1965 (7) TMI 48 - HC - VAT and Sales Tax

Summary

Issues:
Assessment of sales tax under the Central Sales Tax Act, 1956 for inter-State sales of tapioca chips in the assessment years 1958-59 and 1959-60.
Exemption of intra-State sales of tapioca chips under the General Sales Tax Act, 1125, through a notification issued in September 1958.
Interpretation of section 6 of the General Sales Tax Act, 1125, regarding exemption and reduction of tax.
Comparison of liability to taxation under the General Sales Tax Act, 1125, for intra-State sales, and the Central Sales Tax Act, 1956, for inter-State sales.
Analysis of section 9 of the Central Sales Tax Act, 1956, regarding levy and collection of tax for inter-State sales.
Consideration of the previous version of section 9 of the Central Sales Tax Act, 1956, and its implications.
Review of a Supreme Court judgment regarding the interpretation of sections 6, 8, and 9 of the Central Sales Tax Act, 1956.
Application of the Supreme Court decision to the case at hand regarding liability to taxation under the Central Sales Tax Act, 1956.
Final decision on the liability to taxation under the Central Sales Tax Act, 1956, based on the interpretation of relevant provisions and the Supreme Court ruling.

Analysis:
The petitioner, a starch factory, was assessed for sales tax under the Central Sales Tax Act, 1956, for inter-State sales of tapioca chips in the years 1958-59 and 1959-60. The petitioner contended that since intra-State sales of tapioca chips were exempt under the General Sales Tax Act, 1125, they should also be exempt from taxation under the Central Sales Tax Act, 1956. The exemption for intra-State sales was granted through a notification issued in September 1958, which included tapioca under exempted goods. The petitioner fulfilled the conditions for exemption specified in the notification.

Section 6 of the General Sales Tax Act, 1125, empowered the government to notify exemptions and reductions in tax, including specific classes of goods or persons. The relevant notification exempted vegetables, including tapioca, from taxation under the Act. The burden of proving non-taxable transactions was on the dealer, and the petitioner met the conditions for exemption set out in the notification.

Section 9 of the Central Sales Tax Act, 1956, dealt with the levy and collection of tax for inter-State sales. The court reviewed the previous version of section 9 and its substitution, finding no material alteration relevant to the case. A Supreme Court judgment was cited, emphasizing that the liability to pay tax under the Act was subject to specific provisions, and not all inter-State transactions must attract tax.

The Supreme Court decision clarified that the manner of levy and collection of tax under the Central Act should align with the general sales tax law of the State. The Court concluded that if the petitioner would not have been liable to sales tax under the State Act for intra-State sales, they should also be exempt from taxation under the Central Act for inter-State sales. Therefore, the petitions were allowed, ruling in favor of the petitioner's non-liability to taxation under the Central Sales Tax Act, 1956, without costs.