E M PURUSHOTHAMAN Vs. STATE OF KERALA

JUDGEMENT

(1.) Order of the Court was pronounced by Sivarajan, J. The matter arises under the Kerala General Sales Tax Act, 1963 (for short 'the Act'). Assessee to sales tax under the Act is the revision petitioner. He is aggrieved by the Order of the Sales Tax Appellate Tribunal, Additional Bench, Ernakulam in T.A. No. 1074 of 1992. The assessment year concerned is 1988-89. The assessee is a dealer in woolen carpets. For the assessment year 1988-89 he filed a return disclosing a total and non taxable turnover of Rs. 40,884.69. The assessing authority found certain defects in the return. The assessee had produced a photocopy of a letter from the Manager, Canara Bank, Sasthamangalam Branch which showed that the assessee had purchased carpets to the tune of Rs. 3,05,000 in an auction sale of pledged / hypothecated goods of M/s Home Makers, Thiruvananthapuram conducted by the said bank. The assessing authority on that basis had taken the view that in the absence of production of a declaration under R.32(13) of the Kerala General Sales Tax Rules the claim of exemption towards second sales cannot be allowed. The assessing authority accordingly issued a notice proposing to assess the estimated sales turnover of carpets purchased through auction sales. The assessee raised the contention that the bank is a casual trader as defined in the Act and therefore it is liable to pay tax on its sales under S.5 of the Act. An alternate contention was also taken to the effect that the sale proceeds have to be treated as the turnover of Home Makers, Thiruvananthapuram and as it exceeds the taxable limit it is the Home Makers who is liable to pay tax on the sale of carpets. The assessing authority took the view that in the absence of production of declaration as provided under R.32(13) of the K.G.S.T. Rules, the claim cannot be allowed. This order of the assessing authority was confirmed by both the appellate authorities for the very same reason that in order to get exemption as second sales the assessee had to establish the same by producing the declaration as contemplated under R.32(13) of the Rules. This tax revision case was admitted on the following questions of law:

(2.) The facts are not in dispute. The assessee is a dealer in carpets. He had purchased woolen carpets in a public auction conducted by the Canara Bank, Sasthamangalam, evidenced by Annexures D to H. The assessee is the second seller of the carpets so purchased in the State.

(3.) Under S.5 of the Act 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, shall pay tax on his taxable turnover for that year (i) ia the case of goods specified in the First or Second Schedule, at the rates and only at the points specified against such goods in the said Schedules. Woolen carpets at the relevant time was taxable at the point of first sale in the State by a dealer who is liable to tax under S.5 as per Entry 142 of the First Schedule to the Act. The expression 'tax;' as defined in S.2(xxiv) means the tax payable under this Act. The definition of 'taxable turnover' in S.2(xxv) means the turnover on which a dealer shall be liable to pay tax as determined (the rest of the definition omitted as unnecessary), the term 'dealer' is defined in S.2(viii) of the Act to mean any person who carries on the business of buying, selling, supplying or distributing goods directly or otherwise. ...... (rest omitted). The term 'business' defined in. S.2 (vi) includes any transaction in connection with or incidental or ancillary to such trade, commerce, manufacture, adventure or concern contemplated in the main part of the definition of 'business'.