# C.T. Kochouseph v. State of Kerala and Another Etc

- **Citation:** 2025 INSC 661
- **Court:** Supreme Court of India
- **Decided:** 2025-05-09
- **Case number:** Civil Appeal Nos. 4745 and 4746 of 2007
- **Bench:** Sanjiv Khanna CJI, Sanjay Kumar, R. Mahadevan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/c-t-kochouseph-v-state-of-kerala-and-another-etc-38928
- **Pages:** 50

## Headnote

Issue arose whether the purchase tax, as imposed by s.5A of the
Kerala General Sales Tax Act, 1963 or s.7A of the Tamil Nadu
General Sales Tax Act, 1959, is a tax in the nature of manufacture
or consignment tax or an inter-state levy, and thus, ultra vires
the Constitution and beyond the legislative powers of the state
legislature; whether the purchase of goods by the appellants from
dealers exempted from payment of tax by virtue of notifications
or exemptions issued under the Kerala Act or Tamil Nadu Act is
a purchase "which is liable to tax" within the meaning of s.5A of
the Kerala Act or s.7A of the Tamil Nadu Act; and 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, liable to pay purchase tax u/s.5A of
the Kerala Act or s.7A of the Tamil Nadu Act.
Headnotes†
Kerala General Sales Tax Act, 1963 - s.5A - Tamil Nadu
General Sales Tax Act, 1959 - s.7A - Levy of purchase
tax - Constitutional validity of purchase tax under the Acts -
Purchase tax, as imposed by s.5A of the Kerala Act or s.7A of
the Tamil Nadu Act, is a tax in the nature of manufacture or
consignment tax or an inter-state levy - Purchase of goods
by the assessee from dealers exempted from payment of tax
under the Kerala Act or Tamil Nadu Act, if a purchase "which
is liable to tax" within the meaning of s.5A of the Kerala Act
or s.7A of the Tamil Nadu Act - 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, if
liable to pay purchase tax:
* Author
[2025] 6 S.C.R.
311
C.T. Kochouseph v. State of Kerala and Another Etc.
Held: Constitutional validity of s.7A of the Tamil Nadu Act and s.5A
of the Kerala Act upheld - Levy of purchase tax is governed by the
provisions and stipulations of ss.5A or 7A - They are independent
and in a way constitute charging sections - ss.5A or 7A, impose
purchase tax specifically in situations where the seller is granted
exemption from payment of tax - Exemption from payment of tax
at the time of sale is a pre-condition for attracting ss.5A and 7A
respectively - It cannot be said that s.7A of the Tamil Nadu Act
and s.5A of the Kerala Act would have no application when tax
is exempt at the hands of the seller, or for that matter, the tax
u/s.3 or s.5 of the Acts at the hands of the seller is payable at
the point of first sale - The fact that the goods were not exempt
from payment of tax at the time of sale and the goods would have
attracted tax at the first point of sale, is immaterial - Purchase
tax is leviable on and payable by the purchaser - However, the
legislations do not levy the purchase tax to tax the transaction
of the sale and purchase twice - Instead, it levies purchase tax
only where no sales tax was payable on the sale - Purchase
tax is levied on the purchase of goods on which no tax has
been paid on account of any exemption as a result of which
the seller is not required to collect and pay sales tax - Decision
whether or not to levy purchase tax is a prerogative and power
of the State Legislature - It cannot be said that purchase tax is
leviable when there is cross- border or inter-State movement of
the goods or is a consignment tax - What is granted is exemption
from payment of sales tax and not the purchase tax - Grant of
exemption being for the purpose of payment of sales tax, it does
not follow that purchase tax would not be payable when conditions
of s.7A are satisfied - Furthermore, it cannot be said that the
applicable rate of tax on purchase would be nil as the tax payable
on the sale in view of the exemption from payment of sales
tax is nil - Thus, the judgments /orders of High Courts upheld.
[Paras 31, 32, 35, 37-39]

## Text

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[2025] 6 S.C.R. 310 : 2025 INSC 661
C.T. Kochouseph
v.
State of Kerala and Another Etc.
(Civil Appeal No(s). 941-945 of 2004)
09 May 2025
[Sanjiv Khanna CJI,* Sanjay Kumar and R. Mahadevan, JJ.]
Issue for Consideration
Issue arose whether the purchase tax, as imposed by s.5A of the
Kerala General Sales Tax Act, 1963 or s.7A of the Tamil Nadu
General Sales Tax Act, 1959, is a tax in the nature of manufacture
or consignment tax or an inter-state levy, and thus, ultra vires
the Constitution and beyond the legislative powers of the state
legislature; whether the purchase of goods by the appellants from
dealers exempted from payment of tax by virtue of notifications
or exemptions issued under the Kerala Act or Tamil Nadu Act is
a purchase "which is liable to tax" within the meaning of s.5A of
the Kerala Act or s.7A of the Tamil Nadu Act; and 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, liable to pay purchase tax u/s.5A of
the Kerala Act or s.7A of the Tamil Nadu Act.
Headnotes†
Kerala General Sales Tax Act, 1963 - s.5A - Tamil Nadu
General Sales Tax Act, 1959 - s.7A - Levy of purchase
tax - Constitutional validity of purchase tax under the Acts -
Purchase tax, as imposed by s.5A of the Kerala Act or s.7A of
the Tamil Nadu Act, is a tax in the nature of manufacture or
consignment tax or an inter-state levy - Purchase of goods
by the assessee from dealers exempted from payment of tax
under the Kerala Act or Tamil Nadu Act, if a purchase "which
is liable to tax" within the meaning of s.5A of the Kerala Act
or s.7A of the Tamil Nadu Act - 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, if
liable to pay purchase tax:
* Author
[2025] 6 S.C.R.
311
C.T. Kochouseph v. State of Kerala and Another Etc.
Held: Constitutional validity of s.7A of the Tamil Nadu Act and s.5A
of the Kerala Act upheld - Levy of purchase tax is governed by the
provisions and stipulations of ss.5A or 7A - They are independent
and in a way constitute charging sections - ss.5A or 7A, impose
purchase tax specifically in situations where the seller is granted
exemption from payment of tax - Exemption from payment of tax
at the time of sale is a pre-condition for attracting ss.5A and 7A
respectively - It cannot be said that s.7A of the Tamil Nadu Act
and s.5A of the Kerala Act would have no application when tax
is exempt at the hands of the seller, or for that matter, the tax
u/s.3 or s.5 of the Acts at the hands of the seller is payable at
the point of first sale - The fact that the goods were not exempt
from payment of tax at the time of sale and the goods would have
attracted tax at the first point of sale, is immaterial - Purchase
tax is leviable on and payable by the purchaser - However, the
legislations do not levy the purchase tax to tax the transaction
of the sale and purchase twice - Instead, it levies purchase tax
only where no sales tax was payable on the sale - Purchase
tax is levied on the purchase of goods on which no tax has
been paid on account of any exemption as a result of which
the seller is not required to collect and pay sales tax - Decision
whether or not to levy purchase tax is a prerogative and power
of the State Legislature - It cannot be said that purchase tax is
leviable when there is cross- border or inter-State movement of
the goods or is a consignment tax - What is granted is exemption
from payment of sales tax and not the purchase tax - Grant of
exemption being for the purpose of payment of sales tax, it does
not follow that purchase tax would not be payable when conditions
of s.7A are satisfied - Furthermore, it cannot be said that the
applicable rate of tax on purchase would be nil as the tax payable
on the sale in view of the exemption from payment of sales
tax is nil - Thus, the judgments /orders of High Courts upheld.
[Paras 31, 32, 35, 37-39]
Case Law Cited
State of Tamil Nadu v. M.K.Kandaswami and Others [1976] 1 SCR
38 : (1975) 4 SCC 745; Hotel Balaji and Others v. State of A.P. and
Others [1992] Supp. 2 SCR 182 : (1993) Supp. 4 SCC 536; Devi
Dass Gopal Krishan Pvt. Ltd. and Others v. State of Punjab and
Others [1994] 3 SCR 417 : (1994) Supp. 2 SCC 59 - relied on.
312
[2025] 6 S.C.R.
Supreme Court Reports
Kailash Nath and Another v. State of Uttar Pradesh and Others,
AIR 1957 SC 790; Collector of Central Excise, Bombay-I and
Another v. Parle Exports Pvt. Ltd. [1983] Supp. SCR 933 : AIR
1989 SC 644; Casio India Company Private Limited v. State
of Haryana [2016] 2 SCR 791 : (2016) 6 SCC 209; Rajputana
Agencies Ltd. v. CIT (1959) 35 ITR 168; Thermax Private Limited
v. Collector of Customs (Bombay) [1992] 3 SCR 943 : (1992) 4
SCC 440 - held inapplicable.
State of Kerala v. T.S. Govindarajulu Naidu (1993) Supp. 3 SCC
656; Goodyear India Ltd. and Others v. State of Haryana and
Another [1989] Supp. 1 SCR 510 : (1990) 2 SCC 71; Mukerian
Papers Ltd. v. State of Punjab [1991] 1 SCR 347 : (1991) 2 SCC
580; Peekay Re-Rolling Mills (P) Ltd. v. Assistant Commissioner
and Another [2007] 4 SCR 185 : (2007) 4 SCC 30; Shanmuga
Traders and Others v. State of Tamil Nadu and Others (1998) 5
SCC 349; A.V. Fernandez v. The State of Kerala [1957] SCR 837 :
AIR 1957 SC 657; Chatturam Horilram Limited v. Commissioner of
Income Tax, Bihar and Orissa [1955] 2 SCR 290 : AIR 1955 SC
619; M/s Pine Chemicals Ltd. and Others v. Assessing Authority
and Others [1992] 1 SCR 179 : (1992) 2 SCC 683; Associated
Cement Companies Ltd. v. State of Bihar and Others [2004]
Supp. 4 SCR 868 : (2004) 7 SCC 642; Assistant Collector of
Central Excise, Calcutta Division v. National Tobacco Co. of India
Ltd. [1973] 1 SCR 822 : (1972) 2 SCC 560; Somaiya Organics
(India) Ltd. and Another v. State of Uttar Pradesh [2001] 3 SCR
33 : (2001) 5 SCC 519; Collector of Central Excise, Hyderabad
and Others v. Vazir Sultan Tobacco Company Ltd., Hyderabad
and Others [1996] 2 SCR 1194 : (1996) 3 SCC 434; Chief
Commissioner of Central Goods and Service Tax and Others v.
Safari Retreats (P) Ltd. and Others [2024] 10 SCR 793 : (2025)
2 SCC 523; Elel Hotels and Investments Limited and Others v.
Union of India [1989] 2 SCR 880 : (1989) 3 SCC 698; Federation
of Hotel and Restaurant Association of India, Etc. v. Union of India
and Others [1989] 2 SCR 918 : (1989) 3 SCC 634 - referred to.
Malabar Fruit Products Company, Bharananganam Kottayam and
Others v. Sales Tax Officer, Palai and Others (1972) 30 STC 537
(Ker); Yusuf Shabeer and Others v. State of Kerala and Others
(1973) 32 STC 359 (Ker); T.S. Govindarajalu Naidu v. State of
Kerala (1979) 43 STC 233 (Kerala); Bhawani Cotton Mills Ltd. v.
State of Punjab and Another (1967) 20 STC 290 - referred to.
[2025] 6 S.C.R.
313
C.T. Kochouseph v. State of Kerala and Another Etc.
List of Acts
Kerala General Sales Tax Act, 1963; Tamil Nadu General Sales
Tax Act, 1959.
List of Keywords
Purchase tax; Sales tax; Constitutional validity; Exempt from
payment of tax; First point of sale; Power of the State; Source of
revenue for governments; Exemption from payment of sales tax;
Applicable rate of tax; No reverse levy; Excise duty; Custom duty;
Tax in the nature of manufacture; Consignment tax; Inter-state
levy; Beyond the legislative powers of the state legislature; Dealers
exempt from payment of sales tax, if liable to pay purchase tax.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No(s). 941-945
of 2004
From the Judgment and Order dated 04.09.2003 of the High Court
of Kerala at Ernakulam in O.P. No. 25135 of 2002, TRC Nos.
20, 24 and 26 of 1996 and TRC No. 338 of 2000
With
Civil Appeal Nos. 4745 and 4746 of 2007, Civil Appeal Nos. 19371939 and 6055 of 2008, Civil Appeal Nos. 938-939 of 2009, Civil
Appeal Nos. 3024-3025 of 2012 and Civil Appeal Nos. 6615-6617
of 2025
Appearances for Parties
Advs. for the Appellant:
V. Sridharan, C.N. Sreekumar, V. Chitambaresh, Arvind P. Datar,
Sr. Advs., M.P. Vinod, Atul Shankar Vinod, Dileep Pillai, Kannan
Gopal Vinod, Sahil Parghi, Ms. Apeksha Mehta, Ayush Agarwal,
Ms. Charanya Lakshmikumaran, Ms. Umang Motiyani, Ms. Falguni
Gupta, Prakash Ranjan Nayak, Ms. Anupama Kumar, Debasis Jena,
E.M.S. Anam, Ajay Aggarwal, Rajan Narain, Ms. Mallika Joshi.
Advs. for the Respondents:
Pallav Shishodia, V. Giri, K. Radhakrishnan, Sr. Advs., G. Prakash,
C.K. Sasi, Ms. Meena K Poulose, Sabarish Subramanian, C.
Kranthi Kumar, Vishnu Unnikrishnan, Sarathraj B., Danish Saifi,
Ms. Aswani Satheesh, M. Yogesh Kanna.
314
[2025] 6 S.C.R.
Supreme Court Reports
Judgment / Order of the Supreme Court
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 5A
of the Kerala General Sales Tax Act, 19631 and the pari materia
provision of Section 7A of the Tamil Nadu General Sales Tax Act,
1959.2
3.
The following issues arise for our consideration:
I.
Whether the purchase of goods by the appellants from
dealers who were exempted from payment of tax by virtue of
notifications or exemptions issued under the Kerala Act or the
Tamil Nadu Act, is a purchase "which is liable to tax" within
the meaning of Section 5A of the Kerala Act or Section 7A of
the Tamil Nadu Act?
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 5A of the
Kerala Act or Section 7A 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.
1
For short, "Kerala Act".
2
For short, "Tamil Nadu Act".
[2025] 6 S.C.R.
315
C.T. Kochouseph v. State of Kerala and Another Etc.
Statutory Provisions
5.
At this stage, it will be apposite to quote the relevant statutory
provisions of both the Kerala and Tamil Nadu Acts.
Tamil Nadu General Sales Tax Act, 1959
"Section 2(g) "dealer" means any person who carries on
the business of buying, selling, supplying or distributing
goods, directly or otherwise, whether for cash, or for
deferred payment, or for commission, remuneration or
other valuable consideration, and includes -
(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;
316
[2025] 6 S.C.R.
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(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 is for cash,
deferred payment or other valuable consideration;
Explanation (1)- A society (including a co-operative
society), club or firm or an association which, whether
or not in the course of business, buys, sells, supplies or
distributes goods from or to its members for cash, or for
deferred payment, or for commission, remuneration or
other valuable consideration, shall be deemed to be a
dealer for the purposes of this Act .
Explanation (2)- The Central Government or any State
Government which, whether or not in the course of
business, buy, sell, supply or distribute goods, directly
or otherwise, for cash, or for deferred payment, or for
commission, remuneration or other valuable consideration,
shall be deemed to be a dealer for the purposes of this Act;
xx
xx
xx
Section 2(j) "goods" means all kinds of movable property
(other than newspapers, actionable claims, stocks
and shares and securities) and includes all materials,
commodities, and articles including the goods( as goods
or in some other form) involved in the execution of a
works contract or those goods 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;
xx
xx
xx
Section 2(n) "sale" with all its grammatical variations and
cognate expressions means every transfer of the property
in goods (other than by way of mortgage, hypothecation,
charge or pledge) by one person to another in the course
[2025] 6 S.C.R.
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C.T. Kochouseph v. State of Kerala and Another Etc.
of business for cash, deferred payment or other valuable
consideration and includes -
(i) a transfer, otherwise than in pursuance of a contract, of
property in any goods of cash, deferred payment or other
valuable consideration;
(ii) a transfer of property in goods (whether as goods or
in some other form) involved in the execution of a works
contract;
(iii) a delivery of goods on hire-purchase or any system
of payment by installments;
(iv) a 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;
(v) a supply of goods by any unincorporated association
or body of persons to a member thereof for cash, deferred
payment or other valuable consideration;
(vi) a supply, 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 is for cash,
deferred payment or other valuable consideration, and such
transfer, delivery or supply of any goods shall be deemed
to be a sale of those goods by the person making (such)
the transfer, delivery or supply and a purchase of those
goods by the person to whom such transfer, delivery or
supply is made;
Explanation (3)-(a) The sale of purchase of goods shall be
deemed for the purpose of this Act, to have taken place
in the State, wherever the contract of sale or purchase
might have been made, if the goods are within the State-
(i) in the case of specific or ascertained goods, at the time
the contract of sale or purchase is made; and
(ii) in the case of unascertained or future goods, at the time
of their appropriation to the contract of sale or purchase by
the seller or by the purchaser, whether the assent of the
other party is prior or subsequent to such appropriation.
318
[2025] 6 S.C.R.
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Explanation (3)-(b) Where there is a single contract of
sale or purchase of goods , situated at more places than
one, the provisions of clause (a) shall apply as if there
were separate contracts in respect of the goods at each
of such places.
xx
xx
xx
Section 2(q) "total turnover" means the aggregate turnover
in all goods of 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;
Section 2(r) ["turnover" means the aggregate amount for
which goods are bought or sold, or delivered or supplied
or otherwise disposed of in any of the ways referred to in
clause (n), by a dealer] either directly or through another, on
his own account or on account of others whether for cash
or for deferred payment or other valuable consideration,
provided that the proceeds of the sale by a person of
agricultural or horticultural produce other than tea, [and
rubber (natural rubber latex) and all varieties and grades
of raw rubber] grown within the State by himself or on
any land in which he has an interest whether as owner,
usufructuary mortgagee, tenant or otherwise, shall be
excluded from his turnover;
Explanation (1)- "Agricultural or horticultural produce" shall
not include such produce as has been subjected to any
physical, chemical or other process for being made fit for
consumption, save mere cleaning, grading, sorting or dying;
Explanation (1-A).- Any amount charged by a dealer by
way of tax separately without including the same in the
price of the goods bought or sold shall not be included
in the turnover.
Explanation (2)- Subject to such conditions and restrictions,
if any, as may be prescribed in this behalf-
(i)[.........]
Explanation (2) (ii) the amount for which goods are sold
shall include any sums charged for anything done by the
[2025] 6 S.C.R.
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C.T. Kochouseph v. State of Kerala and Another Etc.
dealer in respect of the goods sold at the time of, or before
the delivery thereof;
Explanation (2) (iii) any cash or other discount on the price
allowed in respect of any sale and any amount refunded
in respect of articles returned by customers shall not be
included in the turnover; and
Explanation (2) (iv) where for accommodating a particular
customer, a dealer obtains goods from another dealer and
immediately disposes of the same to the said customer,
the sale in respect of such goods shall be included in the
turnover of the latter dealer but not in that of the former;
Explanation (3)-Any amount realised by a dealer by way
of sale of his business as a whole, shall not be included
in the turnover.
Explanation (4)-The aggregate amount for which the goods
are bought or sold or delivered or supplied through a factor,
broker, commission agent or arhati, del credere agent or
an auctioneer or any other mercantile agent, by whatever
name called, whether for cash or for deferred payment or
other valuable consideration, shall be deemed to be the
turnover of such factor, broker, commission agent, arhati,
del credere agent, auctioneer or any other mercantile
agent, by whatever name called.
xx
xx
xx
Section 3. Levy of taxes on sales or purchases of
goods.-
(1) Every dealer (other than the dealer, casual trader or
agent of a non- resident dealer) whose total turnover for
a year [exceeds three lakhs of rupees] and every casual
trader or agent of a non-resident dealer, whatever be
his turnover for the year, shall pay a tax for each year in
accordance with the provisions of this act.
2) Subject to the provisions of sub-section (1), 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:
320
[2025] 6 S.C.R.
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Provided that all spare parts, components and accessories
of such goods shall also be taxed at the same rate as
that of the goods if such spare parts, components and
accessories are not specifically enumerated in the First
Schedule and made liable to tax under that Schedule;
[Provided further that in the case of goods mentioned in
the First Schedule which are taxable at the point of first
sale, the tax under this Act shall be payable by the first
or earliest of the successive dealers in the State who is
liable to tax under this section.]
Section 3(2-A) Subject to the provisions of sub-section (1),
in the case of goods mentioned in the Fifth Schedule, the
tax under this Act shall be payable by a dealer at the rate
and at the point specified therein on the turnover in each
year relating to such goods:
Provided that in respect of sale by the first dealer to
another registered dealer, the dealer selling the goods
shall furnish to the assessing authority in the prescribed
manner within the prescribed period a declaration duly
filled in and signed by the dealer to whom the goods are
sold containing the prescribed particulars in a prescribed
form, obtained from the prescribed authority.
Section 3(2-B) Subject to the provisions of sub-section (1),
in the case of goods mentioned in the Sixth Schedule, the
tax under this Act shall be payable by a dealer at the first
point of sale and the second point of sale, and at the rate
specified therein on the turnover in each year relating to
such goods;
xx
xx
xx
Section 7-A . Levy of purchase Tax. - (1) [Subject
to the provisions of sub-section (1) of section 3, 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 (sections 3 or 4,) as the case may be, *[not
being a circumstance in which goods liable to tax under
sub-section (2) of section 3 or section 4, were purchased
[2025] 6 S.C.R.
321
C.T. Kochouseph v. State of Kerala and Another Etc.
at a point other than the taxable point specified in the First
or the Second Schedule], and either-
(a) *[consumes or uses such goods in or for 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 or carries 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 [sections 3 or 4], as
the case may be.
Section 8. Exemption from tax. - Subject to such
restrictions and conditions as may be prescribed, a dealer
who deals in the goods specified in the Third Schedule
shall not be liable to pay any tax under this Act in respect
of such goods.
xx
xx
xx
Section 17. Power of Government to notify exemptions
and reductions of tax. -
(1) The Government may, by notification, [issued whether
prospectively or retrospectively,] make an exemption, or
reduction in rate, in respect of any tax payable under this
Act -
(i) on the sale or purchase of any specified goods or class
of goods, at all points or at a specified point or points in
the series of sales by successive dealers; or
(ii) by any specified class of persons, in regard to the
whole or any part of their turnover; [or] (iii) on the sale or
purchase of any specified classes of goods by specified
classes of dealers in regard to the whole or part of their
turnover.
Section 17(4) The Government may, in such circumstances
and subject to such conditions as may be prescribed,
by notification, remit the whole or any part of the tax or
322
[2025] 6 S.C.R.
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penalty or fee payable in respect of any period by any
dealer under this Act."
Kerala General Sales Tax Act, 1963
"5. Levy of tax on sale or purchase of goods: - (1) Every
dealer (other than a casual trader or agent of a non-resident
dealer) whose total turnover for a year is not less than
[one lakh rupees] and every casual trader or agent of a
non-resident dealer, whatever be his total turnover for the
year, shall pay tax on his taxable turnover for that year,--
(i) in the case of goods specified in the First or Second
Schedule, at the rates and only at the points specified
against such goods in the said Schedule;
[ x x x ]
(iii) in the case of transfer of the right to use any goods
for any purpose (whether or not for a specified period) at
the rate of [six per cent] at all points of such transfer on
an aggregate turnover of [rupees one lakh] and above;
[(iv) (a) in the case of transfer of goods involved in the
execution of works contract where transfer is in the form
of goods at the rates and at the points specified against
such goods in the First, Second or Fifth Schedule [ x x x ]
(b) In the case of transfer of goods involved in the execution
of works contract (where the transfer is not in the form
of goods but in some other form) specified in the Fourth
Schedule, at the rate specified against such contract in
the said Schedule:
Provided that no tax is payable in respect of the turnover
of goods the transfer of which was effected without any
processing or manufacture on which tax was levied under
clause (i) on any earlier sale in the State or which are
exempted from tax and for goods coming under the Fifth
Schedule, no tax specified for the first sale is payable,
on which tax was levied in any earlier sale in the State:
Provided further that tax payable in respect of turnover of
goods coming under the second schedule the transfer of
which was effected without any processing or manufacture
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C.T. Kochouseph v. State of Kerala and Another Etc.
shall not exceed the rate and only at the points specified
against such goods in the said Schedule].
(v) in the case of goods specified in the Fifth Schedule
at the rates and at the two points specified against such
goods in the said Schedule;
[Provided that where there are no two points of sale in
the State for any goods coming under the Fifth Schedule
and the first sale is to a person other than a registered
dealer, the rate specified in column (8) of that Schedule
shall apply to such sales]
[(2) Every dealer other than a dealer referred to in subsection (1) whose total turnover for a year in respect of the
goods specified in the First or Second or Fifth Schedule
or goods involved in the execution of works contract
(whether it is in the form of goods or in some other form)
specified in the Fourth Schedule is not less than [rupees
one lakh] shall pay tax at the rate and only at the point or
points specified against the goods in the First or Second
or Fifth Schedule or goods involved in the execution of
works contract (whether it is in the form of goods or in
some other form) specified in the Fourth Schedule, as the
case may be, on his taxable turnover in that year relating
to such goods:
Provided that where a tax has been levied under subsection (1) or sub-section (2) of this section or under section
5A in respect of the sale or purchase or goods specified
in the Second Schedule and such goods are sold in the
course of interstate trade or commerce, the tax so levied
shall be refunded to such person in such manner and
subject to such conditions as may be prescribed
[(2A) (i) Notwithstanding anything contained in this Act or
the rules made thereunder every dealer shall pay turnover
tax on the turnover of goods as specified hereunder,
namely:-
(a) by an oil company defined in the Explanation under
serial number [97] of the First Schedule to this Act whose
total turnover in a year exceeds rupees fifty Iakhs at the
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rate of three per cent on the turnover from the Ist day of
April, 1991 till 31st day of July, 1991 and thereafter at the
rate of four per cent on the turnover:
[(b) by any dealer in Foreign Liquor (Indian made) or
Foreign Liquor (Foreign made) as specified in entries
against serial numbers 53 and 54 of the First Schedule
at the rate of three per cent on the turnover at all points;
(c) by any dealer in jewellery made of gold, silver and
platinum group of metals at the rate of three per cent on
the turnover;
(d) by any dealer in cooked food including beverages not
falling under the entries against serial numbers 53 and
54 of the First Schedule sold or served in hotels and/
or restaurants and not covered by the entries against
serial number 40 of the First Schedule whose turnover
in a year.--
exceeds rupees five lakhs but does not Rupees one
thousand exceed rupees ten lakhs exceeds rupees ten
lakhs but does not at the rate of one per cent exceeds
rupees twenty five lakhs on the turnover exceeds rupees
twenty five lakhs at the rate of two per cent on the turnover:
Provided that tax under sub-sections (1) and (2) of section
5 on such turnover and tax under section 5A shall not be
levied on such dealer;
(e) by any dealer in medicines and drugs including
Allopathic, Ayurvedic, Homoeopathic, Sidha or Unani
preparations or Glucose I. P. at the point of first sale in
the State at the rate of half per cent on the turnover of
such goods:
Provided that dealers other than those who receive the
goods on branch transfer or on consignment shall not be
liable to pay turnover tax when the total turnover does not
exceed rupees fifty lakhs in the year;
(f) by any dealer in tea at the point of second sale in the
State at the rate of three fourth per cent on the turnover
of such good;
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C.T. Kochouseph v. State of Kerala and Another Etc.
(g) by any dealer not coming under sub-clauses (a) to
(f) of goods coming under the First Schedule or the Fifth
Schedule whose total turnover in a year exceeds rupees
fifty lakhs at the rate of haIf per cent on the turnover of
such goods at all points of sale or purchase as the case
may be.]
Provided that no tax under this sub-section shall be payable
on that part of such turnover-
[(i) x x x ]
(ii) which relates to:
(a) sale or purchase of goods in the course of interstate
trade or commerce:
(b) sale or purchase of goods in the course of export out
of the territory of India or sale or purchase in the course
of import into the territory of India;
(c) sale or purchse exempted from tax by notification
under section 10;
(d) all amounts falling under the head 'freight', when
specified and charged for by the dealer separately without
including such amounts in the price of the goods sold;
(e) all amounts falling under the head 'charges for delivery',
when specified and charged for by the dealer separately
without including such amounts in the price of the goods
sold;
(f) all amounts allowed as discount, provided that such
discount is allowed in accordance with the regular practice
of the dealer or is in accordance with the terms of a contract
or agreement entered into in a particular case and provided
also that the accounts show that the purchaser has paid
only the sum originally charged less discount;
(g) all amounts allowed to purchasers in respect of goods
returned by them to the dealer when the goods are taxable
on sales provided that the goods were returned within a
period of three months from the date of delivery of the
goods and the accounts show the date on which the goods
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were returned and the date on which and the amount for
which refund was made; and
(h) all amounts received from the sellers in respect of
goods returned to them by the dealer, when the goods
are taxable on the purchase value provided that the goods
were returned within a period of three months from the
date of delivery of the goods and the accounts show the
date on which the goods were returned and the date on
which and the amount for which refund was received:
Provided further that save as otherwise provided in this
sub-section, no other deduction shall be made from the total
turnover of a dealer for the purposes of this sub-section.
(ii) The provisions of this Act and the rules made thereunder
shall, so far as may be, apply in relation to the assessment,
collection or refund of the turnover tax under this subsection including the provisions relating to appeals and
penalties, as they apply in relation to the assessment,
collection or refund of tax under the other provisions of
this Act.
[(iii) Notwithstanding anything contained in sub-section (1)
of section 22, no dealer shall collect from his purchaser
the turnover tax payable by him under this sub-section.]
(3) Notwithstanding anything contained in sub-section (1)
or sub-section (2), the tax payable by a dealer in respect
of any sale of industrial raw materials, [component parts,
containers or packing materials] which is liable to tax at
a rate higher than [two and a half per cent] when sold
to industrial units for use in the production of finished
products inside the State for sale or for packing of such
finished products inside the State for sale, as the case
may be, shall be at the rate of only [two and a half per
cent] on the taxable turnover relating to such industrial
raw materials, [component parts, containers or packing
materials], as the case may be:
Provided that this sub-section shall not apply where the
sale of such finished products is not liable to tax either
under this Act or under the Central Sales Tax Act, 1956
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C.T. Kochouseph v. State of Kerala and Another Etc.
(Central Act 74 of 1956) or when such finished products
are exported out of the territory of India:
Provided further that the provisions of this sub-section
shall not apply to any sale unless the dealer selling the
goods furnishes to the assessing authority in the prescribed
manner a declaration duly filled in and signed by the dealer
to whom the goods are sold containing the prescribed
particulars in the prescribed form.]
[(3A) x x x x ]
(4) Notwithstanding anything contained in sub-section (1),
every dealer registered under sub-section (3) of section 7
of the Central Sales Tax Act, 1956 (Central Act 74 of
1956), shall, whatever be the quantum of his total turnover,
pay tax for each year in respect of the sale of the goods
with reference to the purchase of which he has furnished
a declaration under sub-section (4) of section 8 of the
aforesaid Central Act [on his taxable turnover in respect
of such goods:]
Provided that this sub-section shall not apply to any dealer
in respect of the sale of the goods the purchase of which
is liable to tax under subsection (1).
[(5) Notwithstanding anything contained in sub-section (1)
or sub-section (2), but subject to sub-section (6), where
goods sold are contained in containers or are packed in
any packing materials, the rate of tax and the point of levy
applicable to such containers or packing materials, as the
case may be, shalI, whether the price of the containers or
the packing materials is charged separately or not be the
same as those applicable to goods contained or packed,
and in determining turnover of the goods, the turnover in
respect of the containers or packing materials shall be
included therein.
(6) Where the sale or purchases of goods, contained in any
containers or packed in any packing materials is exempt
from tax, then, the sale or purchase of such containers or
packing materials shall also be exempt from tax.
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Explanation:- In sub-section (5) and sub-section (6), the
word "containers'' includes gunny bags, tins, bottles or
any other containers.]
5A. Levy of 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 [Sub-Sections (1), (2),
(3), (4), or (5) of Section 5] and either:-
(a) consumes such goods in the manufacture of other
goods for sale or otherwise: or
(b) [uses or] 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 interstate 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
the year at the rates mentioned in Section 5.
(2) Notwithstanding anything contained in sub-section (1),
a dealer (other than a casual trader or agent of a nonresident dealer purchasing goods, the sale of which is
liable to tax under section 5, shall not be liable to pay tax
under sub-section (1) if his total turnover for a year less
than [one lakh 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 section 5 is not less than [fifty thousand
rupees], he shall be liable to pay tax on the taxable turnover
in respect of those goods.
(3) Notwithstanding anything contained in the foregoing
provisions of this section, a dealer referred to in subsection (1), who purchases goods, the sale of which is
liable to tax under clause (ii) of sub-section (1) of Section 5,
and whose total turnover for a year is not less than [one
lakh rupees] but not more than [one lakh ten thousand
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C.T. Kochouseph v. State of Kerala and Another Etc.
rupees] may, at his option instead of paying the tax in
accordance with the provisions of subsection (1), pay tax
[at the rate] mentioned in [ x x x x ] sub-section (1) of
Section 7 in accordance with the provisions of that section."
Summary of the Statutory Position
6.
A brief overview of the relevant statutory provisions is set out below:
 •
Section 3 of the Tamil Nadu Act is the charging provision. It
imposes a liability to pay tax on every dealer whose annual
turnover exceeds the prescribed threshold, as well as on every
casual dealer and agent of a non-resident dealer. The tax is
payable on the dealer's taxable turnover at the rates specified
under the Act. Section 3 does not differentiate between sale
and purchase. The heading refers to 'sales or purchase'.
 •
The term 'turnover' is defined in section 2(r) of the Tamil Nadu
Act to include the total value of goods bought, sold, supplied
or distributed by a dealer, whether directly or through others,
and whether on the dealer's own account or on behalf of
another. However, the definition excludes the sale proceeds of
agricultural or horticultural produce, except where the produce
is tea grown in Tamil Nadu either by the dealer or on land in
which the dealer holds an interest. The Explanation to this
provision clarifies that produce which has undergone physical,
chemical or other processing for the purpose of making it fit
for consumption ceases to be treated as agricultural produce.
This exclusion does not apply where the processing is limited
to cleaning, grading, sorting or drying.
 •
Section 3(2) of the Tamil Nadu Act further provides that, in the
case of goods enumerated in the First Schedule, tax is payable
at the rate and point of levy specified therein, irrespective of
the dealer's aggregate turnover.
 •
Section 8 of the Tamil Nadu Act deals with exemptions and states
that no tax shall be payable on the sale of goods specified in
the Third Schedule, subject to such conditions and restrictions
as may be prescribed.
 •
Section 17 of the Tamil Nadu Act empowers the State Government
to grant, by notification, either full or partial exemptions from tax
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or reductions in the rate of tax. Such notifications may apply to
particular goods or classes of goods, at all or specific points of
sale, or to particular dealers or classes of dealers in respect of
the whole or any part of their turnover.