Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2025 Supreme(SC) 803

SUPREME COURT OF INDIA
Sanjiv Khanna, CJI., Sanjay Kumar, R. Mahadevan, J.
C.T. Kochouseph – Appellant
Versus
State of Kerala And Another Etc. – Respondents
Civil Appeal Nos. 941-945 of 2004 With Civil Appeal No. 4745 of 2007 Civil Appeal No. 4746 of 2007 Civil Appeal Nos. 1937-1939 of 2008 Civil Appeal No. 6055 of 2008 Civil Appeal Nos. 938-939 of 2009 Civil Appeal Nos. 3024-3025 of 2012 and Civil Appeal Nos. of 2025 (Arising Out of Special Leave Petition (Civil) Nos. 9420-9422 of 2012)
Decided On : 09-05-2025

Advocates appeared:
For the Appellant(s) : Mr. C.N. Sreekumar, Sr. Adv. Ms. Anupama Kumar, Adv. Mr. Debasis Jena, Adv. Mr. Rahul Kulhare, Adv. Mr. Prakash Ranjan Nayak, AOR Mr. Ajay Aggarwal, Adv. Mr. Rajan Narain, AOR Ms. Mallika Joshi, Adv. Mr. M. P. Vinod, AOR Mr. V Sridharan, Sr. Adv. Mr. Sahil Parghi, Adv. Mr. Ayush Agarwal, Adv. Ms. Charanya Lakshmikumaran, AOR Ms. Neha Choudhary, Adv. Ms. Nitum Jain, Adv. Ms. Umang Motiyani, Adv.
For the Respondent(s): Mr. G. Prakash, AOR Mr. M. Yogesh Kanna, AOR Mr. V. Girl, Sr. Adv. Mr. Pallav Shishodia, 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.

The Supreme Court ruled that purchases from exempt dealers are subject to purchase tax under the Kerala and Tamil Nadu Sales Tax Acts, affirming the provisions' constitutionality and purpose to prevent tax evasion.

Headnote:(A) Kerala General Sales Tax Act, 1963 - Section 5(a) - Tamil Nadu General Sales Tax Act, 1959 - Section 7(a) - The Supreme Court addressed the applicability of purchase tax for goods purchased from exempt dealers, clarifying that such purchases are taxable under the respective statutes. Courts ruled that exemptions apply only to sales tax, not to purchase tax. (Paras 3, 31)

(B) Taxation - Classification of goods - The Court emphasized the distinctions between taxable goods and exempt goods, affirming that purchase tax is applicable when tax is not paid at the sale point. (Paras 8, 10, 36)

(C) Constitutional validity - The provisions for purchase tax under Sections 5(a) and 7A were upheld as constitutional, reaffirming that legislative power allows for tax liabilities in situations where sales tax is exempted. (Paras 32, 39)

Facts of the case:
The judgment involved a series of appeals regarding the liability of purchase tax under both the Kerala and Tamil Nadu Sales Tax Acts, focusing on whether purchases from exempt dealers are subject to taxation (Para 3).

Findings of Court:
The Court upheld the previous decisions asserting that purchase tax applies in specific scenarios when sales tax exemptions affect transactions (Paras 39-41).

Issues: Whether goods purchased from exempt dealers are taxable, and the constitutionality of the purchase tax provisions were the main issues identified (Paras 3, 39).

Ratio Decidendi: The Court clarified that the taxability of goods under the relevant acts does not nullify the application of purchase tax and validated the provisions aimed at preventing tax evasion (Paras 31, 39).

Result: Appeals dismissed; provisions upheld as valid.

Table of Content
1. main issues concerning tax applicability. (Para 1 , 2)
2. tax liability on goods purchase (Para 3 , 4 , 5)
3. analysis of tax provisions and their implications. (Para 6)
4. court's analysis of tax imposition (Para 7 , 8 , 9 , 10 , 11 , 12)
5. distance between taxability and payability (Para 24 , 25 , 26)
6. constitutionality of tax provisions upheld (Para 30 , 31)
7. dismissal of appeals favored state revenue (Para 39 , 40 , 41 , 42)

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 5 (a) of the KERALA GENERAL SALES TAX ACT , 1963 [For short, “Kerala Act”] and the pari materia provision of Section 7 (a) of the Tamil Nadu General Sales Tax Act, 1959 [For short, “ TAMIL NADU ACT ”].

3. The following issues arise for our consideration:

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 pay purchase tax under Section 5A of the Kerala Act or Section 7A of the TAMIL NADU ACT ?

III. Whether the purchase tax, as imposed by Section 5 (a) of the Kerala Act or Section 7 (a) of the TAMIL NADU ACT , is a tax in the nature of manufacture or consignment tax or an inter-state levy, and therefore ultra vires the Constitution and beyond the legislative powers of the state legislature?

4. At the outset, it is important to note that this is essentially a legacy dispute. Following the enactment and enforcement of the Value Added Tax in 2005 and the Goods and Services Tax Acts in 2017, the legal issue in question no longer arises for consideration under the current legal framework.

STATUTORY PROVISIONS

5. At this stage, it will be apposite to quote the relevant statutory provisions of both the Kerala and TAMIL NADU ACT s.

Tamil Nadu General Sales Tax Act, 1959

(i) A local authority, company, Hindu undivided family, firm or other association of persons which carries on such business;

(ii) a causal trader,

(iii) a factor, a broker, a commission agent or arhati, a del credere agent or an auctioneer, or any other mercantile agent by whatever name called, and whether of the same description as hereinbefore or not, who carries on the business of buying, selling, supplying or distributing goods on behalf of any principal, or through whom the goods are bought, sold, supplied or distributed;

(iv) every local branch of a firm or company situated outside the State;

(v) a person engaged in the business of transfer otherwise than in pursuance of a contract of property in any goods for cash, deferred payment or other valuable consideration;

(vi) a person engaged in the business of transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

(vii) a person engaged in the business of delivery of goods on hire purchase or any system of payment by instalments;

(viii) a person engaged in the business of transfer of the right to use any goods for any purpose (whether 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 i