Purchase tax on exempt first-point sales upheld for goods later moved outside the State; constitutional challenge also failed.

Purchase tax under section 5A(1)(c) of the Kerala General Sales Tax Act was held applicable where taxable goods purchased from dealers exempted under section 10 had not suffered tax at the first point and were later despatched outside the State by stock transfer or consignment sale. The mode of subsequent disposal did not affect liability once the statutory conditions were met. The provision was also held not to offend articles 14 or 301, as binding precedent had already upheld section 5A as a charging provision for goods escaping first-point taxation. The constitutional challenge therefore failed, and the levy remained operative on the disputed turnovers.

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Issues: (i) Whether purchase tax under section 5A(1)(c) of the Kerala General Sales Tax Act, 1963 is leviable on taxable goods purchased from dealers exempted under section 10 and thereafter despatched outside the State by stock transfer or consignment sale; (ii) whether section 5A(1)(c), to that extent, is violative of articles 14 and 301 of the Constitution of India.

Issue (i): Whether purchase tax under section 5A(1)(c) of the Kerala General Sales Tax Act, 1963 is leviable on taxable goods purchased from dealers exempted under section 10 and thereafter despatched outside the State by stock transfer or consignment sale.

Analysis: The goods in question were taxable single-point commodities, and the exemption enjoyed by the first sellers was only by reason of notification under section 10. The earlier binding decision upheld the levy of purchase tax under section 5A where taxable goods had not suffered tax at the first point because the seller was exempted. The Court held that the circumstance of exemption at the first sale does not take the transaction outside section 5A, and that the mode of subsequent disposal, whether within the State or outside the State by branch transfer or consignment sale, does not alter the statutory liability once the conditions of section 5A are met.

Conclusion: The levy under section 5A(1)(c) is attracted and the challenge to its application fails; this issue is decided in favour of the Revenue.

Issue (ii): Whether section 5A(1)(c), to that extent, is violative of articles 14 and 301 of the Constitution of India.

Analysis: The validity of section 5A had already been upheld by binding precedent, including the approval of the provision as a charging section aimed at bringing to tax goods which had escaped taxation at the first point. The Court held that it was bound by that authoritative pronouncement and could not disregard it on the ground that some additional constitutional contentions were not separately examined earlier. The distinction drawn between local resale and outside-State despatch did not persuade the Court to hold the provision discriminatory or unconstitutional.

Conclusion: Section 5A(1)(c) is constitutionally valid and is not invalid under articles 14 or 301; this issue is decided in favour of the Revenue.

Final Conclusion: The revisions succeeded and the constitutional challenge failed, leaving the purchase tax levy under section 5A(1)(c) undisturbed on the disputed turnovers.

Ratio Decidendi: Where taxable goods have not suffered tax at the first point because the first seller is exempted under a notification, purchase tax can be levied under section 5A when the statutory conditions are satisfied, and the provision remains constitutionally valid.

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