1993 (3) TMI 306 - SC - VAT and Sales Tax

Whether the exemption granted under the notification exempting the produce of a factory manufacturing newsprint from the State sales tax for a period of two years from the date of commencement of production in the factory can be called an exemption from tax generally? Held that - Appeal allowed. Following the decision in Pine Chemicals 1992 (1) TMI 305 - SUPREME COURT OF INDIA which deals with an almost similar exemption notification held that the circumstances or conditions contemplated by the Explanation to sub-section must be the circumstances and conditions attaching to the sale and not to the dealer.

Summary

Issues Involved:
1. Interpretation of section 8(2-A) of the Central Sales Tax Act, 1956.
2. Nature of exemption under the Kerala General Sales Tax Act and its applicability to Central Sales Tax.

Issue-wise Detailed Analysis:

1. Interpretation of Section 8(2-A) of the Central Sales Tax Act, 1956:

The core issue in these appeals is the interpretation of section 8(2-A) of the Central Sales Tax Act, 1956. The appellant, Hindustan Paper Corporation Ltd., argued that the exemption granted under the Kerala General Sales Tax Act should also exempt them from Central sales tax due to section 8(2-A). This section states that if a sale or purchase is exempt from tax generally under the state law, or subject to a lower rate than four percent, the Central sales tax should be nil or at the lower rate.

The explanation to section 8(2-A) clarifies that an exemption is not considered "general" if it applies only in specified circumstances or under specified conditions. The appellant contended that the exemption provided to them was a general one, while the state argued it was conditional and limited to specific circumstances.

2. Nature of Exemption under the Kerala General Sales Tax Act and its Applicability to Central Sales Tax:

The State of Kerala issued a notification under section 10 of the Kerala General Sales Tax Act, providing an exemption for the turnover of newsprint sales for two years from the start of production. The appellant claimed this exemption should also apply to Central sales tax under section 8(2-A) of the Central Sales Tax Act. The Sales Tax Officer and subsequent appellate authorities rejected this claim, leading to the present appeals.

The appellant relied on the Supreme Court's decision in Pine Chemicals Ltd. v. Assessing Authority, which dealt with a similar exemption notification and concluded that such exemptions could be considered "general" under section 8(2-A). The state, however, argued that the exemption in question was not general but conditional, as it was limited to a specific period and specific circumstances.

The court examined the scheme of sections 6 and 8 of the Central Sales Tax Act and the explanation to section 8(2-A). It noted that the explanation specifies that an exemption is not general if it applies only in specified circumstances or under specified conditions. The court found force in the state's argument that the exemption was limited to two years from the start of production and thus was not a general exemption. However, the court ultimately followed the binding precedent set in Pine Chemicals, which dealt with a similar issue and concluded that such exemptions could be considered general.

Conclusion:

The court allowed the appeals, finding that the exemption granted under the Kerala General Sales Tax Act could be considered a general exemption under section 8(2-A) of the Central Sales Tax Act, following the precedent set in Pine Chemicals. This decision underscores the importance of precedent in legal interpretation and the specific conditions under which exemptions are considered general or conditional.