Limited bullion exemption under sales tax law did not bar purchase tax on bullion used for gold ornament manufacture.

Bullion purchased from the State Bank of India remained subject to purchase tax under Kerala sales tax law when used in manufacturing gold ornaments. Section 5A(1) applied because bullion was a taxable commodity and the assessee dealt with it in the course of business in a manner attracting purchase tax. The exemption in S.R.O. No. 361/92 was limited to specified sales of bullion by non-resident Indians or banks to registered gold jewellery dealers, subject to production of the prescribed certificate. It was not a general or total exemption, and did not remove bullion from the charging provision for all purposes. The purchase turnover was therefore liable to tax.

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Issues: Whether the purchase turnover of bullion purchased from the State Bank of India was liable to purchase tax under section 5A of the Kerala General Sales Tax Act, 1963, in the light of the exemption granted by S.R.O. No. 361/92.

Analysis: Section 5A(1) applies where a dealer purchases goods in the course of business, the sale or purchase of which is liable to tax, and the goods are consumed in manufacture or otherwise dealt with in a manner attracting purchase tax. Bullion was a taxable commodity under section 5(1), and the assessee used the bullion in manufacturing gold ornaments. The notification under section 10 granted exemption only to sales of bullion by non-resident Indians or banks to registered dealers in gold jewellery, subject to production of the prescribed certificate. The notification did not grant a general or total exemption from tax on bullion, nor did it depend on export of the finished jewellery or on the bullion being imported under the EXIM policy. The exemption was therefore limited and conditional, not one taking the sale outside the charging provision for all purposes.

Conclusion: The purchase turnover of bullion was liable to purchase tax under section 5A(1), and the assessee was not entitled to escape liability on the footing of a total exemption.

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