Declared goods and inter-State sales: braided cord escaped tax because identical local sales were wholly exempt.

Braided cord was treated as "cotton fabrics" and therefore as declared goods under section 14 of the Central Sales Tax Act, 1956. As declared goods, its inter-State sales were governed by section 8(2)(a), which ties the tax rate to that applicable to local sales in the appropriate State. Because identical local sales were wholly exempt under the Madras General Sales Tax Act, the corresponding inter-State sales could not bear tax. The State's contention that local exemption did not automatically extend to inter-State sales was accepted only in part, but the decisive effect came from section 8(2)(a).

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Issues: Whether braided cord was covered by the expression "cotton fabrics" as declared goods under the Central Sales Tax Act, 1956, and whether the inter-State sales of such goods were exigible to tax notwithstanding the local exemption under the Madras General Sales Tax Act, 1959.

Analysis: Braided cord was held to fall within the wide ambit of "cotton fabrics" in section 14 of the Central Sales Tax Act, 1956, read with item 19 of the First Schedule to the Central Excises and Salt Act, 1944. Once the goods were treated as declared goods under section 14, section 8(2)(a) of the Central Sales Tax Act, 1956, applied the rate applicable to local sales in the appropriate State. Since local sales of the same goods were wholly exempt under item 4 of the Third Schedule to the Madras General Sales Tax Act, 1959, the corresponding inter-State sales could not bear tax. The Court also noted that the State's contention that the local exemption under the Madras Act did not by itself extend to inter-State sales was correct only in part, because the decisive effect came from the operation of section 8(2)(a) on declared goods.

Conclusion: The inter-State sales of braided cord were not liable to tax, and the assessee succeeded.

Final Conclusion: The petition by the State failed because the goods were treated as declared goods whose inter-State sales attracted no tax where identical local sales were fully exempt.

Ratio Decidendi: Where goods are declared goods under section 14 of the Central Sales Tax Act, 1956, the tax on inter-State sales under section 8(2)(a) is confined to the rate applicable to local sales in the appropriate State, and if such local sales are wholly exempt, no tax is exigible on the inter-State sales.

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