Purchase tax on exempt goods depends on exemption scope; penalty fails without wilful suppression of turnover.

Purchase tax under section 7-A(1)(c) of the Tamil Nadu General Sales Tax Act, 1959 depends on whether the goods remain taxable goods and whether tax was otherwise payable at the seller's end. Where vegetable oil was fully exempt at the only taxable point up to 31 March 1999, purchase tax did not arise for 1998-99. For the later period, the exemption operated only up to a turnover limit, so the goods remained taxable beyond that limit and purchase tax was attracted for 1999-2000 and 2000-2001. Penalty under section 16(2) requires wilful suppression of taxable turnover, and was not supportable where the relevant facts were already before the assessing authority.

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Issues: (i) Whether purchase tax under section 7-A(1)(c) of the Tamil Nadu General Sales Tax Act, 1959 was leviable on vegetable oil purchased from registered dealers who had obtained exemption under section 17(1) of the Act for the years 1998-99, 1999-2000 and 2000-2001. (ii) Whether penalty under section 16(2) of the Act was sustainable.

Issue (i): Whether purchase tax under section 7-A(1)(c) of the Tamil Nadu General Sales Tax Act, 1959 was leviable on vegetable oil purchased from registered dealers who had obtained exemption under section 17(1) of the Act for the years 1998-99, 1999-2000 and 2000-2001.

Analysis: Purchase tax under section 7-A(1)(c) is attracted only when the goods are taxable goods and the purchase is made in circumstances in which no tax is payable under section 3 or 4. For the period up to 31 March 1999, the notifications granted full exemption at the only taxable point of first sale without any turnover ceiling, so the goods lost the character of taxable goods for that period. From 1 April 1999 onwards, the exemption operated only conditionally up to the prescribed turnover limit, and the goods remained taxable goods beyond that limit. The circumstance that no tax was payable by the seller because of the exemption notification satisfied the statutory condition for purchase tax for the later years.

Conclusion: Purchase tax was not leviable for 1998-99, but was leviable for 1999-2000 and 2000-2001.

Issue (ii): Whether penalty under section 16(2) of the Act was sustainable.

Analysis: Penalty under section 16(2) requires wilful non-disclosure or suppression of taxable turnover. The relevant facts and transactions were already before the assessing authority at the time of original assessment, and the revision was made on a legal reappraisal of the exemption and purchase-tax provisions. The element of wilful suppression was therefore absent.

Conclusion: Penalty under section 16(2) was not sustainable and was deleted.

Final Conclusion: The assessment order was set aside in full for 1998-99, while the tax component was sustained for 1999-2000 and 2000-2001 but the penalty was removed in all the cases.

Ratio Decidendi: Goods that are fully exempt at the only taxable point cease to be taxable goods for the purpose of purchase tax, but where exemption is only conditional and the seller is not liable to tax because of the exemption, section 7-A(1)(c) can still be attracted; penalty under section 16(2) requires wilful suppression.

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