Purchase turnover tax on identifiable manufacturing inputs rejected where wood retained its identity in cable drums.

Section 7-A of the Tamil Nadu General Sales Tax Act, 1959 applies only where goods purchased from non-dealers are consumed, devoured or exhausted in manufacture so that their identity is completely lost. The Madras HC held that wood used to manufacture cable drums did not satisfy that test because the planks retained their identity in the finished product and were not shown to have been consumed in the statutory sense. Following earlier decisions on identifiable purchased materials, the court held that the purchase turnover was not exigible to tax under section 7-A, and the assessee succeeded on this issue.

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Issues: Whether the purchase turnover of wood used in the manufacture of cable drums was liable to tax under section 7-A of the Tamil Nadu General Sales Tax Act, 1959, on the ground that the wood was consumed in manufacture and lost its identity.

Analysis: Section 7-A applies only when goods purchased from non-dealers are consumed, devoured, or exhausted in the manufacturing process so that their identity is completely lost. On the facts, the wood purchased by the assessee was used to make cable drums, but the planks retained their identity and were not shown to have been consumed in the sense required by the provision. The reasoning followed earlier decisions holding that where the purchased material remains identifiable in the finished product, the purchase turnover is not exigible under section 7-A.

Conclusion: The purchase turnover of wood was not taxable under section 7-A, and the assessee succeeded on this issue.

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