Purchase tax on manufacturing inputs applies when components or consumables are utilised in production, even if finished goods are separately taxed.

Purchase tax under section 5A(1)(a) applies where taxable goods are bought and then consumed in manufacturing other goods for sale or otherwise. In assessing consumption, the broader economic sense governs: items taken advantage of and utilised as components or consumable materials in the manufacturing process are treated as consumed, even if they are not permanently incorporated in the final product. The taxability of the finished goods under section 5 does not prevent levy under section 5A. On that basis, components and materials used in making wet grinders were held liable to purchase tax, and the contrary view of the Tribunal was found unsustainable.

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Issues: Whether the purchase turnover of items such as bearings, crown, belt, fire-clay, drums, cables, hardware, paint and casting iron scrap, used in the manufacture of wet grinders, was exigible to purchase tax under section 5A(1)(a) of the Kerala General Sales Tax Act, 1963.

Analysis: Section 5A(1)(a) levies purchase tax where a dealer purchases taxable goods in circumstances where no tax is payable under section 5 and consumes such goods in the manufacture of other goods for sale or otherwise. The disputed items were found to be components or consumable materials that went into the making of the end-product, namely wet grinders. The Court applied the broader economic meaning of "consumption" in manufacture and held that the relevant enquiry is not whether the goods were merely used, but whether they were taken advantage of and utilised as part of the manufacturing process. The fact that the finished goods suffered tax under section 5 was held to be irrelevant to the levy under section 5A.

Conclusion: The purchase turnover of the disputed items was liable to tax under section 5A(1)(a), and the Tribunal's contrary view was erroneous.

Final Conclusion: The revision cases succeeded, and the common order of the Tribunal was set aside to the extent challenged.

Ratio Decidendi: Goods that form components or raw materials of the end-product are consumed in manufacture for the purpose of purchase tax, even if they are described as consumable stores or the finished product is separately taxed.

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