Consignment stock taxability turned on section 8's deeming fiction and the 1988 amendment's prospective operation.

The amended explanation to section 2(xxvi), as made subject to section 8, required the deeming fiction in section 8 to govern taxability of goods sent outside Kerala on consignment and held as closing stock by agents outside the State. On that basis, such closing stock could be brought into the dealer's turnover under the amended regime. The 1988 amendment was a substantive change, not merely clarificatory, because it narrowed the earlier non obstante language and altered the tax position. It therefore operated prospectively from 19 February 1988 and did not apply to prior assessment years' closing stock.

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Issues: (i) Whether, after the 1988 amendment making the explanation to section 2(xxvi) subject to section 8, the value of goods sent outside the State on consignment basis and held as closing stock by agents outside Kerala could be brought to tax as part of the dealer's turnover for the relevant assessment year. (ii) Whether the amendment effected by Act 6 of 1988 was clarificatory and retrospective, or only prospective in operation.

Issue (i): Whether, after the 1988 amendment making the explanation to section 2(xxvi) subject to section 8, the value of goods sent outside the State on consignment basis and held as closing stock by agents outside Kerala could be brought to tax as part of the dealer's turnover for the relevant assessment year.

Analysis: The amended explanation no longer operated independently of section 8. Section 8 creates a statutory fiction that, where goods taxable at a single point in a series of sales or purchases are exported out of the State to another State, the series is deemed to conclude at the stage immediately before export. Once the explanation was made subject to section 8, the determination of whether the purchase had acquired the character of the last purchase had to be made by applying that fiction. The earlier view that closing stock outside the State could not be taxed until actual sale was no longer determinative after the amendment.

Conclusion: The levy on such closing stock was sustainable under the amended provision, and the assessees' challenge on this point failed.

Issue (ii): Whether the amendment effected by Act 6 of 1988 was clarificatory and retrospective, or only prospective in operation.

Analysis: The amendment changed the legal position by narrowing the non obstante clause and expressly making the explanation subject to section 8. That alteration was substantive, not merely explanatory. The statute did not indicate an intention to divest accrued rights for prior assessment years. The legislative scheme showed prospective operation from the date of commencement, so only closing stock as on and after 19 February 1988 could be brought within the amended regime.

Conclusion: The amendment was prospective and not clarificatory, and it did not apply to prior years' closing stock.

Final Conclusion: The assessments were liable to be sustained only for the period to which the amendment applied, and modified by deleting tax on closing stock for the earlier assessment years while maintaining liability for the later assessment year covered by the amended law.

Ratio Decidendi: When a statutory explanation governing last-purchase tax is expressly made subject to a deeming provision fixing the stage of export or transfer, the fiction in that deeming provision must be applied to determine taxability; a legislative change that materially alters that position is substantive and operates prospectively unless the enactment clearly provides otherwise.

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