Reduction of tax on coconut oil allowed despite exemption of coconut oil cake under the sales tax schedule explanation.

Under the Explanation to entry 51 of the First Schedule to the Kerala General Sales Tax Act, reduction of tax on coconut oil was available to the extent of tax paid on the purchase turnover of copra or coconut used in its manufacture. The provision was aimed at preventing double taxation on finished products derived from the same raw material, and the fact that coconut oil cake was exempt did not defeat the relief for coconut oil. The court held that the word "and" in the Explanation did not require both end products to be taxable, and the Tribunal's narrower reading was incorrect.

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Issues: Whether, under the Explanation to entry 51 of the First Schedule to the Kerala General Sales Tax Act, 1963, the assessee was entitled to reduction of tax leviable on coconut oil by the tax levied on the purchase turnover of copra or coconut from which the coconut oil was produced, even though coconut oil cake was exempt from tax.

Analysis: The Explanation was intended to avoid double taxation on the finished products manufactured from copra or coconut. Coconut oil and coconut oil cake are produced simultaneously from the same raw material, and the use of the conjunction "and" in the Explanation does not mean that reduction is available only if both finished products are taxable. The prior decision of the Court had already clarified that exemption of coconut oil cake does not defeat the benefit of reduction relatable to coconut oil, because the language of the Explanation is clear and the Tribunal's contrary reading would frustrate its object.

Conclusion: The assessee was entitled to reduction of the tax leviable on coconut oil by the amount of tax levied on the purchase turnover of copra or coconut, and the Tribunal's view was incorrect.

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