1985 (9) TMI 332 - HC - VAT and Sales Tax

Issues Involved:
1. Interpretation of section 8(2A) of the Central Sales Tax Act, 1956.
2. Applicability of tax exemption under the Kerala General Sales Tax Act to inter-State sales under the Central Sales Tax Act.
3. Whether the exemption granted under the State Act is "general" and thus applicable under the Central Act.

Issue-wise Detailed Analysis:

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

The core issue revolves around the interpretation of section 8(2A) of the Central Sales Tax Act, 1956, particularly after its amendment by Act 61 of 1972. The section stipulates that the tax payable under the Central Act by a dealer on his turnover relating to the sale of any goods, which is exempt from tax generally under the sales tax law of the appropriate State, shall be nil or calculated at a lower rate. The explanation clarifies that a sale or purchase of goods shall not be deemed to be exempt from tax generally if the exemption is only in specified circumstances, under specified conditions, or at specified stages.

The petitioner argued that the amendment did not significantly alter the provision and that any exemption under the State Act should correspondingly apply under the Central Act. Contrarily, the Government Pleader contended that the amendment emphasized that only general exemptions under the State Act would apply to inter-State sales under the Central Act.

2. Applicability of tax exemption under the Kerala General Sales Tax Act to inter-State sales under the Central Sales Tax Act:

The petitioner, M/s. Hindustan Paper Corporation Ltd., claimed exemption from sales tax for inter-State sales under section 8(2A) of the Central Act, citing an exemption granted by the Kerala Government under the State Act. The exemption was for a period of two years from the start of production of newsprint. The Sales Tax Officer, Appellate Assistant Commissioner, and Sales Tax Appellate Tribunal rejected this claim, leading to the revisions under section 41 of the State Act.

The court examined sections 5, 9, and 10 of the Kerala General Sales Tax Act to understand the nature of exemptions granted under the State Act. Section 5 imposes tax on specified goods, section 9 exempts specified goods from tax, and section 10 allows the Government to grant exemptions in public interest either on specified goods or to specified classes of persons.

3. Whether the exemption granted under the State Act is "general" and thus applicable under the Central Act:

The court analyzed whether the exemption granted to the petitioner was a general exemption. The petitioner contended that the exemption was for the goods manufactured by them and thus should be considered general. However, the court emphasized that for an exemption to be "general" under section 8(2A) of the Central Act, it must be a total exemption without any restrictions or limitations.

The court referred to various judgments, including those from the Bombay High Court and the Supreme Court, to interpret the term "general exemption." It concluded that an exemption granted to a specific dealer or class of dealers, even if general in character, does not qualify as a general exemption under the Central Act. The court held that the exemption must be related to the sale or purchase of goods generally, without any conditions or limitations.

Conclusion:

The court dismissed the revisions, holding that the exemption benefit under the Central Act cannot be claimed if the exemption under the State Act is granted to dealers or classes of dealers only, even if it is general in character. The court granted leave to appeal to the Supreme Court due to the apparent conflict of decisions on the issue.

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