Strict construction of tax exemption upheld: sales to Ministry of Industry and Supply were not covered by the named departmental exemption.

A statutory sales tax exemption confined to sales to the Indian Stores Department or the Supply Department could not be extended to sales made to the later Ministry of Industry and Supply, because the exemption was limited to the specific departments named in the Act. The Court applied strict construction of tax exemptions and held that a newly created or differently constituted department could not be treated as the same entity merely because it performed a similar purchasing function. The sales were therefore liable to sales tax, and the assessments stood.

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Issues: Whether sales made by the assessee to the Government of India, Ministry of Industry and Supply, were deductible from taxable turnover as sales to the Indian Stores Department or the Supply Department of the Government of India within section 5(2)(a)(iii) of the Bengal Finance (Sales Tax) Act, 1941.

Analysis: The exemption was confined to sales made to the two departments specifically named in the statute. On the evidence of the departmental evolution, the Department of Industries and Supplies, later redesignated as the Ministry of Industry and Supply, was a newly created and wider organisation and not merely a change of name for the Indian Stores Department or the Supply Department. The statutory exemption could not be expanded by treating purchases made by the later department as if they were purchases by the named departments. Tax exemptions, being creatures of statute, must be construed strictly and cannot be enlarged by implication.

Conclusion: The sales were not exempt under section 5(2)(a)(iii) and were liable to sales tax; the decision was against the assessee and in favour of the Revenue.

Dissenting Opinion: Sinha J. held that the exemption was directed to the purchasing function of the Government of India and that the later departmental changes did not alter the essential identity of that function. On that view, the sales fell within the exemption and the appeals should have been allowed.

Final Conclusion: The majority held that the exemption did not extend to sales made to the Ministry of Industry and Supply, so the assessments stood and the appeals failed.

Ratio Decidendi: A statutory exemption confined to named government departments cannot be extended to a subsequently created or differently constituted department merely because it performs a similar purchasing function.

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