1986 (11) TMI 354 - SC - VAT and Sales Tax

Whether the petitioners entitled to claim exemption from the levy of sales tax under section 8(2A) of the Central Sales Tax Act as it stood in 1978? Held that - Appeal dismissed. The exemption, it is seen, is only to sales of goods which satisfy two conditions, first, the sales should be to an undertaking supplying electrical energy to the public under a licence and second the sale should be for use by the undertaking in the generation or distribution of electrical energy. By no stretch of imagination can it be said that there was any exemption from tax generally. This may be so said even without recourse to the explanation. The explanation only puts the matter beyond all controversy.

Summary

Issues:
- Entitlement to claim exemption from sales tax under section 8(2A) of the Central Sales Tax Act as it stood in 1978.
- Interpretation of the exemption provision under the sales tax law of the appropriate State.
- Application of section 5(2)(a)(iv) of the Punjab General Sales Tax Act to determine exemption under the Central Sales Tax Act.

Analysis:
The Supreme Court considered two writ petitions by the same petitioners raising the question of entitlement to claim exemption from the levy of sales tax under section 8(2A) of the Central Sales Tax Act as it stood in 1978. The petitioners, who manufacture and sell power cables and aluminium conductors, argued that their sales fall within the language of section 5(2)(a)(iv) of the Punjab General Sales Tax Act, which exempts sales to undertakings supplying electrical energy for use in generation or distribution. The Court analyzed whether these sales attract section 8(2A) of the Central Sales Tax Act and are exempt from sales tax. The key issue revolved around whether the sales were exempt from tax generally under the sales tax law of the appropriate State, as required by the exemption provision. The Court noted that the exemption granted by the State law was specific to sales to undertakings supplying electrical energy for a particular purpose, not a general exemption.

The Court referred to the explanation under section 8(2A) of the Central Sales Tax Act, which clarifies that a sale shall not be deemed exempt if it is only exempt under specified circumstances or conditions. The exemption in this case was limited to sales to undertakings supplying electrical energy for specific uses, failing to meet the criteria of a general exemption. The Court cited a previous case where a similar issue was decided against the assessee, emphasizing that the exemption was not applicable in such cases. The petitioners attempted to distinguish the previous case based on the amended provision of section 8(2A), but the Court found no substantial difference in the provisions relevant to the current dispute. The Court also noted a decision of the Allahabad High Court cited by the petitioners, but clarified that it did not express an opinion on that case previously. Ultimately, the Court dismissed the petitions based on the precedent and interpretation of the exemption provisions, affirming that the sales in question did not qualify for exemption under the Central Sales Tax Act.

In conclusion, the Supreme Court's judgment clarified the requirements for claiming exemption from sales tax under section 8(2A) of the Central Sales Tax Act. The Court emphasized the need for a general exemption under the State sales tax law, highlighting that specific or conditional exemptions do not meet the criteria for exemption under the Central Sales Tax Act. The Court's decision was based on the interpretation of relevant provisions and previous case law, ultimately denying the petitioners' claim for exemption.