Foreign liquor tax rate followed the general State rate, with Central Sales Tax changing from 2 per cent to 7 per cent after amendment.

Foreign liquor was not exempt under section 8 of the Madras General Sales Tax Act, because that exemption applied only to goods on which duty was levied or leviable under the Madras Prohibition Act; section 8(2-A) of the Central Sales Tax Act therefore did not attract a nil rate. For inter-State sales, the applicable inside-State rate was the general rate under section 3 of the Madras General Sales Tax Act, not the special 50 per cent rate under section 21-A of the Madras Prohibition Act. On that basis, sales up to 1 October 1958 were taxable at 2 per cent, and sales on and after that date at 7 per cent after the amendment to section 8(2).

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Issues: (i) whether foreign liquor was exempt from tax under section 8 of the Madras General Sales Tax Act so as to attract the nil rate under section 8(2-A) of the Central Sales Tax Act; (ii) whether the rate applicable inside the State for inter-State sales of foreign liquor was 50 per cent under section 21-A of the Madras Prohibition Act or the general rate under section 3 of the Madras General Sales Tax Act; (iii) whether the applicable rate for the period before and after the amendment of section 8(2) of the Central Sales Tax Act was 2 per cent or 7 per cent.

Issue (i): Whether foreign liquor was exempt from tax under section 8 of the Madras General Sales Tax Act so as to attract the nil rate under section 8(2-A) of the Central Sales Tax Act.

Analysis: The exemption in section 8 of the Madras General Sales Tax Act applied only to goods on which duty was levied or leviable under the Madras Prohibition Act, 1937. Foreign liquor imported into India was outside the scope of the excise duty provisions of that Act, because the relevant provisions did not authorise levy on such liquor imported across a customs frontier. The entry in the Third Schedule therefore did not cover foreign liquor, and the contention that the sales were exempt so as to attract a nil rate failed.

Conclusion: Foreign liquor was not exempt under section 8 of the Madras General Sales Tax Act, and section 8(2-A) of the Central Sales Tax Act did not apply.

Issue (ii): Whether the rate applicable inside the State for inter-State sales of foreign liquor was 50 per cent under section 21-A of the Madras Prohibition Act or the general rate under section 3 of the Madras General Sales Tax Act.

Analysis: Section 21-A of the Madras Prohibition Act imposed a sales tax only on specified sales to permit holders or licence holders. That provision was treated as a special exception to the general charging provision in section 3 of the Madras General Sales Tax Act. For the purposes of section 8(2)(b) of the Central Sales Tax Act, the relevant rate was the general rate applicable to sales of the goods inside the State, not the special rate arising under a limited statutory exception. The general rate under section 3 therefore governed, and not the 50 per cent rate under section 21-A.

Conclusion: The applicable intra-State rate was 2 per cent under section 3 of the Madras General Sales Tax Act, not 50 per cent under section 21-A of the Madras Prohibition Act.

Issue (iii): Whether the applicable rate for the period before and after the amendment of section 8(2) of the Central Sales Tax Act was 2 per cent or 7 per cent.

Analysis: Before the amendment of section 8(2), inter-State sales not falling within section 8(1) were taxable at the same rate as would have applied if the sales had taken place inside the State. After the amendment, section 8(2)(b) fixed the rate at 7 per cent or the intra-State rate, whichever was higher. Since the intra-State rate was 2 per cent, the amendment meant that sales before 1 October 1958 were taxable at 2 per cent, while sales on and from that date were taxable at 7 per cent.

Conclusion: Sales up to 1 October 1958 were taxable at 2 per cent, and sales on and after 1 October 1958 were taxable at 7 per cent.

Final Conclusion: The assessments based on a 50 per cent levy could not stand, and the turnover was liable only at the lower statutory rates applicable under the Central Sales Tax Act read with the general State rate.

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