Turnover-tax exemption for arrack dealer confirmed where arrack was outside the retained liquor category.

Under S.R.O. No. 1401 of 1992, an arrack dealer paying sales tax at the compounded rate under the Kerala General Sales Tax Act, 1963 was treated as entitled to turnover-tax exemption because the notification exempted goods not expressly retained for tax at all points. Arrack was outside the retained liquor category, which covered foreign liquor and Indian-made foreign liquor, so the dealer was not liable to turnover tax on arrack sales. The relief in favour of the dealer was restored.

---

---

Issues: (i) Whether an arrack dealer who paid sales tax at the compounded rate under section 7(14) of the Kerala General Sales Tax Act, 1963 was entitled to exemption from turnover tax under S.R.O. No. 1401 of 1992; (ii) Whether arrack fell within the class of liquor items retained for turnover tax at all points under the notification, so as to deny the exemption.

Issue (i): Whether an arrack dealer who paid sales tax at the compounded rate under section 7(14) of the Kerala General Sales Tax Act, 1963 was entitled to exemption from turnover tax under S.R.O. No. 1401 of 1992.

Analysis: The notification exempted items not covered by the specified sub-clauses from turnover tax, and the earlier declaratory ruling on the discriminatory operation of the notification had recognised exemption for local dealers on first sales of goods not falling within those retained categories. The petitioner's claim was therefore governed by the exemption scheme under the notification as applied to local sales.

Conclusion: The petitioner was entitled to exemption from turnover tax under the notification.

Issue (ii): Whether arrack fell within the class of liquor items retained for turnover tax at all points under the notification, so as to deny the exemption.

Analysis: The retained-at-all-points category under sub-clause (b) covered foreign liquor and Indian-made foreign liquor, corresponding to entries 53 and 54 of the First Schedule to the Kerala General Sales Tax Act, 1963. Arrack was specifically outside those entries, and the petitioner, being a dealer in arrack, was covered by the exemption clause.

Conclusion: Arrack did not fall within the retained liquor category, and the petitioner was not liable to pay turnover tax on its sales turnover.

Final Conclusion: The revision succeeded, the Tribunal's order was set aside, and the appellate authority's relief in favour of the petitioner stood restored.

Ratio Decidendi: Where a turnover-tax notification exempts goods not expressly retained for tax at all points, a dealer in a commodity outside the retained entries is entitled to the exemption, and a discriminatory restriction cannot be extended by implication to deny that relief.

---