Inter-State sales tax exemption construed in favour of dealer where State-law exemption extended to corresponding sale transaction.

Inter-State sales turnover under the Central Sales Tax Act was discussed in relation to taxability under Section 8(1) and the limiting effect of Section 8(2), together with the proviso to Section 8(1). Section 8(2) was treated as excluding tax where the corresponding State sales tax law would not tax the same transaction. The proviso to Section 8(1) was construed as referring to the sale transaction itself, not merely the goods in abstract, and any ambiguity in the taxing provision was read in favour of the dealer. The State-law exemption for the relevant purchase transaction was held to extend to the corresponding inter-State sale, so the disputed turnover was not liable to tax and the levy failed.

---

---

Issues: Whether the turnover from inter-State sales was liable to tax under Section 8(1) and Section 8(2) of the Central Sales Tax Act, 1956, or fell within the exemption provided by the proviso to Section 8(1).

Analysis: Section 8(1) imposes tax on sales in the course of inter-State trade or commerce, while Section 8(2) limits the tax burden where the corresponding State law would not have attracted tax on the same transactions. The turnover covered by Section 8(2) could not be taxed because the related transactions were not taxable under the State sales tax law. As to the remaining turnover, the proviso to Section 8(1) had to be read as relating to the sale transaction itself, not merely to the goods in the abstract. The language of the proviso, though inexact, was construed in favour of the dealer because two reasonable interpretations were possible in a taxing provision. The exemption under the State law for the relevant purchase transaction was held to extend to the corresponding inter-State sale, so as to give effect to the legislative scheme and avoid defeating the benefit of the State exemption.

Conclusion: The disputed turnover was not liable to tax under the Central Sales Tax Act, 1956, and the levy was set aside in favour of the assessee.

---