Limited sales tax exemption does not remove tax liability, so concessional raw material rates remain available.

A limited sales tax exemption for small-scale industrial units does not mean their finished products are not liable to tax under the Act. The proviso to the concessional-rate provision applies only where the finished products are genuinely not liable to tax under the Kerala General Sales Tax Act or the Central Sales Tax Act, or where they are exported. Because the statutory test is tax liability, not merely tax payable, the concession for industrial raw materials and component parts remains available. The limited exemption under S.R.O. No. 968 of 1980 therefore does not defeat entitlement to the concessional rate.

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Issues: Whether small-scale industrial units enjoying a limited sales tax exemption under S.R.O. No. 968 of 1980 are disentitled from the concessional rate under section 5(3) of the Kerala General Sales Tax Act on the footing that their finished products are not liable to tax.

Analysis: The notification was issued under section 10(2) of the Kerala General Sales Tax Act and granted only an exemption from payment of tax for a limited period, subject to conditions and monetary ceiling. Section 5(3) provides a concessional rate for industrial raw materials and component parts, but its proviso withdraws that concession only where the finished products are not liable to tax under the Act or under the Central Sales Tax Act, 1956, or where they are exported. A limited exemption from payment of tax does not mean that the finished products are not liable to tax under the Act. The statutory language could not be rewritten to substitute a test of tax payable for the enacted test of tax liability.

Conclusion: The assessees remained entitled to the concessional rate under section 5(3), and the proviso did not apply against them.

Final Conclusion: The Revenue failed to establish any ground to deny the concessional purchase of industrial raw materials, and the appeal was rejected.

Ratio Decidendi: A limited exemption from payment of sales tax does not negate liability to tax for the purpose of the proviso to the concessional-rate provision.

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