State sales tax exemption extends to inter-State sales where Central tax liability follows State tax incidence.

Goods exempt under the State sales tax notification, where the notified conditions were satisfied, were treated as not liable to State sales tax; that exemption also carried through to inter-State sales under the Central Sales Tax Act. Section 9 of the Central Act was applied through the State tax machinery, so taxability depended on the underlying incidence under State law. On the Supreme Court's construction, a transaction not taxable as an intra-State sale did not become taxable merely because it was an inter-State sale. The petitions were allowed in favour of the assessee.

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Issues: Whether goods exempt from tax under the State sales tax notification would also escape liability under the Central Sales Tax Act when sold in the course of inter-State trade.

Analysis: The exemption notification issued under section 6 of the General Sales Tax Act, 1125 exempted the relevant goods from State sales tax, and the assessee had complied with the notified conditions. Section 9 of the Central Sales Tax Act, 1956 provides for levy and collection of Central sales tax through the machinery of the general sales tax law of the appropriate State. In light of the Supreme Court's construction of section 9, if a transaction would not attract State sales tax as an intra-State sale, the same transaction does not become liable merely because it is an inter-State sale under the Central Act.

Conclusion: The exemption and resulting non-liability under the State enactment applied equally to the inter-State sales, and the petitions were allowed in favour of the assessee.

Ratio Decidendi: Liability under section 9 of the Central Sales Tax Act is determined by the incidence of tax under the corresponding State sales tax law, so a transaction exempt from State tax is not taxable under the Central Act merely because it is an inter-State sale.

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