1994 (11) TMI 379 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the exemption granted under the Karnataka Sales Tax Act for footwear costing less than Rs. 30 per pair extends to the Central Sales Tax Act turnover.
2. Whether the exemption under the Karnataka Sales Tax Act is a general exemption or subject to specified conditions.

Analysis:
The petitioner, a footwear manufacturer, challenged a notice under section 9(3) of the CST Act proposing to tax sales of footwear costing less than Rs. 30 per pair. The petitioner argued that the exemption under the KST Act should also apply to the CST Act turnover. The Karnataka government had exempted footwear costing less than Rs. 30 per pair from sales tax under the KST Act through a notification. The petitioner contended that this exemption should also be applicable to CST turnover under section 8(2A) of the CST Act. However, the assessing authority issued a notice proposing to tax the CST turnover, leading to the petitioner filing a petition seeking a declaration of exemption for inter-State sales of such footwear.

The Court examined the relevant provisions of the CST Act and the exemption notification under the KST Act. Section 8(2A) of the CST Act provides for nil tax on goods exempted under the State sales tax law. The Court referred to the Supreme Court's decision in International Cotton Corporation case and the Patna High Court's decision in Pradeep Rubber Industries case to analyze the applicability of exemptions under specified conditions. The Court noted that the exemption under the KST Act was conditional, based on the sale price of footwear not exceeding Rs. 30 per pair.

The Court further discussed the meaning of "specified circumstances" and "under specified conditions" as explained in the Indian Aluminium Cables case. It emphasized that for an exemption to apply under the CST Act, it must be a general exemption without specified conditions. The Court concluded that since the exemption under the KST Act was subject to a specified condition of the sale price, it could not be extended to the CST Act turnover. Therefore, the assessing authority was justified in issuing the notice under the CST Act, and the petition was dismissed.

In summary, the Court held that the exemption for footwear costing less than Rs. 30 per pair under the KST Act did not extend to the CST Act turnover due to the specified condition attached to the exemption notification. The judgment clarified the distinction between general exemptions and those subject to specified conditions, emphasizing that the benefit of exemption cannot be extended to turnover under the CST Act if it is conditional under the State Act.