The court clarified the conditions necessary to attract S.5A of the Kerala General Sales-tax Act, 1963, and upheld the tax liability of the petitioners under the Act.

1. The main question that arises in all these Original Petitions is one of. validity and construction of S.5A of the Kerala General Sales-tax Act, 1963. All the petitioners are assessees who have been assessed to tax on the purchase turnover of certain goods under S.5 A of the said Act. In some of the petitions there are other questions also raised. I will first refer to and deal with common questions here.

2. S.5 of the Kerala General Sales-tax Act, 1963 (hereinafter referred to as the "Act") charges to tax the taxable total turnover of every dealer subject to certain conditions. 'Total turnover' has been defined in S.2 (xxvi) of the Act to mean the aggregate turnover in all goods by 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. The taxable turnover of a dealer is the turnover on which he is liable to pay tax as determined after making such deductions and in such manner as has been prescribed. Turnover may be purchase turnover or sales turnover. S.2 (xxvi) defines turnover as the aggregate amount for which goods are either bought or sold, or supplied or distributed by a dealer. The proceeds of the sale by a person of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest, whether as owner, usufructuary mortgagee, tenant or otherwise, shall be excluded from his turnover. The tax under S.5 may be on the taxable purchase turnover or the taxable sales turnover of a dealer. That sub-section itself provides that in the case of goods specified in the First or Second Schedule, it would be at such points against such goods as are specified in the schedule and in the case of other goods at all points of sales. Therefore it is apparent that all goods (which is a term defined in the Act) are liable to tax under the Act either at all points of sale or a particular point specified in the First or Second Schedule. These specified points are either points of purchases or of sales. The definition of a dealer indicates that it includes a casual trader and even a person who sells produce obtained by him from agriculture or horticulture or otherwise; though when he, a 'dealer' within the definition of the term, sells those goods it is not part of his turnover.

3. S.5A of the Act was inserted in the Act by S.3 of the Kerala General Sales Tax (Amendment) Act (Act 14 of 1970). Earlier the corresponding section had been incorporated in the Act by Ordinance No. 9 of 1970 which was repealed by Act 14 of 1970. The object as apparent from the Statement of Objects and Reasons of the Amending Act is stated to be 'a measure for checking evasion of sales-tax'. The section itself runs as follows:

"5A. Levy of the purchase tax; (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 S.5, 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, 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 S. S.

(2) Notwithstanding anything contained in sub-section (1) a dealer (other than a casual trader or agent of a non-resident dealer) purchasing goods, the sate of which is liable to tax under S.5, shall not be liable to pay tax under sub section (1) if his total turnover for a year is less than ten thousand rupees:

Provided that where the total turnover of such dealer for the year in respect of the goods mentioned in clause (i) of sub-section (1) of S.5 is not less than two