Purchase-tax exemption for gold articles requires proof of tax payment on manufactured goods; Fifth Schedule exemption is not enough.

Purchase-tax exemption on gold and silver articles under the Karnataka Sales Tax Act depended on the manufacturer proving payment of tax under section 5(1) or section 5(3)(a) on the articles manufactured from the purchased goods. The Karnataka HC held that this condition was a clear prerequisite in the exemption notification, and that exemption of mangalasutras under the Fifth Schedule did not amount to payment of tax by the manufacturer. Earlier cases relied on by the assessee were distinguished because they involved different notifications and legislative purposes. A liberal interpretation could not override the express wording and object of the notification, so the purchase-tax levy was upheld.

---

---

Issues: Whether the assessee was entitled to exemption from purchase tax on gold articles purchased from unregistered dealers for use in manufacturing mangalasutras, despite not having paid tax on the resulting sales because those sales were exempt under the Fifth Schedule.

Analysis: The exemption notification under section 8A of the Karnataka Sales Tax Act, 1957 granted relief from purchase tax on gold and silver articles only if the manufacturer proved payment of tax under section 5(1) or section 5(3)(a) on the articles manufactured from the purchased goods. The Court distinguished the earlier decisions relied on by the assessee, holding that those cases involved different notifications with a different legislative purpose. Here, the notification itself made payment of sales tax on the manufactured gold articles the condition precedent for claiming exemption from purchase tax. The exemption granted under the Fifth Schedule to the buyer of mangalasutras could not be treated as equivalent to payment of tax by the manufacturer, and a liberal construction could not be adopted so as to defeat the clear wording and object of the notification.

Conclusion: The assessee was not entitled to the purchase-tax exemption, and the levy was upheld.

---