Purchase tax exemption for rubber wood manufacturers survives despite sales tax exemption, where underlying tax liability remains intact.

A manufacturer of treated rubber wood remained entitled to purchase tax exemption under S.R.O. No. 9/2007 because the notification applied to manufacturers liable to tax under the Kerala General Sales Tax Act or the Central Sales Tax Act. The fact that the unit was already enjoying a sales tax exemption did not extinguish its underlying tax liability, and therefore did not disqualify it from the later purchase tax benefit. A prior Division Bench ruling on purchasers did not govern this manufacturer's claim. The rejection of exemption was unsustainable, and the impugned order and consequential assessment order were set aside.

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Issues: Whether the assessee, a small-scale industrial unit manufacturing treated rubber wood and enjoying sales tax exemption, was entitled to exemption from purchase tax under S.R.O. No. 9/2007 issued in respect of purchase tax payable under Section 5A of the Kerala General Sales Tax Act, 1963.

Analysis: The exemption notification granted relief to manufacturers of rubber wood products who were liable to pay tax under the Kerala General Sales Tax Act, 1963 or the Central Sales Tax Act, 1956. The fact that the assessee was not actually paying sales tax by reason of an exemption did not alter its underlying tax liability. A grant of exemption presupposes liability to tax, and non-payment because of exemption does not make the manufacturer ineligible for the benefit of the later purchase tax exemption. The earlier Division Bench decision relied on by the Department dealt with a different situation involving purchasers and not the manufacturer-assessee itself.

Conclusion: The assessee was entitled to the benefit of S.R.O. No. 9/2007 and the rejection of exemption was unsustainable.

Final Conclusion: The impugned order and the consequential assessment order were set aside, and the writ petitions were allowed.

Ratio Decidendi: Where an exemption notification is confined to manufacturers liable to tax, the existence of a sales tax exemption does not negate the manufacturer's liability to tax for the purpose of availing purchase tax exemption under the same scheme.

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