Second-sale exemption turns on whether the earlier transaction was taxable, not on later retrospective cancellation of registration.

Under the Tamil Nadu General Sales Tax Act, exemption for a later sale depends on whether the earlier transaction was a taxable first sale, not on the seller's registration status after the event. The Madras High Court stated that retrospective cancellation of the first seller's registration could not convert an already taxable first sale into a non-taxable one for the purchaser. Because the assessee bought the goods while the seller's registration was in force, its own sale remained a second sale eligible for exemption. The reassessment restoring tax was therefore unsustainable.

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Issues: Whether retrospective cancellation of the first seller's registration certificate deprived the assessee of exemption on the footing that its sale was only a second sale and not the first taxable sale.

Analysis: The decisive question was whether liability could be fastened on the assessee merely because the first seller's registration was later cancelled with retrospective effect. Applying the scheme of section 3, particularly section 3(2), of the Tamil Nadu General Sales Tax Act, 1959, the Court held that what matters is whether the first transaction is a taxable sale. Once the first sale is shown to be taxable, the purchaser's sale cannot be treated as the first sale merely because the seller was not registered or because the registration was subsequently cancelled retrospectively. The assessee had purchased the goods when the seller's registration was in force, and the later cancellation could not alter the character of the transaction for exemption purposes.

Conclusion: The assessee was entitled to treat its sale as a second sale and claim exemption; the reassessment order restoring tax was unsustainable.

Ratio Decidendi: For single-point levy under the Tamil Nadu General Sales Tax Act, the exemption turns on whether the earlier sale is a taxable sale, not on the seller's registration status at a later date or on retrospective cancellation of that registration.

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