Sales tax exemption under industrial policy does not extend to purchase tax unless clearly stated.

An exemption notification framed under the Karnataka industrial policy for sales tax on goods manufactured and sold could not be extended by implication to purchase tax on arecanut. The policy language and later Government Order referred to sales tax exemption or deferral and, while widening incentives to some non-manufacturing units, did not enlarge the exemption to tax on purchases. Because exemptions must be expressed in clear terms, the distinction between sale and purchase remained material. Purchase tax, turnover tax and cess were therefore held to remain leviable under the Act.

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Issues: Whether the exemption and incentive notifications issued under the Karnataka industrial policy covered purchase tax leviable on arecanut, or were confined to sales tax on goods manufactured and sold by the industrial unit.

Analysis: The relevant notification and Government Orders granted relief in respect of tax payable on goods manufactured and sold, and spoke in terms of sales tax exemption or sales tax deferral. The later Government Order clarified that incentives and concessions were available to manufacturing units, with specified non-manufacturing units also brought within the scheme, but there was no enlargement of the exemption to purchase tax. The terms used in the policy and notification were read in their context, and the distinction between sale and purchase was treated as material. As the exemption was a matter of policy and had to be expressed in clear terms, it could not be extended by implication to tax leviable on purchases under section 6.

Conclusion: The exemption did not extend to purchase tax, and the levy of purchase tax, turnover tax and cess under the Act was valid.

Ratio Decidendi: An exemption notification framed for sales tax on goods manufactured and sold cannot be construed to include purchase tax unless the language clearly and expressly so provides.

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