Purchase tax on pulses and grams applies where exempt sales are followed by interstate branch transfers under the Tamil Nadu VAT Act.

Section 12 of the Tamil Nadu VAT Act was construed strictly as a charging provision, and liability to purchase tax was found to arise where the goods purchased were subsequently transferred outside the State to branches or agents. The court distinguished between exempt goods and an exempt transaction: Entry 68 of Part B of the Fourth Schedule exempted only the sale transaction of pulses and grams when the seller's turnover was below the prescribed limit, but did not make the goods non-taxable for all purposes. Because the petitioners bought the goods and despatched them outside the State, the case fell within Section 12(1)(c), so purchase tax applied and the challenge to the notices and assessment orders failed.

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Issues: Whether dealers purchasing pulses and grams covered by Entry 68 of Part B of the Fourth Schedule to the Tamil Nadu Value Added Tax Act, 2006 and thereafter transferring them outside the State to branches or agents are liable to purchase tax under Section 12 of the Act.

Analysis: Section 12 is a charging provision and therefore has to be construed strictly. Its application depends on whether the goods purchased are goods whose sale or purchase is liable to tax under the Act and whether the circumstances stated in the provision are satisfied. The exemption under Entry 68 does not render pulses and grams exempt goods as such; it exempts only the sale transaction when effected by a dealer whose turnover in respect of those goods does not exceed the prescribed limit. The distinction between exempt goods and an exempt transaction is material. Where only the transaction or the dealer is exempt, the goods remain taxable goods for other purposes and the exemption does not extend to subsequent dealings outside the specified category. Since the petitioners purchased the goods and despatched them outside the State to branches or agents, the case fell within Section 12(1)(c), and the mere fact that the immediate purchase was from a dealer whose turnover was below the threshold did not exclude purchase tax liability.

Conclusion: The petitioners were held liable to purchase tax under Section 12 of the Act, and the challenge to the pre-revision notices and assessment orders failed.

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