K.V. ABDUL KADER, PROPRIETOR KEVEE SUPARI TRADERS versus STATE OF KERALA AND ORS.

Citation: [1998] 1 S.C.R. 411 · Decided: 29-01-1998 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed

Judgment (excerpt)

K.V. ABDUL KADER, PROPRIETOR 
A 
--\" 
KEVEESUPARITRADERS 
v. 
STATE OF KERALA AND ORS. 
-~ 
JANUARY 29, 1998 
B 
y· 
[S.P. BHARUCHA AND V.N. KHARE, JJ.] 
Sales Tax: 
Kera/a General Sales Tax Act, 1963-Explanation to Section 2 (xxvi), c 
Sections 8 (b), 5 and 5-A-Sales Tax-Last Purchase-By amending Act No.6 
of 1988, explanation to Section 2 (xxvi) made subject to the provisions of 
Section 8(b)-Ejfect of-Held, goods exported by assessee to agents outside 
the State and part remaining thereof at the end of the financial year deemed 
--{ 
to attain the quality of last purchase by virtue of Section 8(b) and exigible D 
. (7' 
to lax . 
Interpretation of Statutes-External aid-Statement of Objects And 
Reasons could be relied upon. 
The legal position prior to the amendment of 1988 was that a dealer 
was not liable to pay sales tax on purchases of goods until the goods acquired E 
the quality of last purchase inside the State. The explanation to Section 2 
(xxvi) of the Kerala General Sales Tax Act was added by Act No. 21of1978 
to give effect to the said judgment. The Division Bench of the Kera la High 
Court in the case of Deputy Commissioner of Sales Tax (Law), Board of 
--< 
Revenue (Taxes), Trivandrum v. Keveyam & Co. and Others, (1986) 63 STC, F 
"' 
387, held that closing stock of an assessee whether inside or outside the 
State was not exigible to tax. As a result of the said decision the Government 
was losing huge amount of revenue and inorder to overcome the situation, 
Act No.6of1988 was introduced where by explanation to S. 2 (xxvi) was made 
subject to the provisions of Section 8 of the Act. 
G 
.. ·~-
The appellant, dealer in arecanuts has agents outside the State as well . 
He paid sales tax by working out the purchase value on the sales effected 
by the agent and the tax on the remaining stock was paid as and when the 
stock was sold. For the period 1987-88 the Sales Tax Officer disallowed the 
appellant's claim that the closing stock valued at Rs. 38,91,289.52 pending H 
411 
412 
SUPREME COURT REPORTS 
[1998) l S.C.R. 
A with the agents outside the State be excluded from taxation and vide order 
dated November 30, 1989, sent a demand of Rs. 1,79,400.00 and surcharge 
1''--
of Rs. 11,953.00. The order of assessment was challenged before the High 
Court and was dismissed. The writ appeal was also dismissed. Hence this 
appeal. 
B 
The legal position prior to the amendment of 1988 was that a dealer 
was not liable to pay sales tax on purchases of goods until the goods acquired 
the quality of last purchase inside the State. The explanation to Section 2 
(xxvi) of the Kerala General Sales Tax Act was added by Act No. 21 of 1978 
to give effect to the said judgment. The Division Bench of the Kera la High 
C Court in the case of Deputy Commissioner of Sales Tax (law), Board of 
Revenue (Taxes), Trivandrwn v. Keveyam & Co. and Others, (1986) 63 STC, 
387, held that closing stock of an assessee whether insi~e or outside the 
State was not exigible to tax. As a result of the said decision the Government 
was losing huge amount of revenue and in order to overcome the situation, 
Act No.6of1988 was introduced whereby explanation to S. 2 (xxvi) was made 
D subject to the provisions of Section 8 of the Act. 
The contention raised by the appellant was that though the amendment 
to explanation to Section 2(xxvi) makes it subject to the provisions of Section 
8, the language in the said section is not sufficient to impute when the goods 
held by an assessee outside the State attained t'he quality of last purchase. 
E Therefore, the said amendment has not achieved the intended object. 
Dismissing the Appeal, this Court 
HELD : I.I. The question whether a particular purchase is the last 
purchase or not has to be decided in terms of Section 8(b) of the Kerala 
General Sales Tax Act. After the amendment explanation to S.2(xxvi) is made 
F subject to the provisions of S.8 and as a result of which, as soon as the goods 
are exported it attains the stage of last purchase and is liable to tax-
irrespective of the fact that such goods are sHll held by agents outside the 
State. Thus the legal position that emerged after the amendment is that, all 
the purchases of the closing stock of goods exported outside the State and 
G held by agents are deemed to attain the quality of last purchase and exigible 
to tax. (415-C] 
·· 
The State of Madras v. T.Narayanaswami Naidu and Another, (1968) 
21 STC l and Deputy Commissioner of Sal

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