Purchase tax under Section 7A applies despite sales tax exemption when goods are used in manufacture after non-taxed purchase.

Purchase tax under Section 7A of the Tamil Nadu General Sales Tax Act applies where goods purchased under a conditional sales tax exemption do not suffer tax at the first taxable point and are then consumed in manufacture. The exemption notification does not displace the statutory charge under Section 7A, because the scheme ensures tax is collected at least once and prevents revenue leakage. Accordingly, the reassessment and levy of purchase tax were upheld in favour of the Revenue.

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Issues: Whether purchase tax under Section 7A of the Tamil Nadu General Sales Tax Act could be levied on edible oil purchased under an exemption notification and used as raw material in manufacture, and whether the exemption from sales tax excluded the charge under Section 7A.

Analysis: The assessment records showed that the edible oil purchased by the assessee had enjoyed exemption because the selling dealer's turnover was below the prescribed limit, and the goods were thereafter consumed in the manufacture of biscuits. The statutory scheme under Section 3(2) was treated as ensuring tax at least once on goods taxable at the first sale point, and where that point did not suffer tax for any reason, Section 7A was held to operate. The earlier decision on the same issue was followed, holding that Section 7A applies even to cases of conditional exemption and that the exemption notification does not remove the charging effect where the goods are not available for further tax treatment. The purpose of Section 7A was regarded as preventing tax leakage and plugging evasion.

Conclusion: Section 7A applied notwithstanding the exemption notification, and the reassessment and levy of purchase tax were upheld in favour of the Revenue.

Final Conclusion: The revisions failed because the exemption from sales tax did not prevent the statutory purchase tax liability on goods consumed in manufacture after non-payment of tax at the earlier sale point.

Ratio Decidendi: Purchase tax can be levied under Section 7A where goods exempted at the sale stage do not suffer tax at the first taxable point and are used in manufacture, because the exemption does not displace the statutory charge.

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