Multi-point sales tax levy shifts after exempt first sale, with rate depending on the nature of the subsequent sale.

Under the fourth proviso to section 5(1)(v) of the Kerala General Sales Tax Act, 1963 read with the Fifth Schedule, exemption of the first intra-State sale does not remove the multi-point levy; it shifts the taxable point to subsequent sales. Where the exempt first sale is followed by a sale to a registered dealer for resale, that sale is treated as the first point and any later sale becomes the last point. Where there is only one subsequent sale to a person other than a registered dealer, or to a registered dealer otherwise than for sale, that sale is treated as the deemed first and last sale and the higher rate applies. The applicability of the rate depends on the character of the subsequent sale and the nature of the dealer involved.

---

---

Issues: Whether, under the fourth proviso to section 5(1)(v) of the Kerala General Sales Tax Act, 1963 read with the Fifth Schedule, exemption of the first sale within the State shifts the multi-point levy to subsequent sales and what rate of tax applies depending on whether the subsequent sale is to a registered dealer for sale or otherwise.

Analysis: The charging scheme in section 5(1)(v) and the Fifth Schedule contemplates levy at two points for the specified goods, with different rates depending on whether the sale is the first point, the last point, or a case where there are no two points of sale in the State. The fourth proviso was construed as operating where the first sale within the State is not taxable because of exemption, in which event the levy is shifted to the subsequent sale or sales. If the exempted first sale is followed by a subsequent sale to a registered dealer for sale, that sale is treated as the first point of levy and the next sale, if any, becomes the last point. If there is only one subsequent sale and it is to a person other than a registered dealer or to a registered dealer other than for sale, that sale is treated as the deemed first and last sale and the higher rate applies. The authorities below had not properly examined whether the assessee was an intermediary dealer or whether the sale was to a registered dealer for sale or otherwise, and they had also not correctly appreciated the nature of the turnover on which tax was to be computed.

Conclusion: The exempt first sale did not extinguish the levy under the Fifth Schedule, but the applicable rate depended on the character of the assessee's subsequent sale; the assessment was therefore unsustainable as made and required fresh determination.

---