2005 (1) TMI 653 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of the notification dated September 4, 1995 under section 8(5) of the Central Sales Tax Act, 1956.
2. Applicability of exemption on inter-State sales of goods manufactured by an exempted unit under rule 28A of the Haryana General Sales Tax Rules, 1975.

Issue-wise Detailed Analysis:

Issue 1: Interpretation of Notification Dated September 4, 1995
The core question was whether the notification dated September 4, 1995, issued under section 8(5) of the Central Sales Tax Act, 1956, pertained to the exemption of goods or the person selling it. The court examined the notification, which stated that no tax under the Central Act shall be payable on the sale of goods manufactured in Haryana by any dealer holding a valid exemption certificate under rule 28A, provided no tax has been charged on such sales. The court concluded that the notification does not extend the exemption to dealers who do not hold a valid exemption certificate. The exemption is specifically tied to the goods manufactured by the exempted unit and not to any subsequent dealer.

Issue 2: Applicability of Exemption on Inter-State Sales
The petitioner argued that inter-State sales of goods purchased from an exempted unit should be exempt from Central sales tax. The court scrutinized rule 28A(2)(n) and (4)(c) of the Haryana General Sales Tax Rules, 1975, and section 8(2A) and (5) of the Central Sales Tax Act, 1956. Rule 28A(4)(c) extends the exemption to all successive stages of sale or purchase within the state, provided the dealer furnishes a certificate in form S.T. 14-A. However, the court held that this rule applies only to intra-State sales and not to inter-State sales. The notification dated September 4, 1995, does not extend this exemption to inter-State sales by dealers who do not hold an exemption certificate.

Legal Precedents and Arguments:
The petitioner relied on several judgments, including *International Cotton Corporation (P.) Ltd. v. Commercial Tax Officer, Hubli*, *Pine Chemicals Ltd. v. Assessing Authority*, and others, to argue for exemption. However, the court found these precedents inapplicable to the specific interpretation of rule 28A and the notification. The court emphasized the need for strict construction of exemption clauses, citing *State Level Committee v. Morgardshammar India Ltd.*, which mandates that exemption clauses should be strictly interpreted to avoid undue burden on non-exempted taxpayers.

Conclusion:
The court concluded that the notification dated September 4, 1995, does not exempt inter-State sales by dealers who do not hold a valid exemption certificate under rule 28A. The benefit of exemption is limited to the goods manufactured by the exempted unit and does not extend to subsequent dealers. The questions referred by the Tribunal were answered against the petitioner and in favor of the department, affirming that the petitioner is liable to pay tax on inter-State sales of goods purchased from an exempted unit.