Class-based sales exemption does not bar purchase tax where the commodity remains taxable and statutory conditions are satisfied.

Purchase tax under section 5A of the Kerala General Sales Tax Act was leviable where the goods remained taxable under the Act, even though sales by a newly set up small-scale industrial unit were exempt under a notification limited to that class of sellers. The exemption operated only at the seller's level and did not amount to a total exemption of the commodity at all stages of sale. Earlier decisions on complete commodity exemption were distinguished, and authorities applying purchase tax to class-based exemptions were followed. The assessee's purchase of resin was therefore taxable in its hands, and the contrary view of the Tribunal was unsustainable.

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Issues: Whether purchase tax under section 5A of the Kerala General Sales Tax Act, 1963 was leviable on taxable goods purchased from a newly set up small-scale industrial unit whose sales were exempt under a notification issued under section 10 of the Act.

Analysis: Section 5A applies where a dealer purchases goods, the sale or purchase of which is liable to tax under the Act, in circumstances in which no tax is payable under section 5, and thereafter uses or disposes of the goods in one of the statutorily specified ways. The exemption notification granted relief only to the turnover of sales by a specified class of sellers, namely new industrial units under the small-scale industries, and did not grant a total exemption to the commodity itself at all points of sale. The earlier decisions dealing with total exemption of the commodity were distinguished, while the authorities holding that purchase tax is attracted where the goods remain taxable but the seller enjoys a limited or class-based exemption were applied. The exemption to the seller did not extend to the purchaser, and the purchaser remained liable when the conditions of section 5A were satisfied.

Conclusion: Purchase tax under section 5A was leviable on the assessee's purchase of resin, and the Tribunal's contrary view was unsustainable.

Final Conclusion: The revision succeeded and the assessee's purchase of resin from an exempt small-scale unit was held taxable in its hands under the purchase tax provision.

Ratio Decidendi: Where the commodity remains taxable under the Act but sales are exempt only in the hands of a specified class of sellers, the exemption does not extinguish the taxable character of the goods and does not bar levy of purchase tax on the purchaser when the statutory conditions for purchase tax are met.

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