1983 (1) TMI 246 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the exemption granted under the notification dated 21st August, 1979, is a general exemption or subject to specified circumstances and conditions.
2. Whether the petitioners are liable to pay Central sales tax on inter-State sales of woollen felts during the period from 1965 to 1976.

Detailed Analysis:

1. General Exemption vs. Specified Circumstances and Conditions:
The primary issue revolves around whether the exemption granted by the notification dated 21st August, 1979, is a general exemption under the Rajasthan Sales Tax Act or subject to specified circumstances and conditions, thus affecting the applicability of section 8(2A) of the Central Sales Tax Act.

The petitioners argued that the notification clearly exempted dealers who paid additional excise duty in lieu of sales tax for the period from 25th August, 1965, to 22nd April, 1976, from paying any further sales tax. They contended that this exemption should apply to inter-State sales tax as well, under section 8(2A) of the Central Sales Tax Act.

The respondents countered that the exemption was not general but subject to specific conditions, including:
1. Payment of additional excise duty in lieu of sales tax.
2. Non-collection of sales tax on the purchase or sale of woollen felts.
3. No refund of additional excise duty from the Central Government.
4. An undertaking not to claim a refund of such additional excise duty.

The Court examined various precedents, including:
- Hindustan Safety Glass Works (P.) Ltd. v. State of Uttar Pradesh [1974] 34 STC 209: The Allahabad High Court held that a three-year exemption from sales tax was not subject to specified conditions.
- Indian Aluminium Cables Ltd. v. State of Haryana [1976] 38 STC 108 (SC): The Supreme Court held that general exemption means total exemption from tax, and exemptions subject to conditions or circumstances do not qualify as general exemptions.
- Poysha Industrial Co. Ltd. v Commissioner of Sales Tax [1977] 40 STC 455: The Allahabad High Court held that exemptions granted for specific periods or under specific conditions are not general exemptions.

The Court concluded that the notification dated 21st August, 1979, was subject to specified conditions and circumstances. Therefore, the exemption was not general, and the provisions of section 8(2A) of the Central Sales Tax Act, along with its explanation, were not attracted.

2. Liability to Pay Central Sales Tax:
Given the conclusion that the exemption was not general, the Court held that the petitioners were liable to pay Central sales tax on the inter-State sales of woollen felts during the period from 1965 to 1976.

The petitioners' argument that section 8(2A) of the Central Sales Tax Act exempted them from paying inter-State sales tax was rejected. The Court emphasized that the exemption granted by the notification was conditional and not a blanket exemption from sales tax.

Conclusion:
The Court dismissed the writ petitions, holding that the exemption under the notification dated 21st August, 1979, was not a general exemption but subject to specified conditions and circumstances. Consequently, the petitioners were liable to pay Central sales tax on inter-State sales of woollen felts for the relevant period. The Court did not address the preliminary objections raised by the respondents, as the decision on merits was in favor of the respondents. The writ petitions were dismissed with no order as to costs.