1996 (1) TMI 383 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of section 8(2-A) of the Central Sales Tax Act, 1956 regarding exemption for footwear costing less than Rs. 30 per pair under the Karnataka Sales Tax Act, 1957.

Comprehensive Analysis:
The case involved an appeal regarding the interpretation of section 8(2-A) of the Central Sales Tax Act, 1956 in relation to the exemption granted under the Karnataka Sales Tax Act, 1957 for footwear costing less than Rs. 30 per pair. The appellant, a dealer in footwear, argued that the exemption under the Karnataka Sales Tax Act for footwear costing less than Rs. 30 per pair is general and not subject to specific conditions. On the other hand, the State contended that the exemption was only with reference to the condition that the cost of footwear was less than Rs. 30, making it not a general exemption. The assessing authority relied on a circular stating that Central sales tax is payable on inter-State sales of footwear costing less than Rs. 30 per pair, even if exempted under the Karnataka Sales Tax Act. The single Judge dismissed the writ petition, holding that the exemption was not general and did not entitle the appellant to benefit under section 8(2-A) of the Central Sales Tax Act.

The central issue before the High Court was to determine whether the exemption for footwear costing less than Rs. 30 per pair under the Karnataka Sales Tax Act was a general exemption or subject to specific conditions. The Court referred to the decision in Commissioner of Sales Tax v. Pine Chemicals Ltd., where the Supreme Court clarified that a general exemption under the Central Sales Tax Act applies to goods that are totally exempted from tax without specific conditions or circumstances. The Court emphasized that if the exemption is with reference to the goods themselves, it is considered general in nature. In this case, the Legislature classified footwear into two categories based on cost, making the exemption with reference to the description of goods and not specific conditions. The Court disagreed with the single Judge's interpretation and allowed the appeal, setting aside the order and quashing the assessment related to footwear costing less than Rs. 30 per pair under the Central Sales Tax Act.

The Court also noted the department's inconsistent views on the matter, where penalty proceedings were initiated for tax collected on identical goods, later revised due to uncertainty about the legal position. The Court concluded by allowing the appeal, quashing the assessing authority's order regarding footwear costing less than Rs. 30 per pair under the Central Sales Tax Act, and directing the refund of any deposited monies by the appellant. The circular issued by the Commissioner was deemed ineffective and quashed.