires transfer of title in the goods to another person otherwise than by sale. No such transfer occurred, because the cashew shells were consumed by the assessee as fuel and the other items were used up in maintenance of the factory and kiln.

Conclusion: The goods were not disposed of otherwise than by way of sale within the State and section 5A(1)(b) was not attracted.

Final Conclusion: The revision cases failed because the disputed purchases were outside the charging ambit of section 5A, and the assessee's liability to purchase tax was negatived.

Ratio Decidendi: Goods used only as fuel or for ancillary maintenance in a manufacturing activity are not goods consumed in the manufacture of other goods for sale, and disposal under section 5A(1)(b) requires transfer of title to another person.

---