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PETITIONER: STATE OF TAMIL NADU

       Vs.

RESPONDENT: M. K KANDASWAMI ETC. ETC.

DATE OF JUDGMENT15/07/1975

BENCH: SARKARIA, RANJIT SINGH BENCH: SARKARIA, RANJIT SINGH KRISHNAIYER, V.R. GUPTA, A.C.

CITATION:  1975 AIR 1871            1976 SCR  (1)  38  1975 SCC  (4) 745  CITATOR INFO :  R          1979 SC1475  (30)  D          1981 SC1055  (13)  R          1981 SC1206  (12)  R          1988 SC1487  (46)  D          1990 SC 781  (3,5,21,22,23,31,34,81)

ACT:      Interpretation of Statutes-Provision susceptible of two constructions-Construction defeating  purpose of  provision, if can be resorted to.      Tamilnadu General  Sales-tax Act  1959 Section  7-A(1)- interpretation-Sale or  purchase of certain  goods generally taxable under  the   Act-Act prescribing  circumstances when no tax  be attracted-  Provisions of  section charging  such goods to tax, if workable.

HEADNOTE:      Section 7-A(1  ) of  Tamilnadu   General Sales-tax Act, 1959, provides  that every  dealer who  in the course of his business purchases from registered  dealer or from any other person, any goods (the sale or purchase  of’ which is liable to tax  under this  Act) in circumstances in which no tax is payable under  section 3,  4 or  5, as  the case may be, and either, (a)  consumes such goods in the manufacture of other goods for  sale or otherwise; or  (b) disposes of such goods in any  manner other  than by  way of sale  in the State. Or (c) despatches them to a place outside the state except as a direct result  of sale  or purchase  in the course of inter- State trade  or commerce  shall  pay  tax  on  the  turnover relating to the purchase  aforesaid at the rate mentioned in s. 3,  4 or 5 as the case may be whatever be the quantum  of such turnover  in a  year: The  proviso to  this sub-section exempts   dealer (other  than a  casual trader or agent of a non resident  dealer), if  his turnover  for a  year is less than Rs. 25,000/-.      All the  respondents are  dealers against  whom  either pre-assessment   proceedings    have   been   initiated   or assessments have  been made  under s.  7-A of the Act on the purchase turnover  of goods  like arecanuts, Gingelly seeds, butter  turmeric   and  grams  and  castor  seeds.  All  the respondents filed  writ petitions  under Art.   226  of  the

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constitution in  the High  court of  Madras challenging  the validity of  the pre-assessment  proceedings assessments and the  demand   notices.  The  High  court  allowed  the  writ petitions  and   quashed  the   impugned   proceedings   and assessments.   The State  has preferred  this appeal  on the basis   of the  certificate granted  by the High Court under Art. 133(1)(c) of the Constitution      It was  contended for the appellant that the High Court was wrong  in taking the view that the expression "goods the sale or  purchase of which is liable to tax under this  Act" and the phrase "purchases.. in circumstances in which no tax is payable  under section  3, 4 or 5" are a contradiction in terms and  therefore, s.  7-A(1) being  far from clear as to its intention,  the Joint-commercial  Tax  officer  was  not justified in involving this section.      Accepting the contention and allowing the appeal, ^      HELD: (1)  Section 7-A  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. [46F-G]      (ii) The scheme of the Act involves three inter-related but distinct  concepts  namely,  taxable  person’,  ’taxable goods’ and  ’taxable event’. All the three must be satisfied before a person can be saddled with liability under the Act. The ingredients  of-section 7-A(1)  are: (1)  The person who purchases the goods is a dealer: (2) The purchase is made by him in  the course  of his  business; (3)  Such purchase  is either from  "a registered  dealer or from any other person; (4) The goods purchased are goods the sale or purchase of 39 which is liable to tax under this Act." (5) Such purchase is "in circumstances  in which no tax  is payable under s. 3, 4 or 5  as the  case may  be", and  (6) The dealer either. (a) consumes such  goods in  the manufacture  of other goods for sale or  otherwise or  (b) despatches  all such goods in any manner   other than  by way  of sale  in the  State  or  (c) despatches them  to   place outside  the State  except as  a direct result  of sale  or purchase  in the  course of inter state trade or commerce. Section 7-h can be involved only if all these  ingredients are cumulatively satisfied [43F; 42G- H; 43A-B]      (iii)  Ingredients   (4)  and   (5)  are  not  mutually exclusive and  the existence  of one  does  not  necessarily negate  the   other.  Both  can  co-exist  and  in  harmony. Ingredient (4)  would be  satisfied if  it is shown that the particular goods  were ’taxable  goods’ i.e.., the goods the sale or  purchase of  which is  generally taxable  under the Act. Notwithstanding  the goods  being ’taxable goods’ there may be circumstances in a given case, by reason of which the particular sale or purchase does not attract tax under 9. 3, 4 or  S. Section 7-A provides for such a situation and makes the purchase  of such  goods taxable  in the  hands  of  the purchasing dealer  on his  purchase turnover  if any  of the conditions (a),  (b) and (c) of sub-section (1) of s. 7-A is satisfied. [44G-H]      (iv) The  goods in  question are  ’taxable  goods.  The sales of arecanuts,  Gingelly Seeds, turmeric and gram  were not liable   to tax in the hands of the sellers as they were agriculturists and  the goods  were the produce of the crops raised by  them. Similarly  , butter  was purchased  by  the

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assessee concerned  directly from  the house  holders  whose sales are not liable to tax  under the Act. Caster-seeds are said to  have been  purchased by the assessee concerned from unregistered dealers  under bought notes  If this is a fact, then such  sales may not  be liable to tax under the Act. In all these cases, the purchases have been made by the dealers of goods,  the sale or purchase of which is generally liable to   tax under  the act,  but because  of the  circumstances prescribed under  the Act no tax was suffered  in respect or the sale of these goods by the sellers. If it is a tact that the Gingelly  seeds and  Castor seeds  were crushed into oil and the  butter was  converted into  ghee by  the purchasers dealers concerned. the condition in clause (a) of section 7- A(1) would be satisfied and s. 7-A would be attracted. If in the case  of arecanuts,  turmeric and  gram, the  purchasers dealers transported  these goods  outside the State for sale on consignment  basis, their  case  would also be covered by clause (b)  or (c)  of s.  7-A(1)  and such dealers would be liable to  tax   on the  purchase-turnover of  these  goods. [46B-F]      Ganesh Prasad Dixit v. Commissioner of Sales-tax [1969] 3 S.C.R. 490, applied      Malaba.  Fruit   Products     Company     Bharananganam Kottayam and    ors. v The  Sales Tax officer Palci and ors. 30 S.T.C.  537, Yusuf  Shabeer and ors. v. State  of  Kerala and ors. 32 S.T.C. 359, referred to.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION :  Civil Appeals Nos 1040 to 1072 of  1973.      From the  Judgment and order dated the 23rd April, 1971 of the  Madras High  Court in W.Ps. Nos. 585, 860, 861, 864. 3349,, 4149/1970  and 508,  577,  578,  605-609,  629,  694- 697.797,838,884, 894-897,  902, 909, 934-936, 1015 & 1049 of 1971.      5 .  Govind   Swaminathan, A. V. Rangam, A. Subhashini, K. Venkataswami and N.S. Sivam, for the appellant.      Ashok  Sen,   Y.  S.   Chitlay,  C.  Natarajan  and  S. Gopalakrishnan, for  respondents  (In  C.As.  Nos.1043,1046- 1048,1062-1064,1068-1070, 1049-1050,  1054, 1057-1058, 1061, 1067, 1055, 1065 & 1059/75). 40      T. A.  Ramachandran, for the respondents in C.As. 1060- 1061 &  1066/73      The Judgment of the Court was delivered by      SARKARIA, J.-These  appeals by  the State of Tamil Nadu on a certificate granted by the High Court under Art. 133(1) (c)  of   the  Constitution  raise  a  question  as  to  the interpretation and  scope of  s. 7-A  of the  Madras General Sales-tax Act, 1959 (hereinafter called, the Madras Act).      All the  respondents are  dealers against  whom  either pre-assessment   proceedings    have   been   initiated   or assessments have  been made  under s.  7-A of the Act on the purchase turnover of certain goods.      The assessee-respondents  in Civil  Appeals Nos.  1040, 1041, 1042  and 1044  of 1973  are said  to  have  purchased arecanuts from  agriculturists, and  thereafter  transported those goods outside the State for sale on consignment basis.      The twenty  assessees in  Civil Appeals  Nos.  1046-48, 1054-1057, 1059-1060, 1061 to 1066, 1068 to 1072 of 1973 are alleged   to    have   purchased    Gingelly   seeds    from agriculturists. Gingelly  seeds so  purchased  were  crushed into oil by them.

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    The four  respondents in Civil Appeals Nos. 1045, 1050, 1058 and  1067 of  1973 are alleged to have purchased butter from householders and then converted it into Ghee.      The three  assessees in  Civil Appeals  Nos. 1051, 1052 and  1053   of  1973   purchased  turmeric  and  grams  from agriculturists and  then transported those goods outside the State for sale on consignment basis.      The assessees  in Civil  Appeal No  1043  of  1973  are alleged to  have purchased  castor seeds from (unregistered) dealers on  bought notes  and thereafter  crushed them  into oil.      It will  be convenient to take tile last mentioned case as a model. Therein, the Joint Commercial Tax officer, Leigh Bazar, and Gugai Division, Salem issued a notice dated 11-2- 1970 to the assessee in these terms:           "You are  liable to  pay purchase tax under s. 7-A      of the  ’TNGST Act  1959, on  the purchase price of the      Castor Seeds  purchased and  which was  consumed in the      manufacture of  other goods  for sales  or disposed  of      otherwise. ’           The turnover  of such  purchases made  from 27-11-      1969 II  lo 31-1-1970  amounts to  Rs. 3,303.323.67 and      the tax due works out to Rs. 9,099,69. 41           You are  hereby requested  to pay  the  amount  as      stated above  within 10  days of  the receipt  of  this      notice."      This was  followed by  a Memorandum  dated 5-3-1970  in which it was inter alia stated:           "Admittedly you  have purchased  the castor  seeds      through your  own bought  notes from registered dealers      whose transactions  are not  verifiable. As per section      10 the  burden of  proof that  any dealer or any of his      transactions is  not liable to tax under this Act shall      lie on  such dealer.  Therefore, the purchases effected      by you  have suffered  tax already, should be proved by      you."      All the aforesaid dealers (hereafter referred to as the assesses  filed   writ  petitions  under  Art.  226  of  the Constitution in  the High  Court of  Madras challenging  the validity of  the pre-assessment  proceedings/assessments and the demand  notices. The  High Court accepted the contention of the assesses that "the circumstances contemplated by that provision (s.  7-A)  did  not  include  the  possibility  or impossibility of  verifiability of the transactions with the dealers from whom the petitioner had purchased," and further observed:           " ...  that if  the purpose  of Section  7-A is as      obviously it  is, to check evasion, the phraseology has      fallen short  of achieving  that purpose.  Section  7-A      could have  detailed the circumstances in which the tax      liability under  Section 7-A would arise. But, instead,      the circumstances  have been  related by the section to      sales or  purchases which  are liable  to tax under the      Act, but  for some  reason no tax is payable in respect      of them. It appears to be a contradiction in terms, and      we are  unable to  visualise the  circumstances  except      what we  have noticed  above in which Section 7-A could      be applied.  In fact,  we are  unable to  visualise the      circumstances in  which the two-fold requirement of the      sale being  liable to tax but for some reason no tax is      payable under  Sections 3,  4 or 5 can arise, except in      cases of  exemption. Even  there the  difficulty arises      whether one  can say that the sale which is exempted is      liable  to   tax,  and  then  assume  that  because  of

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    exemption, the  tax is  not payable.  To our  minds the      language of  Sec. 7-A  is far  from  clear  as  to  its      intention, and  we think  that the Joint Commercial Tax      officer was not Justified in invoking Section 7-A."      With regard  to the  purchases of  butter, the  learned Judges said:           "We fail  to see  how this  could  be  done  under      Section 7-A.  Butter is taxable to multi-point talc and      is levied  on the sales. That being the case, we do not      understand how  purchase tax  can also be levied at the      purchase point of the sales which were also the subject      matter of  charge. If  the  purchases  were  made  from      householders or other persons who 42      are not  dealers, even so, inasmuch as the transactions      were   not liable  to tax at all under the Act, on that      ground, Section 7-A could not be invoked."      On the  above reasoning,  the High  Court by  a  common judgment   dated 28-5-1971,  allowed all  the writ petitions and quashed  the impugned proceedings and assessments. Hence these appeals by the State.      Section 7-A  was inserted  by the  Tamil Nadu Amendment Act 2  of 1970  with effect from 27-11-1969. At the relevant time the material part of s. 7-A read as under:           "(1)  Every  dealer  who  in  the  course  of  his      business purchases from a registered dealer or from any      other person,  any goods (the sale or purchase of which      is liable  to tax  under this  Act) in circumstances in      which no  tax is  payable under  "section 3, 4 or 5, as      the case may be, and either,-           (a)  consumes such  goods in  the  manufacture  of                other goods for sale or otherwise; or           (b)  disposes of  such goods  in any  manner other                than by way of sale in the State; or           (c)  despatches them  to i place outside the State                except as a direct result of sale or purchase                in  the   course  of  inter-State,  trade  or                commerce shall pay  tax on  the turnover  relating  to  the  purchase aforesaid at the rate mentioned, in section 3, 4 or 5 as the case may  be whatever  be the  quantum of such turnover in a year:           Provided that a dealer (other than a casual trader      or agent of a non-resident dealer) purchasing goods the      sale of which is liable to tax under sub-section (1) of      section 3  shall-not be  liable to  pay tax  under this      sub-section, if  his total  turnover for a year is less      than twenty five thousand rupees.      (2) . .      (3) . .      On analysis,  Sub-section  (1)  breaks  up  into  these ingredients:      (1)  The person who purchases the goods is a dealer;      (2)  The purchase  is made  by him in the course of his           business;      (3)  Such purchase  is either from "a registered dealer           or from any other person". -      (4)  The  goods   purchased  are  "goods  the  sale  or           purchase of  which   is. liable to tax: under this           Act." 43      (5)  Such purchase is "in circumstances in which no tax           is payable under section 3, 4 or 5 as the case may           be", and      (6)  The dealer either

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         (a)  consumes such  goods in  the  manufacture  of                other goods for sale or otherwise or           (b)  despatches all such goods in any manner other                than by way of sale in the State or           (c)  despatches them  to a place outside the State                except as a direct result of sale or purchase                in  the   course  of   inter-State  trade  or                commerce.      Section 7-A(1)  can be invoked if the above ingredients are cumulatively  satisfied. The  Proviso to the sub-section exempts a  dealer (other  than a casual trader or agent of a non-resident dealer),  if his  turnover for  a year  is less than Rs.  25,000/- (which  by  a  subsequent  amendment  was raised to Rs. 50,000/-).      The assesses  prima facie fall within the definition of ’dealer’ in  Section 2(g)  which includes  not only a person who carries  on  the  business  of  "selling,  supplying  or distributing" goods  but also  the one  who carries  on  the business  of "buying" only. Difficulty in interpretation has been experienced  only with  regard to that part of the sub- section which  relates to  ingredients (4) and (5). The High Court has taken the view that the expression "goods the sale or purchase  of which  is liable  to tax under this Act" and the phrase  "purchase in  circumstances in  which no  tax is payable under  section 3,  4 or  5, "are" a contradiction in terms".      We are unable to accept this interpretation which would render Section 7-A (1) wholly nugatory. With due respect, it seems  to   us  that   in   arriving   at   this   erroneous interpretation, the learned Judges mixed up concept of goods liable to  tax with the transactions liable to tax under the Act. The  scheme of  the Act involves three interrelated but distinct concepts  which may  conveniently be  described  as ’taxable person’,  ’taxable goods’  and ’taxable event’. All the three  must be  satisfied before a person can be saddled with  liability   under  that’   Act..   Nevertheless,   the distinction between them, is overlooked. may lead to serious error in  the  construction  and  application  of  the  Act. ’Goods’ Is defined in s. 2(j) as:           "all  kinds    of  movable  property  (other  than      newspapers, actionable  claims, stocks   and shares and      securities) and  includes all  materials.  commodities,      and articles (including those to be used in the fitting      out, improvement  or repair  of movable  property); and      all growing  crops, grass  or things  attached  to,  or      forming part of the land which are agreed to be severed      before sale or under the contract of sale".      "Taxable person’   is a ’dealer’ as defined in s. 2(g). "Taxable event’  is the sale or purchase of ‘goods’ effected during the accounting 44 period although  the tax  liability is  enforced only  after quantification    is  effected  by  assessment  proceedings. ’Sale’ is defined in s. 2(n) as .           "every transfer  of the  property in  goods by one      person to another in the course of business for cash or      for deferred  payment or  other valuable consideration,      but does  not include  a mortgage hypothecation, charge      or pledge."      Section 3(2)  which is  the  main  charging  provision, enjoins that   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 whatever be the quantum of turnover in that year

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    The focal  point in  the expression, "goods the sale or purchase of  which is  liable to  tax under the Act," is the character  and   class  of   goods  in   relation  to  their exigibility. In  a way this expression contains a definition of ’taxable  goods’, that  is, goods  mentioned in the First Schedule of the Act, the sale or purchase of which is liable to tax  at the  rate and  at  the  point  specified  in  the schedule. The  words, "the  sale or  purchase  of  which  is liable to  tax under  the Act" qualify the term "goods", and exclude by  necessary implication goods the sale or purchase of which  is totally  exempted from tax at all points, under s. 8  or s 17(1) of the Act. The goods so exempted-not being taxable goods"-cannot be brought to charge under s. 7-A.      The words  "under the  Act" will  evidently  include  a charge created by s. 7-A, also. It is to be noted that s. 7- A is  not subject  to s.  35 it  is  by  itself  a  charging provision. Section 7-A brings to tax goods the sale of which would normally  have been, taxed at some point in the State, subsequent to  their purchase  by the  dealer if those goods are not  available for  taxation, owing  to the  act of  the dealer in  (a) consuming  them in  the manufacture  of other goods for  sale or  other- wise,  or (b) despatching them in any manner  other than  by way  of sale in the State, or (c) despatching them  to a  place outside  the State except as a direct result  of sale  or purchase  in the  course of inter State trade or commerce.      Ingredients (4)  and (5) are not mutually exclusive and the existence  of one does not necessarily negate the other. Both can  co-exist and  in harmony.  Ingredient (4) would be satisfied if  it is  shown that.  the particular  goods were ’taxable goods;  i.e., the  goods the  sale or  purchase  of which is  generally taxable  under the  Act. Notwithstanding the goods  being ’taxable goods’, there may be circumstances in a  given case,  by reason of which the particular sale or purchase does not attract tax under s. 3, 4 or 5. Section 7- A provides  for such  a situation  and makes the purchase of such goods taxable in, the hands of the purchasing dealer on his purchase  turnover if any of the conditions (a), (b) and (c) of sub-section (1) of s. 7-A is satisfied. 45      The meaning  and  scope  of  the  phrase  "purchases  . circumstances in  which no tax is payable under Section 3, 4 or S"  and its  co-existence with ingredient (4) can be best understood by applying it to the cases in hand.      In all the forty appeals under consideration, the goods in question.  namely, arecanuts,  Gingelly Seeds,  turmeric, grams, castor-seeds  and butter  are  "goods,  the  sale  or purchase of  which is generally taxable under the Act." That is to say, they are ’taxable goods’. The sales of arecanuts, Gingelly seeds,  turmeric and gram were not liable to tax in the hands of the sellers as they were agriculturists and the goods  were  the  produce  of  the  crops  raised  by  them. Similarly, butter  was purchased  by the  assesses concerned directly from  the house-holders  whose sales are not liable to tax  under he  Act. Caster-seeds  are said ’ to have been purchased  by   the  assessee  concerned  from  unregistered dealers under  bought-notes. If  this is  a fact,  then such sales may not be liable to tax under the Act      Thus in  all these  cases, the purchases have been made by the  dealer, of  "goods, the sale or purchase of which is generally liable  to tax  under the Act", but because of the circumstances aforesaid  no tax  was suffered  in respect of the sale of these goods by the sellers. If it is a fact that the Gingelly  seeds (vide,  Civil Appeals Nos. 1046 to 1048, 1054 to  1057, 1059  to 1069/1973)  an‘d Caster-seeds  (vide

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Civil Appeal  1043/73) were  crushed into oil and the butter (vide Civil  Appeals Nos.  1049, 1050,  1059,  1067/73)  was converted into Ghee by the purchasers-dealers concerned, the condition in  clause (a)  of sub-section (1) of s. 7-A would be satisfied  and s.  7-A would be attracted. If in the case of arecanuts  (vide Civil  Appeals Nos.  1040  to  1044/73), turmeric and  gram (vide Civil Appeals Nos. 1051 to 153/73), the purchasing  dealers transported  these goods outside the State for  sale on  consignment basis, their case would also be covered  by clause  (b) or  (c) of  s. 7-A  (1) and  such dealers would  be liable  to tax on the purchase-turnover of these goods.      It may  be remembered that s. 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 repugnant to this cardinal canon of interpretation.      In Ganesh  Prasad Dixit v. Commissioner of Sales-tax(1) s. 7  of the Madhya Pradesh General sales Tax Act, 1959 (for short, Madhya Pradesh Act) was under challenge. That section was as follows:           "Every dealer  who in  the course  of his business      purchases any  taxable goods, in circumstances in which      no tax  under section 6 is payable on the sale price of      such goods and 46      either consumes  such goods in the manufacture of other      goods   for sale or otherwise or disposes of such goods      in any manner other than by way of sale in the State or      despatches them  to a place outside the State except as      a direct  result of  sale or  purchase in the course of      inter-State trade  or commerce,  shall be liable to pay      tax on  the purchase  price of  such goods  at the same      rate at  which it  would have been leviable on the sale      price of such goods under section 6:           Provided................."      The assessee therein was a firm of building contractors and was registered as a dealer under the Madhya Pradesh Act. The firm  were  purchasing  building  materials  which  were taxable under  the Act  and were using them in the course of their business.  The Sales-tax  officer served a notice upon them to snow cause why ’best-judgment assessment’ should not be made  against  them.  The  assesses  did  not  offer  any explanation. The  Sales-tax officer assessed the turnover in respect of  the sales  as ’nil’  and assessed  the  firm  to purchase tax  under s. 7 on the purchase turnover one of the questions that  fell for  decision was, whether in the facts and circumstances  of the  case   the applicant was a dealer during  the   assessment  period   under  the  Act  and  the imposition of  purchase tax on him under s. 7 of the Act was in order.  Answering the  question in  the affirmative, this Court observed:           "The phraseology  used in that section is somewhat      involved, but  the meaning  of the  section  is  fairly      plain. Where no sales tax  is payable under s. 6 on the      sale price of the goods, purchase tax is payable by the      dealer who  buys taxable  goods in  the course  of  his      business, and  (1) either  consumes such  goods in  the      manufacture of  other goods  for sale,  or (2) consumes      such goods  otherwise; or (3) disposes of such goods in

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    any manner  other than  by way of sale in the State; or      (2) despatches them to a place outside the State except      as a direct result of sale or purchase in the course of      inter  State   trade  or  commerce.  The  assesses  are      registered as  dealers and they have purchased building      materials in the course of their business. the building      materials are taxable under the Act, and the appellants      have consumed  the  materials  otherwise  than  in  the      manufacture of  goods for sale and for a profit motive.      On the  plain words  of s.  7  the  purchase  price  is      taxable.      The impugned  s. 7-A  is based  on s  7 of  the  Madhya Pradesh Act Although the language of these two provisions is not completely  identical yet their substance and object are the same.  Instead of  the longish  phrase, "the  goods, the sale or  purchase of  which is liable to tax under this Act" employed in  s. 7-A  of the  Madras Act,  s. 7 of the Madhya Pradesh Act  conveys the  very connotation  by  using    the convenient, terse  expression, "taxable  goods".  The  ratio decidendi of Ganesh Prasad (supra) is therefore, an apposite guide for  construing s.  7-A. Unfortunately, that decision. it seems.  was not  brought to  the notice  of  the  learned Judges of the High Court. 47      Section 5-A  of the  Kerala General Sales Tax Act, 1963 (for short,  the Kerala  Act) which  is identical  with  the impugned provision, runs thus:      "5A. "Levy of purchase tax-       (1) Every dealer  who ill  the course  of his business           purchases from  a registered   dealer or from ally           other per  son any  goods, the sale or purchase of           which  is   liable  lo  tax  under  this  Act,  in           circumstances in  which no  tax is  payable  under           section S, and either-           (a)  consumes   such goods  in the  manufacture of                other goods for sale or otherwise; 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.’      The validity  of  s.  5-A  was  challenged  by  a  writ petition before  a learned  Judge   (Subramaniam Poti J.) of the Kerala  High Court  in Malabar  Fruit Products  Company, Bharananganam   Kottayam and or .  v The Sales Tax officer , Palai and ors.(1) It was contended, inter alia:           (1)  The object  sought  to  be  achieved  by  the                introduction of  s. 5-A  of the  Act had  not                been  accomplished  because  the  section  is                vague           (2)  Assuming that the section is clear enough and                can be  treated as  a charging  section,  the                section  imposes  tax  not  on  the  sale  or                purchase  of   goods  but   on  its   use  or                consumption;           (3)  That the  Sate Legislature  had no competency                to impose  tax on  the use and consumption of                goods and so section is ineffective:      Holding that s. 5-A was valid and intra vires the State Legislature, the  learned Judge  explained the scheme of the section, thus:           "Though normally  a sale by a registered dealer or      by a  dealer attracts  tax, there  may be circumstances      under which  the seller  may  not  be  liable  as,  for

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    example, when  his turn  over is  below  the  specified      minimum. In  such cases  the "goods"  are liable  to be      taxed, but  the sales  take place  in circumstances  in      which no  tax is  payable at  the point at which tax is      levied under the Act. If the goods are not available in      the State  for subsequent  taxation by reason of one or      other of  the circumstances  mentioned in. clauses (a),      (b) and  (c) of  section 5A(1)  of  the  Act  then  the      purchaser is  sought to  be made  liable under  section      5A". 48           "Another instance I can conceive of is a case of a      dealer selling  agricultural or  horticultural  produce      grown by  him or  grown in  any land  in which  he  has      interest, whether  as  owners  usufructuary  mortgagee,      tenant or otherwise. From the definition of ’turnover ’      in section  2(xxvii) of  the Act it is evident that the      proceeds of  such  sale  would  be  excluded  from  the      turnover of a person who sells goods produced by him by      manufacture  agriculture,  horticulture  or  otherwise,      though merely by such sales he satisfies the definition      of a  "dealer" in the Act. Thus, such a person selling,      such produce  is t  treated  as  a  dealer  within  the      meaning of the Act and the sales are of goods which are      taxable under the Act but when he sells these goods, it      is not part of his turnover. Therefore, it is a case of      a dealer  selling goods  liable to tax under the Act in      circumstances in which no tax is payable under the Act.      In such  a case,  the purchaser  is sought  to be taxed      under section 5A provided the conditions are satisfied.      The case  of growers  selling goods  to persons to whom      section SA thus applies is covered by this example."      The judgment  of the  learned  judge  was  affirmed  in appeal by  a Division  Bench of  the same  High Court (vide, Yusuf Shabeer  and ors.  v. State  of Kerala and ors.(1) The Bench expressly  dissented from the view taken by the Madras High Court in the judgment now under appeal.      In our  opinion, the  Kerala High  Court has  correctly construed s.  5A of  the Kerala Act which is in pari materia with the  impugned  s. 7A of the Madras Act. "Goods the sale or purchase  of which  is liable to tax under this Act in s. 7A(1)" means  ’taxable goods’,  that  is, the kind of goods, the sale  of which  by a particular person or dealer may not be taxable  in the  hands of  seller but the purchase of the same  by  a  dealer  in  the  course  of  his  business  may subsequently become  taxable. We  have pointed  out  and  it needs to  be emphasised  again that  Section 7A  itself is a charging section. It creates a liability against a dealer on his purchase  turnover with  regard to  goods, the  sale  or purchase of  which though  generally liable to tax under the Act, have  not due to the circumstances of particular sales, suffered tax  under Section  3, 4  or 5, and which after the purchase, have  been dealt  by  him  in  any  of  the  modes indicated in clauses (a),(b) and (c) of Section 7-A (1) .      For the  foregoing reasons, we allow these appeals, set aside the  judgment of  the High  Court and  dismiss to writ petitions. In  the circumstances, we would leave the parties to bear  their own  costs. All the cases will now go back to the   taxing    authority   concerned   for   such   further investigation, proceedings  or action as may be necessary in the particular  case, in  accordance with  law as  clarified above. V.M.K.                                      Appeals allowed. 49

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