AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2025 (5) TMI 854
X X X X Extracts X X X X
X X X X Extracts X X X X
....odia, Sr. Adv. Mr. C. K. Sasi, AOR Ms. Meena K Poulose, Adv. Mr. Nihar Dharmadhikari, Adv. Mr. K. Radhakrishnan, Sr. Adv. Mr. Sabarish Subramanian, AOR Mr. C. Kranthi Kumar, Adv. Mr. Vishnu Unnikrishnan, Adv. Mr. Sarathraj B, Adv. Mr. Danish Saifi, Adv. Ms. Aswani Satheesh, Adv. JUDGMENT SANJIV KHANNA, CJI. Leave granted in SLP (C) Nos. 9420-9422 of 2012. 2. This judgment decides a batch of matters pertaining to Section 5A of the Kerala General Sales Tax Act, 1963 For short, "Kerala Act" and the pari materia provision of Section 7A of the Tamil Nadu General Sales Tax Act, 1959. For short, "Tamil Nadu Act". 3. The following issues arise for our consideration: I. Whether the purchase of goods by the appellants from dealers who were exempted from payment of tax by virtue of notifications or exemptions issued under the Kerala Act or the Tamil Nadu Act, is a purchase "which is liable to tax" within the meaning of Section 5A of the Kerala Act or Section 7A of the Tamil Nadu Act? II. Whether the appellant-assessee who had purchased goods, that were exempt from payment of sales tax or from the dealers who were exempt from payment of sales tax, are liable to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or not for a specified period) for cash, deferred payment or other valuable consideration; (ix) a person engaged in the business of supplying by way of, or as part of, any service or in any other manner whatsoever of goods, being food or any other article for human consumption or any drink (whether or not intoxicating), where such supply or service is for cash, deferred payment or other valuable consideration; Explanation (1)- A society (including a co-operative society), club or firm or an association which, whether or not in the course of business, buys, sells, supplies or distributes goods from or to its members for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, shall be deemed to be a dealer for the purposes of this Act . Explanation (2)- The Central Government or any State Government which, whether or not in the course of business, buy, sell, supply or distribute goods, directly or otherwise, for cash, or for deferred payment, or for commission, remuneration or other valuable consideration, shall be deemed to be a dealer for the purposes of this Act; XX XX XX Section 2(j) "goods" mean....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds, at the time the contract of sale or purchase is made; and (ii) in the case of unascertained or future goods, at the time of their appropriation to the contract of sale or purchase by the seller or by the purchaser, whether the assent of the other party is prior or subsequent to such appropriation. Explanation (3)-(b) Where there is a single contract of sale or purchase of goods, situated at more places than one, the provisions of clause (a) shall apply as if there were separate contracts in respect of the goods at each of such places. XX XX XX Section 2(q) "total turnover" means the aggregate turnover in all goods of a dealer at all places of business in the State, whether or not the whole or any portion of such turnover is liable to tax; Section 2(r) ["turnover" means the aggregate amount for which goods are bought or sold, or delivered or supplied or otherwise disposed of in any of the ways referred to in clause (n), by a dealer] either directly or through another, on his own account or on account of others whether for cash or for deferred payment or other valuable consideration, provided that the proceeds of the sale by a person o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of a non- resident dealer) whose total turnover for a year [exceeds three lakhs of rupees] and every casual trader or agent of a non- resident dealer, whatever be his turnover for the year, shall pay a tax for each year in accordance with the provisions of this act. 2) Subject to the provisions of sub-section (1), in the case of goods mentioned in the First Schedule, the tax under this Act shall be payable by a dealer at the rate and [only] at the point specified therein on the turnover in each year relating to such goods: Provided that all spare parts, components and accessories of such goods shall also be taxed at the same rate as that of the goods if such spare parts, components and accessories are not specifically enumerated in the First Schedule and made liable to tax under that Schedule; [Provided further that in the case of goods mentioned in the First Schedule which are taxable at the point of first sale, the tax under this Act shall be payable by the first or earliest of the successive dealers in the State who is liable to tax under this section.] Section 3(2-A) Subject to the provisions of sub-section (1), in the case of goods mentione....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nment may, by notification, [issued whether prospectively or retrospectively,] make an exemption, or reduction in rate, in respect of any tax payable under this Act - (i) on the sale or purchase of any specified goods or class of goods, at all points or at a specified point or points in the series of sales by successive dealers; or (ii) by any specified class of persons, in regard to the whole or any part of their turnover; [or] (iii) on the sale or purchase of any specified classes of goods by specified classes of dealers in regard to the whole or part of their turnover. Section 17(4) The Government may, in such circumstances and subject to such conditions as may be prescribed, by notification, remit the whole or any part of the tax or penalty or fee payable in respect of any period by any dealer under this Act." Kerala General Sales Tax Act, 1963 " 5. Levy of tax on sale or purchase of goods: - (1) Every dealer (other than a casual trader or agent of a non-resident dealer) whose total turnover for a year is not less than [one lakh rupees] and every casual trader or agent of a non-resident dealer, whatever be his total turnover for the year, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in the Fourth Schedule is not less than [rupees one lakh] shall pay tax at the rate and only at the point or points specified against the goods in the First or Second or Fifth Schedule or goods involved in the execution of works contract (whether it is in the form of goods or in some other form) specified in the Fourth Schedule, as the case may be, on his taxable turnover in that year relating to such goods: Provided that where a tax has been levied under sub- section (1) or sub-section (2) of this section or under section 5A in respect of the sale or purchase or goods specified in the Second Schedule and such goods are sold in the course of interstate trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be prescribed [(2A) (i) Notwithstanding anything contained in this Act or the rules made thereunder every dealer shall pay turnover tax on the turnover of goods as specified hereunder, namely:- (a) by an oil company defined in the Explanation under serial number [97] of the First Schedule to this Act whose total turnover in a year exceeds rupees fifty Iakhs at the rate of three per ce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sale or purchase of goods in the course of export out of the territory of India or sale or purchase in the course of import into the territory of India; (c) sale or purchse exempted from tax by notification under section 10; (d) all amounts falling under the head 'freight', when specified and charged for by the dealer separately without including such amounts in the price of the goods sold; (e) all amounts falling under the head 'charges for delivery', when specified and charged for by the dealer separately without including such amounts in the price of the goods sold; (f) all amounts allowed as discount, provided that such discount is allowed in accordance with the regular practice of the dealer or is in accordance with the terms of a contract or agreement entered into in a particular case and provided also that the accounts show that the purchaser has paid only the sum originally charged less discount; (g) all amounts allowed to purchasers in respect of goods returned by them to the dealer when the goods are taxable on sales provided that the goods were returned within a period of three months from the date of delivery ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the prescribed manner a declaration duly filled in and signed by the dealer to whom the goods are sold containing the prescribed particulars in the prescribed form.] [(3A) x x x x ] (4) Notwithstanding anything contained in sub-section (1), every dealer registered under sub-section (3) of section 7 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956), shall, whatever be the quantum of his total turnover, pay tax for each year in respect of the sale of the goods with reference to the purchase of which he has furnished a declaration under sub-section (4) of section 8 of the aforesaid Central Act [on his taxable turnover in respect of such goods:] Provided that this sub-section shall not apply to any dealer in respect of the sale of the goods the purchase of which is liable to tax under subsection (1). [(5) Notwithstanding anything contained in sub-section (1) or sub- section (2), but subject to sub-section (6), where goods sold are contained in containers or are packed in any packing materials, the rate of tax and the point of levy applicable to such containers or packing materials, as the case may be, shalI, whether the price of the con....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a year is not less than [one lakh rupees] but not more than [one lakh ten thousand rupees] may, at his option instead of paying the tax in accordance with the provisions of subsection (1), pay tax [at the rate] mentioned in [ x x x x ] sub-section (1) of Section 7 in accordance with the provisions of that section." SUMMARY OF THE STATUTORY POSITION 6. A brief overview of the relevant statutory provisions is set out below: * Section 3 of the Tamil Nadu Act is the charging provision. It imposes a liability to pay tax on every dealer whose annual turnover exceeds the prescribed threshold, as well as on every casual dealer and agent of a non-resident dealer. The tax is payable on the dealer's taxable turnover at the rates specified under the Act. Section 3 does not differentiate between sale and purchase. The heading refers to 'sales or purchase'. * The term 'turnover' is defined in section 2(r) of the Tamil Nadu Act to include the total value of goods bought, sold, supplied or distributed by a dealer, whether directly or through others, and whether on the dealer's own account or on behalf of another. However, the definition excludes the sale proceeds ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the Kerala Act reflect a framework broadly similar to that of the Tamil Nadu Act, particularly in relation to charging, exemptions, and the imposition of purchase tax. * Section 5 of the Kerala Act is the charging section. It provides that every dealer whose turnover exceeds the prescribed threshold, as well as every casual dealer and agent of a non-resident dealer, is liable to pay tax on the turnover for that year. In the case of goods specified in the First or Second Schedule, the tax is payable at the rate and at the point of levy specified therein. The heading reads - "levy of tax on sale or purchase of goods". * Section 5A of the Kerala Act Inserted by Act 14 of 1970. is in pari materia to section 7A of the Tamil Nadu Act. It provides for the levy of purchase tax in specified circumstances. The section applies where a dealer, in the course of business, purchases goods that are liable to tax, from either a registered dealer or any other person, but no tax is payable under section 5 in respect of such transaction. If such goods are (i) consumed in the manufacture of other goods, whether for sale or otherwise, (ii) used or disposed of in a manner other tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or in the interpretation and application of the Madras Act. Referring to Section 7A as the charging provision read with Section 3(2) and the definition clauses of the term 'goods' in Section 2(j), 'dealer' in Section 2(g) and 'sale' in Section 2(n) in the context of 'taxable person', 'taxable goods' and 'taxable event', it is held, that the expression - "goods, the sale or purchase of which is liable to tax under the Act", refers to the character and class of goods in relation to their exigibility. Essentially, this expression is held to define "taxable goods", that is, goods listed in the First Schedule of the Act, the sale or purchase of which is subject to tax at the specified rate and point of levy. The words "the sale or purchase of which is liable to tax under the Act" qualify the term "goods" and, by necessary implication, exclude goods that are totally exempt from tax "at all points" Both - sale or purchase. under Section 8 or Section 17(1). Such "exempt goods", 'Exempt goods' here, as explained hereinafter, refers to goods on which no sales or purchase tax can be levied. not being "taxable goods", cannot be brought to charge under Section 7-A. 9. Elaborating further on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... examples. For instance, in a case where a sale is made by the seller whose turnover is below the specified minimum, the purchaser may be liable to pay tax on the purchase in the circumstances mentioned in clauses (a), (b) and (c) of Section 5A(1). Another example considers the sale of agricultural or horticultural produce, which is excluded from the turnover of the seller. In this scenario, although the person selling such produce is treated as a 'dealer', such sale is not part of his turnover; the purchaser may nonetheless be taxed under Section 5A, when agricultural or horticultural produce are "goods liable to tax" and the conditions thereof are satisfied. This judgment was upheld by the Division Bench of the High Court of Kerala in Yusuf Shabeer and Others v. State of Kerala and Others. (1973) 32 STC 359 (Ker). Approving the view taken in Yusuf Shabeer (supra), this Court observed: "34. In our opinion, the Kerala High Court has correctly construed Section 5-A of the Kerala Act which is in pari materia with the impugned Section 7-A of the Madras Act. "Goods the sale or purchase of which is liable to tax under this Act in Section 7-A(1)" means "taxable goods", that is, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 1973 For short, "Haryana Act" as well as the scope, effect, and validity of Section 13-AA of the Bombay Sales Tax Act, 1959. For short, "Bombay Act" The Court referred to its earlier judgment in M.K.Kandaswami (supra) which was relied upon by the Revenue but was sought to be distinguished on the ground that the legal question involved was different. The contention of the assessee was accepted. The Court observed that Section 9 of the Haryana Act begins with the words, "where a dealer liable to pay tax under the Act," rather than "whether a dealer has paid tax or has not paid tax." The phrase "liable to pay tax under the Act" refers to the obligation to pay sales tax on certain purchases. The Court clarified that the liability to pay tax arises upon the occurrence of a taxable event, that is, the event that gives rise to the charge. Although the assessment and actual recovery of tax may happen later, the liability is triggered by this taxable event. The imposition of tax involves three stages. First, the declaration of liability. This is established by the statute and defines who is legally bound to pay tax. Second, assessment, which quantifies the liability, but does not create i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... State, other than by way of inter-State sale or export. 15. At this point, it is important to note the distinction in the wording of Section 9 of the Haryana Act. As stated in paragraph 8 of Goodyear (supra), the amended Section brought within its scope the purchase of goods (other than those listed in Schedule B) from within the State, when such goods are used to manufacture other goods, or when the manufactured goods are disposed of outside the State other than by way of inter-State sale or export. 16. A similar issue with reference to the Gujarat Sales Tax Act, 1969, For short, "Gujarat Act." Uttar Pradesh Sales Tax Act, 1948 For short, "Uttar Pradesh Act" as well as the Andhra Pradesh General Sales Tax Act, 1957 For short, "Andhra Pradesh Act" was examined by a three-Judge Bench of this Court, which included Ranganathan, J., in Hotel Balaji and Others v. State of A.P. and Others. 1993 Supp (4) SCC 536 Jeevan Reddy, J., writing for himself and Ramaswami, J., referred to some earlier judgments and concurred with the opinion expressed in M.K.Kandaswami (supra), while disagreeing with the ratio in Goodyear (supra). The ratio in Goodyear (supra), it was stated, cannot be acce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y be notified under Section 15. 91. Now, what does the above analysis signify? The section applies only in those cases where (a) the goods are purchased (for convenience sake, I may refer to them as raw material) by a dealer liable to pay tax under the Act in the State, (b) the goods so purchased cease to exist as such goods for the reason they are consumed in the manufacture of different commodities and (c) such manufactured commodities are either disposed of within the State otherwise than by way of sale or despatched to a place outside the State otherwise than by way of an inter-State sale or export sale. It is evident that if such manufactured goods are not sold within the State of Haryana, but yet disposed of within the State, no tax is payable on such disposition; similarly, where manufactured goods are despatched out of State as a result of an inter-State sale or export sale, no tax is payable on such sale. Similarly again where such manufactured goods are taken out of State to manufacturers' own depots or to the depots of his agents, no tax is payable on such removal. Goodyear takes only the last eventuality and holds that the taxable event is the removal of go....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to tax the purchase of goods by a manufacturer whose existence as such goods is put an end to by him by using them in the manufacture of different goods in certain circumstances. The tax is levied upon the purchase price of raw material, not upon the sale price - or consignment value - of manufactured goods. Would it be right to say that the levy is upon consignment of manufactured goods in such a case? True it is that the levy materialises only when the purchased goods (raw material) is consumed in the manufacture of different goods and those goods are disposed of within the State otherwise than by way of sale or are consigned to the manufacturing-dealer's depots/agents outside the State of Haryana. But does that change the nature and character of the levy? Does such postponement - if one can call it as such - convert what is avowedly a purchase tax on raw material (levied on the purchase price of such raw material) to a consignment tax on the manufactured goods? We think not. Saying otherwise would defeat the very object and purpose of Section 9 and amount to its nullification in effect. The most that can perhaps be said is that it is plausible (as pointed out by Ranganathan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or (b) disposes of such goods in any manner other than by way of sale in the State; or (c) despatches them to any place outside the State except as a direct result of sale or purchase in the course of inter-State trade or commerce; shall, whatever be the quantum of the turnover relating to such purchase for a year, pay tax on the taxable turnover relating to such purchase for that year at the rates mentioned in Section 5."" 17. Referring to the argument and discussion on the validity of Section 5A of the Kerala Act in Malabar Fruit Products Company (supra), this Court, in Hotel Balaji (supra) observes: "93. One of the arguments urged against the validity of the said provision was that inasmuch as the tax is levied depending upon the mode in which the goods purchased are consumed, disposed of or despatched, the tax is really one in the nature of consumption tax or use tax, but not sales tax. This argument was answered by the learned Judge in the following words: "According to me, this contention is based on a misconception of the scope of taxation on the sale of goods. It is true that sales tax is a tax imposed on the occasion of the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd not to forego it where the goods manufactured out of them are disposed of (or despatched, as the case may be) in a manner not yielding any revenue to the State or serving the interests of nation and its economy, as explained hereinbefore. The purchased goods are put an end to by their consumption in manufacture of other goods and yet the manufactured goods are dealt with in a manner as to deprive the State of any revenue; in such cases, there is no reason why the State should forego its tax revenue on purchase of raw material. 96. Another observation in Kandaswami [(1975) 4 SCC 745] relevant for the present purpose may also be noticed: (SCC p. 751, para 26) "It may be remembered that Section 7-A is at once a charging as well as a remedial provision. Its main object is to plug leakage and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves its workability, and efficacy is to be preferred to the one which would render it otiose or sterile. The view taken by the High Court is re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....read over a subsequent period of time. 19. In our opinion, the judgment in Hotel Balaji (supra) covers the issues in question. However, Hotel Balaji (supra) did not consider and examine the judgment of the three-Judge Bench in Mukerian Papers Ltd. v. State of Punjab, (1991) 2 SCC 580 which followed the ratio of Goodyear (supra). Interpreting the provisions of Section 4B of the Punjab General Sales Tax Act, 1948, For short, "Punjab Act" Mukerian Papers Ltd. (supra) held that one of the requirements for the accrual of purchase tax is that the manufactured goods must be sent outside the State. The liability to pay purchase tax does not arise at the time of purchasing raw materials within the State or their use in manufacturing goods other than those listed in Schedule B. It was observed that, although the purchase tax is levied on the raw materials purchased by the manufacturer, the actual levy is deferred until those materials are consumed in the manufacture of a commercially distinct commodity. The relevant date, for the purpose of taxation, is the date on which the goods are sent outside the State. Thus, the taxable event occurs when the goods are sent outside the State, regardl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing in Goodyear (supra). Referring to the issue of the vires of the State enactments that were struck down as unconstitutional in Goodyear (supra) on the grounds that they imposed a tax during the course of inter-State trade or commerce amounting to a consignment tax, and also that the taxable event was not purchase, specific reference was made to the reasoning of Ranganathan, J. in Hotel Balaji (supra), which reads as under : "3. (...)The learned Judge recalled his observations in his concurring opinion in Goodyear and observed that the particular viewpoint presented in Hotel Balaji was not presented in Goodyear and that on reconsideration, he finds the reasoning in support of the validity of the provisions more persuasive. The learned Judge said: (SCC pp. 549-50, para 10) "This larger concept, namely, that these various alternatives are not set out in the section with a view to fasten the charge of tax at the point of use, consumption, manufacture, production and consignment or despatch but in an attempt to make clear that what is sought to be levied is a tax on raw materials on the occasion of their last purchase inside the State had not been projected before, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....recovered had the purchase taken place from a registered non-exempted dealer, then Section 5A enables the State to recover such loss from the assessee herein. In such a case, Section 5A would stand attracted, subject to the other conditions being fulfilled. This is where the difference between "payability" and "leviability" comes into existence. The goods in question were undoubtedly liable to tax. However, since exemption notification under Section 10 of the Act came into the field, though liable to tax, such goods were exempted from payment of tax. In our view, therefore, there is a clear demarcation between these two concepts of "leviability/taxability" on the one hand vis- a-vis "payability" on the other. Our view is also fortified to this extent by the reasoning of the judgement of this Court in the case of State of Tamil Nadu vs. M.K. Kandaswamy & Ors. reported in [1975] 36 S.T.C. 191. In that case, a three-Judge Bench of this Court was required to decide interpretation and scope of Section 7A of the Madras General Sales Tax Act, 1959 [for short, "Madras Act"], which section was in pari materia with Section 5A of the Act. While interpreting Section 7A of the Madras Act, this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Act by virtue of a notification, Section 5A has been enacted to nonetheless impose tax on certain transactions, thereby safeguarding the State's revenue from potential loss. The reasoning and ratio in M.K.Kandaswami (supra) was expressly agreed as correct. However, what prompted the two-Judge Bench to refer the matter to a larger Bench was the decision of another two-Judge Bench of this Court in Peekay Re-Rolling Mills (P) Ltd. v. Assistant Commissioner and Another, (2007) 4 SCC 30 which the Bench felt holds that the expression 'levy' would include 'collection' or 'payment' as well and not mere authorisation for levy. The two-Judge Bench in the reference order dated 27.10.2009 did not agree with the observation that the 'levy' would include 'collection' or 'payment' of tax in the context of Section 5 and 5A of the Act. 23. We have examined the judgment in Peekay Re-Rolling Mills (P) Ltd. (supra), which refers to several decisions, including the judgments in Bhawani Cotton Mills Ltd. v. State of Punjab and Another (1967) 20 STC 290 and Shanmuga Traders and Others v. State of Tamil Nadu and Others. (1998) 5 SCC 349 The Court in Peekay Re- Rolling Mills (P) Ltd. (supra) holds tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, insofar as it imposes or authorizes levy of tax, shall be subject to the conditions specified in Clauses (a) and (b). Clause (a) in specific terms has stated that tax in respect of any sale or purchase of declared goods inside the State shall not exceed 3% of the sale and purchase price and secondly, the tax will not be levied at more than one stage. In the said case, the levy of purchase tax on cotton was set aside on the grounds that the tax imposed under the Punjab Act conflicted with Section 15 of the Central Act. The plea of the assessee that sales tax may have been paid by the earlier transactions and therefore the levy of purchase tax would violate clause (a) to Section 15 was accepted. Pertinently, Bhawani Cotton Mills (supra) refers to the decision of this Court in A.V. Fernandez v. The State of Kerala, AIR 1957 SC 657 which refers to the following observations in Chatturam Horilram Limited v. Commissioner of Income Tax, Bihar and Orissa, AIR 1955 SC 619 to distinguish three stages in the imposition of tax, namely, declaration of liability, assessment and recovery: "If there is a liability to tax, imposed under the terms of the taxing statute, then follow the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that in the impugned judgment the Division Bench of the High Court erroneously distinguishes Shanmuga Traders (supra) from the facts of the case. Shanmuga Traders (supra) again is a case relating to declared goods under Section 14 of the Central Act, which it was held can be taxed only at a single point. It is for the State to determine whether the single point should be the point of first sale, intermediate sale or the last sale in the State. If the State designates the point of first sale as the single point of taxation and then exempts that point- whether through a general provision or one specifically applicable to a particular class of sellers or goods-then tax cannot be levied either at the first sale or at any subsequent stage. The ratio in the said case is not applicable as this is not a case of declared goods and the bar under Section 15 of the Central Act does not apply. 28. Peekay Re-Rolling Mills (P) Ltd. (supra) also relies on M/s Pine Chemicals Ltd. and Others v. Assessing Authority and Others, (1992) 2 SCC 683 which holds that exemption arises only when there is a tax liability. The Court reaffirms that exemption presupposes that tax is otherwise leviable. This wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ort than the term 'assessment'. It may include both 'imposition' of a tax as well as 'assessment'. The term 'imposition' is generally used for the levy of a tax or duty by legislative provisions indicating the subject-matter of the tax and the rates at which it has to be taxed. The term 'assessment', on the other hand, is generally used in this country for the actual procedure adopted in fixing the liability to pay a tax on account of particular goods or property or whatever may be the object of the tax in a particular case and determining its amount. The Division Bench appeared to equate 'levy' with an 'assessment' as well as with the collection of a tax when it held that 'when the payment of tax is enforced, there is a levy'. We think that, although the connotation of the term 'levy' seems wider than that of 'assessment', which it includes, yet, it does not seem to us to extend to 'collection'. Article 265 of the Constitution makes a distinction between 'levy' and 'collection'. ( emphasis supplied ) " In our opinion, the word 'levy' rightly refers to the exigibility or imposition of tax. The 'assessment' of tax is the second stage and refers to the determination of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s that the constitutional validity of the impugned provisions was not examined while deciding Kandaswami (supra) ought to be rejected, even if we would accept that the question of constitutional validity was not directly addressed. Hotel Balaji (supra) specifically upholds the constitutionality of the impugned provisions, disagreeing with the opinion/ratio expressed in Goodyear (supra). We would also like to record that purchase tax is levied on the purchase of goods on which no tax has been paid on account of any exemption as a result of which the seller is not required to collect and pay sales tax. The decision whether or not to levy purchase tax is a prerogative and power of the State Legislature. As noticed above, the liability to pay is distinct from levy of tax. This being so, the argument that purchase tax is leviable when there is cross- border or inter-State movement of the goods or is a consignment tax must be rejected. Even otherwise, the event, that is inter-State movement of the goods, which does not amount to inter-State sale, falls within the legislative domain and power of the State Legislature. The State, when it imposes such tax, does not exceed its power to impos....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as exempt in view of the GO issued under Section 17, as stated above, is untenable. The GO refers to the tax payable at the time of sale, that is, the sales tax. The GO does not grant exemption from payment of purchase tax. The grant of exemption being for the purpose of payment of sales tax, it does not follow that purchase tax would not be payable when conditions of Section 7A are satisfied. Further, it would be contradictory or rather nugatory to argue that the rate of tax specified in the Schedule should be taken as nil as no payment is to be made on the sale amount as sales tax. If we accept this argument, it would defeat the very purpose and objective of enacting Section 7A of the Tamil Nadu Act. Section 7A is only attracted where the sales tax is not payable, which means there should be an exemption notification under Section 17 or exemption under the Third Schedule, read with Section 8 of the Tamil Nadu Act. 36. In view of the aforesaid reasoning, the judgments of this Court in Kailash Nath and Another v. State of Uttar Pradesh and Others AIR 1957 SC 790 and Collector of Central Excise, Bombay-I and Another v. Parle Exports Pvt. Ltd. AIR 1989 SC 644 will have no applica....