Purchase tax on green tea leaves used for export tea manufacturing upheld where the input remained commercially distinct from the finished product.

Purchase tax under section 5A of the Kerala General Sales Tax Act was payable on green tea leaves bought from unregistered dealers and consumed in manufacturing exported tea. The export of the finished tea did not alter the character of the green tea leaves as a separate commodity, and green tea leaves and manufactured tea were commercially distinct. The exemption under section 5(3) of the Central Sales Tax Act was inapplicable because it covers only purchases or sales made against prior orders for export. The tax scheme was read as preventing cascading tax burden on the final product, and the levy was upheld.

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Issues: Whether purchase tax under section 5A of the Kerala General Sales Tax Act, 1963 was leviable on green tea leaves purchased from unregistered dealers and consumed in the production of manufactured tea exported by the assessee.

Analysis: The liability under section 5A arose because the green tea leaves were purchased from unregistered dealers and were consumed in manufacturing manufactured tea. The export of manufactured tea did not change the character of the purchased green tea leaves as a distinct commodity. Green tea leaves and manufactured tea were commercially different, and the exemption under section 5(3) of the Central Sales Tax Act applies only to sales or purchases made against prior orders for export. The charging entry also reflected the legislative scheme by synchronising tax on green tea leaves and manufactured tea to avoid cascading tax burden on the final product.

Conclusion: The levy of purchase tax under section 5A was valid and was rightly upheld against the assessee.

Ratio Decidendi: Where green tea leaves purchased from unregistered dealers are consumed in manufacturing tea for export, purchase tax is payable under section 5A if the purchased commodity is commercially distinct from the exported finished product and the export exemption under section 5(3) of the Central Sales Tax Act is not attracted.

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