1994 (10) TMI 262 - SC - VAT and Sales Tax

Whether the Bench which decided Pine Chemicals 1992 (1) TMI 305 - SUPREME COURT OF INDIA is right in holding that the benefit of the said sub-section is available even where the goods are exempted with reference to industrial unit and for a specified period, viz., period of five years from the date the relevant unit goes into production? Whether an exemption of the nature granted under Government Order No. 159 dated March 26, 1971, is an exemption available only in specified circumstances or under specified conditions within the meaning of the Explanation to section 8(2-A), as contended by the State or is it a case where the goods are exempt from the tax generally within the meaning of section 8(2-A), as contended by the respondents-dealers? Held that - We may reiterate that we have not allowed the learned counsel for the review petitioners to question the correctness of the first three points decided in the judgment under review. We are told that section 8-B of the Jammu and Kashmir General Sales Tax Act permits refund of sales tax only in cases where the dealer has not collected the same and that the question whether the dealers herein did or did not collect the tax in respect of transactions concerned herein has been left open by this Court though a finding against the dealer was recorded by the High Court. We are also told that proceedings for refund are now pending where the State has taken the defence based on section 8-B of the State enactment. We need express no opinion in that behalf. Inasmuch as the judgment in Pine Chemicals supra is now being set aside in so far as the interpretation of section 8(2-A) is concerned and because the only issue involved in Civil Appeals was the one relating to the meaning and applicability of the said sub-section, these review petitions are liable to be allowed

Issues Involved:
1. Validity of Government Order No. 159-Ind. dated March 26, 1971, under Section 5 of the Jammu and Kashmir General Sales Tax Act.
2. Effectiveness and enforceability of the Government Order.
3. Impact of S.R.O. No. 448 dated October 22, 1982, on the exemption notification.
4. Applicability of Section 8(2-A) of the Central Sales Tax Act to the exemption granted under Government Order No. 159.

Issue-wise Detailed Analysis:

1. Validity of Government Order No. 159-Ind. dated March 26, 1971, under Section 5 of the Jammu and Kashmir General Sales Tax Act:
The court held that despite the Government Order No. 159-Ind. dated March 26, 1971, not explicitly invoking or referring to Section 5 of the Jammu and Kashmir General Sales Tax Act, it should be understood as an order granting exemption under and with reference to Section 5 of the said Act. This interpretation was crucial to validate the exemption granted by the order.

2. Effectiveness and Enforceability of the Government Order:
The court determined that the Government Order was effective by itself and did not require any additional or further orders to make it enforceable. This ruling underscored the self-sufficiency of the order in granting the exemption.

3. Impact of S.R.O. No. 448 dated October 22, 1982, on the Exemption Notification:
The court held that S.R.O. No. 448 dated October 22, 1982, did not supersede the exemption notification provided by the Government Order No. 159. This ensured the continuity of the exemption granted to the dealers-assessees.

4. Applicability of Section 8(2-A) of the Central Sales Tax Act to the Exemption Granted under Government Order No. 159:
The primary focus of the court's review was on the applicability of Section 8(2-A) of the Central Sales Tax Act. Section 8(2-A) states that the tax payable under the Central Sales Tax Act by a dealer on his turnover shall be nil or calculated at a lower rate if the sale or purchase of goods is exempt from tax generally under the sales tax law of the appropriate State.

The court analyzed the language of Section 8(2-A) and its explanation, which clarifies that an exemption is not considered "general" if it applies only under specified circumstances or conditions. The court examined Government Order No. 159, which provided an exemption for large and medium-scale industries from State sales tax on raw materials and finished products for five years from the date the unit goes into production.

The court concluded that the exemption granted under Government Order No. 159 was conditional and not general. The exemption was linked to the industrial unit and the period within which the goods were manufactured and sold, rather than to the goods themselves. Therefore, the exemption did not satisfy the requirements of Section 8(2-A) of the Central Sales Tax Act, which necessitates a general exemption from the State sales tax.

Additional Considerations:
- The court referenced previous decisions, such as Indian Aluminium Cables Ltd. v. State of Haryana and International Cotton Corporation (P.) Ltd. v. Commercial Tax Officer, Hubli, which supported the interpretation that a general exemption means total exemption from tax, not conditional or specified exemptions.
- The court emphasized the need to rectify the error in the judgment under review to ensure consistency with established legal interpretations and to avoid widespread implications for similar cases across the country.

Conclusion:
The court allowed the review petitions concerning the interpretation of Section 8(2-A) of the Central Sales Tax Act, setting aside the judgment in Pine Chemicals Ltd. v. Assessing Authority to the extent it related to this issue. The court dismissed the civil appeals preferred by the dealers to the extent indicated and upheld the interpretation that the exemption granted under Government Order No. 159 was not a general exemption under Section 8(2-A). The review petitions concerning cases that did not involve the interpretation of Section 8(2-A) were dismissed.

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