Narrow construction of exemption notifications bars purchase-tax relief for paddy used in manufacture under the statutory scheme.

An exemption notification for small-scale industrial units was construed narrowly: goods described as taxable at the point of last purchase under the Kerala General Sales Tax Act, 1963 cover only commodities that are so taxable under the statutory scheme. Purchase tax under section 5A, imposed because goods are consumed in manufacture, does not by itself make those goods goods taxable at the point of last purchase. On that reading, paddy purchased and used in manufacture did not qualify for exemption from purchase tax under SRO No. 1729 of 1993, and the disallowance of exemption was sustained.

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Issues: Whether paddy purchased by a small-scale industrial unit and used in manufacture was entitled to exemption from purchase tax under SRO No. 1729 of 1993, and whether goods subjected to tax under section 5A could be treated as goods taxable at the point of last purchase in the State.

Analysis: The dispute turned on the construction of the exemption notification governing small-scale industrial units. The claim was that once purchase tax under section 5A of the Kerala General Sales Tax Act, 1963 was attracted on goods consumed in manufacture, such goods should be regarded as taxable at the point of last purchase in the State and therefore fall within the notification. The contrary view was that the expression in the notification refers only to goods specifically made taxable at the point of last purchase under the scheme of the Act, and not to every commodity on which purchase tax is levied because it is consumed in manufacture. The notification had to be read consistently with the Act and not in a manner that would extend exemption to all goods merely because they were used in manufacturing by an industrial unit.

Conclusion: The claim for exemption on the purchase turnover of paddy was not accepted, and the disallowance of exemption was upheld against the assessee.

Final Conclusion: The exemption notification was construed narrowly, and the purchase tax demand on paddy used in manufacture was sustained.

Ratio Decidendi: An exemption notification referring to goods taxable at the point of last purchase covers only goods so taxable under the statutory scheme and cannot be expanded to every commodity subjected to purchase tax under section 5A merely because it is consumed in manufacture.

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