Functional character governs exemption classification; inter-State resale did not destroy the goods' exempt status.

Goods described as a boiler with accessories were treated as exempt under the relevant sales tax entry because their real functional character was a device for converting agricultural waste into fuel. The description in the invoice did not control classification where actual use showed a waste conversion device, and the exemption entry was to be read practically rather than narrowly. Subsequent resale in inter-State trade did not alter that exempt character or create taxability, since the goods retained the same description and use. The denial of exemption was therefore unsustainable, and relief followed for the assessee.

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Issues: (i) Whether the goods described as a boiler with accessories were entitled to exemption under Entry 46 of Part B of III Schedule of the Tamil Nadu General Sales Tax Act as agricultural and municipal waste conversion devices producing energy; (ii) Whether resale of the goods in inter-State trade changed their exempt character and made them taxable.

Issue (i): Whether the goods described as a boiler with accessories were entitled to exemption under Entry 46 of Part B of III Schedule of the Tamil Nadu General Sales Tax Act as agricultural and municipal waste conversion devices producing energy.

Analysis: The description in the invoice and the actual user of the goods showed that they were acquired and used as a device for converting agricultural waste such as coconut shells and groundnut shells into fuel. The mere use of the word "boiler" in the description did not control the nature of the commodity when its functional character was that of a waste conversion device. The exemption entry was to be read in a practical manner and not by a narrow or pedantic approach.

Conclusion: The goods fell within the exemption entry and were not to be treated as a simple boiler.

Issue (ii): Whether resale of the goods in inter-State trade changed their exempt character and made them taxable.

Analysis: The commodity had already been treated as exempt at the stage of the local purchase, and its character did not change merely because it was subsequently resold to a dealer in another State. Taxability could not arise only from the fact of inter-State resale when the goods themselves retained their exempt description and use.

Conclusion: The inter-State resale did not deprive the goods of exemption.

Final Conclusion: The denial of exemption was unsustainable and the orders of the authorities were set aside to that extent, resulting in relief to the assessee.

Ratio Decidendi: A commodity must be classified for exemption according to its real functional character and user, and not by a narrow description; an inter-State resale does not by itself alter the exempt nature of the goods.

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