1993 (12) TMI 222 - HC - VAT and Sales Tax

Summary

Issues: Interpretation of exemption notification under Rajasthan Sales Tax Act, liability under Central Sales Tax Act, conditions for exemption, availability of alternative remedy

In this case, the main issue revolves around the interpretation of a notification granting exemption under section 4(2) of the Rajasthan Sales Tax Act, 1954, specifically related to the sale and purchase of footwear manufactured by small-scale industries up to a value of Rs. 20. The question at hand is whether this exemption should be considered as a general exemption for goods and dealers covered by it or as a conditional exemption, affecting the liability under the Central Sales Tax Act. The petitioners argue that the exemption, despite having a value limit, is a general and unconditional exemption, while the Revenue contends that any limitation or condition attached to the exemption negates its general nature. The crux lies in determining whether the conditions specified in the notification are merely for identification purposes or if they constitute conditions for claiming the exemption.

The judgment delves into the legal framework governing exemptions under the Rajasthan Sales Tax Act, emphasizing that conditions for exemption are distinct from defining the goods or persons eligible for exemption. It highlights that once goods and dealers are identified as per the notification, the exemption should be considered general and unconditional, thereby attracting provisions of the Central Sales Tax Act. The court draws support from Supreme Court decisions, such as Pine Chemicals Ltd. v. Assessing Authority and Hindustan Paper Corporation Ltd. v. State of Kerala, which underscore that conditions for exemption should pertain to the transaction of sale and not merely to the identification of goods or dealers seeking exemption.

The court rejects the Revenue's argument that confining the exemption to small-scale industries and footwear worth Rs. 20 constitutes conditions for exemption. Consequently, the reassessment orders issued solely on the ground of wrongly granting exemption under the Central Sales Tax Act are deemed unsustainable due to lack of foundation for reassessment based on existing material. Despite the availability of an alternative remedy through appeal, the court decides to entertain the petition given the timely approach before reassessment orders were passed, thorough examination of the matter on merit, and alignment of the raised issue with principles established by the apex court.

Ultimately, the petition is allowed, leading to the quashing of the impugned notices under the Act and the assessment orders. The court refrains from issuing any costs in this regard, thereby concluding the case in favor of the petitioners and highlighting the importance of correctly interpreting exemption notifications to determine tax liabilities under relevant statutes.