Case Note & Summary
The appeal before the Supreme Court arose from a dispute over central sales tax exemption claimed by the respondent assessee, M/s. Hindustan Safety Glass Works (P) Ltd., based on a State notification. The State of Uttar Pradesh had issued Gazette Notification dated 9 January 1970 under Section 4-A of the U.P. Sales Tax Act, 1948, declaring that the turnover of specified goods manufactured by seven newly set up industrial undertakings would be exempt from payment of sales tax for three years from the date of publication. The respondent, one of those undertakings, manufactured mirrors and toughened glass from February 1969 and claimed that its inter-State sales of those goods were exempt from central sales tax under Section 8(2A) of the Central Sales Tax Act, 1956, as it stood before its amendment by Act No.61 of 1972 effective 1 April 1973. The Allahabad High Court had earlier decided in favour of the respondent in Hindustan Safety Glass Works (P) Ltd. v. State of Uttar Pradesh, (1974) 34 STC. The State appealed to the Supreme Court, which heard the matter along with connected civil appeals. The central legal issue was whether the exemption granted by the State notification qualified as a general exemption of goods from tax under the State sales tax law, thereby attracting the exemption under Section 8(2A) of the Central Sales Tax Act. The respondent argued that before the 1972 amendment, Section 8(2A) exempted sales or purchases of any goods by a dealer if the dealer was generally exempt, and that it was not necessary to show that the goods themselves were generally exempt. The State, relying on Commissioner of Sales Tax, J & K v. Pine Chemicals Ltd. and Indian Aluminium Cables Ltd. v. State of Haryana, contended that the exemption was special, limited to specified goods of specified undertakings for a limited period, and therefore not a general exemption. The Supreme Court examined the language of Section 8(2A) before and after its amendment. It held that the pre-amendment provision, including its Explanation, required that the sale or purchase of goods be exempt from tax generally under the State law. A special exemption granted to a new industrial undertaking for a limited period was not a general exemption because it applied only to specified circumstances and conditions, as explained in the Explanation. The Court rejected the respondent's contention that the old provision required only dealer-level exemption. It observed that the amendment by Act No.61 of 1972 did not change the concept of 'exempt from tax generally'. The Court followed Pine Chemicals, where a similar exemption to large and medium industries for five years was held not general, and Indian Aluminium Cables, where exemption under specified circumstances and conditions was held not general. It noted that in the present case, the exemption was granted to specified goods of specified newly set up units for a specified period, while similar goods produced by other industries remained taxable. Therefore, the exemption was not general but special. The Court concluded that the respondent assessee was not entitled to the benefit of Section 8(2A) of the Central Sales Tax Act. It held that the State notification did not confer a general exemption on the goods, and thus the claim for central sales tax exemption failed. The decision was in favour of the State and against the assessee.
Headnote
A) Sales Tax - Central Sales Tax Exemption - General Exemption Requirement - Central Sales Tax Act, 1956, Section 8(2A) - State notification granted exemption from payment of sales tax to turnover of specified goods manufactured by seven newly set up industrial undertakings for three years; such exemption was with reference to specified industrial units and period, not to goods generally; therefore the exemption was not a general exemption and assessee could not claim benefit of Section 8(2A) - Held that the ratio in Commissioner of Sales Tax v. Pine Chemicals Ltd. applied and respondent assessee not entitled to exemption. B) Statutory Interpretation - Pre-amendment and Post-amendment Section 8(2A) - Meaning of 'Exempt from Tax Generally' - Central Sales Tax Act, 1956, Section 8(2A) and Explanation - Pre-amendment Explanation provided that exemption in specified circumstances or conditions or at specified stages is not deemed general; the amendment by Act 61 of 1972 did not change the concept; a dealer-specific limited period exemption is not general - Held that contention that old provision required only dealer exemption rejected. C) Precedent - Application of Supreme Court Decisions - General vs Special Exemption - Central Sales Tax Act, 1956, Section 8(2A); U.P. Sales Tax Act, 1948, Section 4-A - Decisions in Pine Chemicals and Indian Aluminium Cables established that conditional or limited exemptions do not qualify as general exemption; notification granting exemption to new units for limited period is special, not general - Held that assessee cannot distinguish these cases; exemption not available.
Issue of Consideration
Whether exemption granted under notification dated 9 January 1970 under Section 4-A of U.P. Sales Tax Act, 1948 to specified goods manufactured by specified newly set up industrial undertakings for three years is 'exempt from tax generally' under Section 8(2A) of Central Sales Tax Act, 1956; and whether pre-amendment Section 8(2A) (before 1 April 1973) required only dealer exemption rather than goods exemption.
Final Decision
The Supreme Court held that the exemption granted by the notification was not a general exemption but a special one, and therefore the respondent assessee was not entitled to claim exemption under Section 8(2A) of Central Sales Tax Act; the court rejected respondent's arguments and ruled in favour of the State.
Law Points
- exemption from central sales tax under section 8(2A) requires general exemption under state law
- exemption limited to specified goods of specified units for limited period is not general exemption
- explanation to section 8(2A) excludes exemptions in specified circumstances or conditions
- amendment by act 61 of 1972 did not change concept of general exemption
- special exemption to new industrial undertakings not available to similar goods of other industries
