Paripoornan, J.@mdashThese Tax Revision Cases are filed by the Revenue. The same question arises for consideration in all these cases Counsel appealing for both sides agreed that T.R.C.No. 12 of 1985 may be taken as the main case. It is agreed that the decision rendered in T.R.C.No. 12 of 1985 will govern the other Tax Revision Cases also. Respondents in all these T.R.Cs. are the assessees. The matter arises under the Kerala General Sales Tax Act, 1963. In T.R.C.No. 12 of 1985, the assessment year with which we are concerned is 1978-79. The respondent is an arecanut dealer. Arecanut is taxable under Schedule I Entry 47 at the point of last purchase in the State by a dealer who is liable to tax u/s 5 of the Act. In T.R.C.No.71 of 1955, we are concerned with copra. Copra is taxable under Schedule II Entry 6 at the point of last purchase in the State by a dealer who is liable to tax u/s 5 of the Act. During the relevant year, the assessee sent the good outside the State to his agents on consignment basis and such goods formed the closing stock of the assessee as on the last day of the year. The assessing authority as well as the first appellate authority held that the turnover representing such goods which ware sent outside the State by the assessee to his agents on consignment basis is taxable under the Kerala General Sales Tax Act. In second appeal, the Appellate Tribunal reversed the said decision and held that such goods sent by the assessee outside the State to his agents on consignment basis did not acquire the quality of last purchase within the State and so the turnover relating thereto could not be brought to tax. The Revenue has filed the aforesaid revisions from the decision of the Appellate Tribunal.
2. We heard counsel for the Revenue, Mr. T Karunakaran Nambiar and also counsel for the assessees-respondents, Mr. K C. Balagangadharan. Counsel for the Revenue argued that arecanuts sent by the assessee outside the State to his agents on consignment basis may be part of the closing stock as on 31st March of the relevant year. Even so, the closing stock of goods held by an assessee inside the State alone will not acquire the quality of last purchase. In other words, if the goods have moved outside the State, the goods will be liable to tax. In the circumstances, the assessee will be the last purchaser of the goods in the State and the goods in question will acquire the quality of last purchase within the State for the concerned assessment year. Counsel sought support for the above submission from the decision reported in State of Madras v. Narayanaswami Naidu ((1968) 21 S. T. C 1 5) pointing out the passages wherein the illustration dealt with by the Madras High Court has been quoted. On the other hand, counsel for the assessee-respondent contended that it is settled law that a dealer is not liable to pay tax on the purchases until the purchases acquire the quality of being the last purchases inside the State The same decision has (21 S. T. C. 1 at page 4) categorically held so. Mr. Balagangadharan also contended that the attempt of the Revenue to draw a dichotomy between the closing stock of the goods held by the assessee inside the State and outside the State is unwarranted and has no legal foundation. It was submitted that the decision of the Appellate Tribunal is justified in law and that no interference is called for.
3. On hearing the rival contentions of the parties, we are of the view that the submissions of the respondent''s counsel are entitled to acceptance. In State of Madras v. Narayanaswami Naidu (21 S. T. C. I 4) the Supreme Court categorically held as follows:
......it seems to us clear that a dealer is not liable to pay a tax on the purchases until the purchases acquire the quality of being the last purchases inside the State. In other words, when he files a return and declares stock in hand, the stock in hand cannot be said to have been acquired by last purchase because he may still during the next assessment year sell it or he may consume it himself or the goods may be destroyed, etc. He would be entitled to claim before the assessing authorities that the character of acquisition of the stock in hand was undetermined; in the light of subsequent events it may or may not become the last purchase inside the State.
We are of the view that in the light of the above categorical pronouncement of the Supreme Court in Narayanswami Naidu''s case 21 [21 S. T. C. 1 4], the contention of the Revenue is wholly devoid of merit. We are unable to see any distinction between the closing stock of the goods held by an assessee, inside the State and outside the State. Learned counsel for the Revenue conceded that if the closing stock of the goods was held inside the State and outside the State. Learned counsel for the Revenue conceded that if the closing stock of the goods was held inside the State, they are not exigible to lax It passes one''s comprehension, when counsel for the Revenue submits, that the very same goods, if held by the assessee in a place outside the State, will be exigible to tax on the ground that the goods have acquired the quality of last purchase. Whether inside or outside the State, goods continued to be that of the assessee The goods sent to his agents outside the State on consignment basis still continued to be the goods of the assessee. Counsel for the Revenue conceded that the assessee has got the power of disposal over such goods sent on consignment basis outside the State If the assessee-dealer has got the power of disposal, even over such goods, which were sent to a place outside the State, it is open to the assessee-dealer to re-call the goods at any time and deal with it in any manner.
4. In the light of the decision of the Supreme Court, we reject the contention of the Revenue that since the goods moved outside the State to be held by the agents of the assessee for consignment sales, they became exigible to tax.
5. The decision of the Full Bench of this Court in Season Rubbers v. State of Kerala ((1981) 48 STC 256) was brought to our notice. The said Full Bench has followed the decision of the Supreme Court aforesaid. In that case, the question was this; when the goods are sold in a subsequent year and such disposal gives the character of last purchase to the purchase made earlier, whether the higher rate of tax prevalent at the time when it is sold, can be made applicable to the concerned turnover? The Full Bench answered the question in the negative. It was held that the tax being on the purchase, despite the fact that the purchase attains the character of last purchase later, the rate prevalent at the time of purchase alone would be relevant. It is the disposal of the goods that gives the character of last purchase to the purchase made earlier. Under the Act, the liability to tax is on the transaction of purchase. The concept itself involves the requirement of there being a purchase and that purchase being identified as the last purchase which can only be on a later date. The above Full Bench decision fully supports the submission of the respondent-assessee. It is also relevant to note that explanation to Sec.2 (xxvi) was added by Act 21 of 1978. The explanation states that in the case of every dealer liable to tax under Sec 5, regarding the goods which are taxable at the point of last purchase in the State and which are held as closing stock on the last day of any financial year, the amount for which such goods were purchased by the dealer shall be deemed also to be a part of his total turnover for the subsequent year or each of the subsequent years until such goods are either sold by him in the State or such purchase acquires the character of last purchase in the State in the hands of such dealer, and in case such purchase acquires the character of last purchase in the State on the hands of such dealer, the turnover in respect of such purchase shall be liable to tax in the year in which the purchase acquires the character of last purchase. That only shows that the goods which, are liable to tax at the last purchase point and formed the closing stock of an year shall be shown in the subsequent years as part of the total turnover until they are sold and the goods acquire the quality of last purchase exigible to tax. It is self evident that this provision was inserted in order to see that the matter does not escape the attention of the Revenue for the subsequent years and such goods held as closing stock in one year shall continue to be part of the total turnover for the subsequent years until they are brought to tax.
6. For the reasons stated above, we are of the view that these Tax Revision Cases are without merit. The decision of the Appellate Tribunal is justified in law. We dismiss these Tax Revision Cases with costs. In T.R.C. No. 127 of 1984, on substantially the same grounds, the Appellate Tribunal remitted the matter to the assessing authority Counsel for the Revenue did not argue that a different principle will apply in this case. If that be so, in the light of our decision aforesaid, we hold that the Appellate Tribunal was not justified in ordering a remit in T. A. No. 352 of 1982. It should have been held that the closing stock which was sought to be taxed is not exigible to tax We hold so. The order of remit was unnecessary in the circumstances.
Issue carbon copy of this judgment to counsel for the parties, on usual terms.
