Prospective withdrawal of sales tax exemption and treatment of latex processing as manufacture under exemption notifications.

Under Section 10 of the Kerala General Sales Tax Act, an exemption already operating under an earlier notification could not be withdrawn retrospectively by a later notification, because cancellation or variation of an exemption notification is prospective only. The exemption on purchase turnover of rubber used in the manufacture of centrifuged latex and crumb rubber was therefore preserved for the earlier period. The document also states that the conversion of field latex into centrifuged latex and crumb rubber was treated as a manufacturing activity for the exemption scheme, since the notifications themselves proceeded on that basis. Denial of the exemption on either ground was unsustainable, and the assessments and reopening steps based on that denial were set aside to the extent indicated.

---

---

Issues: (i) Whether the State could retrospectively withdraw an exemption already granted under the Kerala General Sales Tax Act by issuing a later notification; (ii) Whether the conversion of field latex into centrifuged latex and crumb rubber involved manufacture for the purpose of the exemption notification.

Issue (i): Whether the State could retrospectively withdraw an exemption already granted under the Kerala General Sales Tax Act by issuing a later notification.

Analysis: The exemption for purchase turnover of rubber used in the manufacture of centrifuged latex and crumb rubber was first granted for an earlier period and continued for the relevant period under a later notification. Section 10 of the Act distinguishes between the power to grant exemption or reduction in tax and the power to cancel or vary a notification. The power to grant exemption may operate prospectively or retrospectively, but the power to cancel or vary a notification under Section 10(3) is only prospective. A later notification cannot therefore take away an exemption already available for a prior period.

Conclusion: The later notification could not validly withdraw the exemption for the period during which the earlier notification operated, and the denial of exemption on that basis was unsustainable.

Issue (ii): Whether the conversion of field latex into centrifuged latex and crumb rubber involved manufacture for the purpose of the exemption notification.

Analysis: The exemption notifications themselves proceeded on the basis that manufacturers of centrifuged latex and crumb rubber were entitled to relief on the purchase turnover of rubber used in that activity. When the State has issued notifications granting exemption on that footing, it cannot contend, for the same period and purpose, that no manufacturing process is involved. The notifications were construed according to their plain terms, and the departmental objection was inconsistent with the language and premise of the exemption scheme.

Conclusion: The conversion of field latex into centrifuged latex and crumb rubber was treated as a manufacturing activity for the purpose of the exemption, and the assessees were entitled to the benefit.

Final Conclusion: The exemption could not be denied either on the ground of retrospective withdrawal by the later notification or on the ground that the activity was not manufacture; the assessments and reopening steps based on that denial were set aside to the extent indicated in the order.

Ratio Decidendi: Under Section 10 of the Kerala General Sales Tax Act, the Government may vary or cancel an exemption notification only prospectively, and an exemption notification must be applied according to its own terms when determining entitlement to relief.

---