Restricted State sales tax exemption did not qualify as general exemption for Central sales tax relief under section 8(2A).

Section 8(2A) of the Central Sales Tax Act, 1956 applies where State law grants a general exemption from sales tax, and the Punjab & Haryana HC held that this extends beyond entries in a tax-free schedule or section 6 of the State Act. However, an exemption under section 5(2)(a)(iv) of the Punjab General Sales Tax Act, 1948 was found to operate only when sales were made to specified electricity undertakings and goods were used for generation or distribution of energy. Those restrictions were treated as specified circumstances and conditions, so the exemption was not general and did not attract nil Central sales tax.

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Issues: (i) Whether sales falling within section 5(2)(a)(iv) of the Punjab General Sales Tax Act, 1948 could be treated as exempt from Central sales tax under section 8(2A) of the Central Sales Tax Act, 1956. (ii) Whether the exemption under section 5(2)(a)(iv) was a general exemption or one granted under specified circumstances or specified conditions within the meaning of the explanation to section 8(2A).

Issue (i): Whether sales falling within section 5(2)(a)(iv) of the Punjab General Sales Tax Act, 1948 could be treated as exempt from Central sales tax under section 8(2A) of the Central Sales Tax Act, 1956.

Analysis: Section 8(2A) applies where, under the sales tax law of the appropriate State, the sale or purchase of goods by a dealer is exempt from tax generally. The Court held that the expression is not confined to exemptions placed only in the State Act's tax-free schedule or to section 6 alone. Even though section 5 deals with deductions from taxable turnover, it also operates to remove certain sales from State sales tax and therefore falls within the broad field of State exemptions relevant to section 8(2A).

Conclusion: The contention that section 8(2A) applied only to section 6 of the State Act was rejected.

Issue (ii): Whether the exemption under section 5(2)(a)(iv) was a general exemption or one granted under specified circumstances or specified conditions within the meaning of the explanation to section 8(2A).

Analysis: The Court held that the exemption under section 5(2)(a)(iv) was restricted by the circumstance that the sale must be to an undertaking supplying electrical energy under a licence or sanction and by the condition that the goods must be used for generation or distribution of such energy. These restrictions were treated as specified circumstances and specified conditions within the explanation to section 8(2A). The Court further accepted the principle that an exemption limited by such conditions is not an exemption generally, and that the assessee claiming exemption bears the burden of proving entitlement to it.

Conclusion: The exemption was not general, and the sales were not exempt from Central sales tax under section 8(2A).

Final Conclusion: The references were answered in favour of the department and against the assessees, with the result that the inter-State sales remained liable to tax.

Ratio Decidendi: An exemption under State sales tax law is not "general" for the purposes of section 8(2A) of the Central Sales Tax Act, 1956 if it operates only upon fulfillment of specified circumstances or conditions; such a restricted exemption does not attract nil Central sales tax.

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