Penultimate sale for export protects export-specific tags and labels from purchase tax when they form part of the exported product.

Tags and labels purchased from exempted dealers, printed to export specifications and attached to coir products exported without change in identity, were treated as penultimate purchases for export under section 5(3) of the Central Sales Tax Act. On that basis, the export-linked turnover was excluded from the Kerala General Sales Tax Act turnover computation, and section 5A purchase tax could not be levied despite the items being used in the export manufacturing process. The assessments and appellate orders denying exemption were set aside, and the purchase tax demand on the tags and labels was annulled.

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Issues: Whether purchase tax under section 5A of the Kerala General Sales Tax Act was leviable on tags and labels purchased from exempted dealers and attached to coir products exported outside India, or whether the purchases were covered by the exemption for penultimate transactions under section 5(3) of the Central Sales Tax Act, 1956.

Analysis: The turnover definition under the Kerala General Sales Tax Act excludes export turnover, including deemed export turnover under section 5(3) of the Central Sales Tax Act, 1956. The purchased tags and labels were printed to the petitioner's export specifications, were earmarked for export from the outset, and were attached to the exported goods without any change in identity. On those facts, the purchases were the penultimate purchases preceding the export of the goods and fell within the scope of section 5(3). Although the goods were used in the manufacturing process for export, section 5A operated subject to the export exemption available under section 5(3).

Conclusion: The petitioner was not liable to purchase tax under section 5A on the tags and labels, and the assessments and appellate orders disallowing exemption were set aside.

Final Conclusion: The revision cases succeeded, and the purchase tax demand on the tags and labels attached to the exported products was annulled.

Ratio Decidendi: Where goods purchased are specifically earmarked for export and are exported as part of the exported product without change in identity, the transaction is protected as a penultimate sale for export under section 5(3), and purchase tax cannot be levied under section 5A notwithstanding their use in manufacture or labelling for export.

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