DEPUTY COMMISSIONER OF SALES TAX (LAW), BOARD OF REVENUE (TAXES), ERNAKULAM. versus THOMAS STEPHEN & CO. LTD. QUILON.

Citation: [1988] 3 S.C.R. 248 · Decided: 14-03-1988 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Cited by 3 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

A 
B 
c 
DEPUTY COMMISSIONER OF SALES TAX (LAW), 
BOARD OF REVENUE (TAXES), ERNAKULAM. 
v. 
THOMAS STEPHEN & CO. LTD. QUILON. 
MARCH 14, 1988 
[SABYASACHI MUKHARJI & S. RANGANATHAN, JJ.] 
A_. 
Kera/a General Sales Tax Act, 1963: s. 5A( 1)-Cashew Shells and 
consumed stores used as fuel in the Kiln and maintenance-Whether 
exempt from Tax-Consumption in process of manufacture resulting in A 
other goods-Essentiality of. 
Section SA(l) of the Kerala General Sales Tax Act, 1963, requires 
~ a dealer to pay purchase tax on the taxable goods purchased in cir-
- -""-~ cumstances in which no tax is payable, if he (a) consumes such goods in 
the manufacture of other goods for sale or otherwise, or (b) disposes _of 
D 
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. 
E 
F 
G 
H 
The assessee-company, a manufacturer and dealer in ceramics 
was sought to be assessed to tax under s. SA of the Act for the assess-
ment years 1974--7S, 1975-76 and 197&-77 among other things for the 
purchase turnover of cashew shells and consumed stores, lime shells 
etc., purchased by it. The assessee contended that cashew shells were 
used by them as fuel for manufacturing products and, therefore, by 
virtue of notification S.R.O. 732/73 the purchase turnover of cashew 
shells was exempt from tax. Iu the alternative, it was contended that the 
purchases in question were not liable for levy of tax since none of the 
conditions prescribed in clause (a), (b) or (c) of s. SA(!) of the Act were 
satisfied, and that lime shells and certain consumed stores !lad been 
used in the maintenance of the kiln and the factory, and were not 
taxable in view of the conditions prescribed ins. SA. 
The assessing anthority and the First Appellate Authority brought 
these pnrchases to tax under s. SA(l) of the Act. The Tribunal rejected 
the 11ssessee's claim of exemption under the said notification. However, 
it held that these items were not taxable under s. SA of the Act. It took 
the view that the cashew shells had been used only as fuel in the kiln for 
the manufacture of tiles and other goods and, hence, clause (a) of s. 
SA(l) of the Act was not satisfied, there being no consumption of the 
248 
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DY. COMMR. OF S.T. (LAW)•. TIIOMAS STEPHEN 
249 
cashew shells in the manufacture of other goods or otherwise, that there 
was no disposal of lime shells or the consumed stores which were used 
up for the maintenance of the factory and kiln and that there was also 
no consumption of those goods in the manufacture of other goods for 
sale or otherwise. The High Court upheld the decision of tile Trf: 
bunal. 
)., 
Dismissing the special leave petitions by the Revenue, 
HELD: l. Goods used for ancillary purpose like fuel in the pro-
cess of manufacture, do not fall withins. SA(l)(a) of the Act. Consump-
)\ tion must be in the manufacture as raw-material or of other compo-
nents which go into the making of the end product, to come within the 
~ 
mischief of the section. Cashew shells do not tend to the making of the 
end product. These .had been used as fuel in the kiln and did not get 
transformed into the end product. These had not been used as raw-
material in the manufacture of the goods but only as aid in the man-
ufacture of goods by the assessee. Cashew shells, therefore, do not 
attract levy of tax under the said section. The same is the position with 
regard to the liine shells and consumed stores, which have been used 
only in the maintenance of the kiln and the factory and not used in the 
mannfacture of the end product. l252E-G] 
2. Disposal means transfer of title in the goods to any other 
person. The expression "dispose" means to transfer or alienate. Clause 
(b) of section SA(l) requires that the goods in question should be trans-
ferred to some person othewise than by way of sale. In the instant case, 
there was no evidence of transfer of cashew shells, the lime shells or the 
consumed stores at all. These were used by the assessee himself as fuel 
A 
B 
c 
D 
E 
in the case of cashew shells for maintenance of kiln. Therefore, there 
F 
was no disposal of the goods as known to law. SulH:lause (b) ofs. SA(l) 
was, therefore,. not applicable. [253G·H; 254A-B] 
CIVIL APPELLATE JURISDICTION: Special Leave Petition 
(Civil) Nos. 8747-49 of 1987. 
From the Judgment and Order dated 9.12.1986 of 

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