Kerala HC: Purchase tax on bullion from non-resident Indians for ornaments production.

The Kerala HC overturned the Sales Tax Appellate Tribunal's decision, holding that the respondent must pay purchase tax on bullion bought from non-resident Indians for manufacturing ornaments. The court emphasized that purchase tax applies if the commodity is taxable and purchased without the seller paying tax. The respondent was directed to provide evidence of purchases from non-residents to prove tax liability under section 5(1) to avoid liability under section 5A. The case was remanded for further investigation, giving the respondent two months to submit required documentation. Failure to do so would confirm liability under section 5A, with seller assessment limitations not justifying imposing liability on the respondent.

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The Kerala High Court delivered a judgment on a case filed by the State against an order of the Sales Tax Appellate Tribunal. The Tribunal had ruled that the respondent was not liable to pay purchase tax on bullion bought from non-resident Indians. The State argued that the purchases were taxable under section 5A as they were used in manufacturing ornaments subsequently sold by the respondent. The court disagreed with the Tribunal's decision, stating that purchase tax is applicable if the commodity is taxable and the purchase occurs under circumstances where no tax is payable by the seller. The court cited previous decisions to support its stance. It further ruled that the respondent must provide proof of purchase from non-residents to show that the sellers were liable to pay tax under section 5(1) in order to escape liability under section 5A. The case was remanded to the assessing officer for further investigation, with the respondent given two months to produce necessary documentation. Failure to do so would confirm the assessment under section 5A. The court emphasized that the inability to assess sellers due to limitations is not a valid reason to impose liability on the respondent.

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