Exemption notifications and separate treatment of inter-State turnover must be considered before taxing sales and rejecting revisions.

Sales tax authorities were required to consider an amended exemption notification and the material on record before bringing exempt sales into taxable turnover; best judgment assessment could not ignore legally exempt transactions, and that inclusion was unsustainable. Inter-State sales also had to be treated separately from intra-State sales under the Central sales tax regime, with the authority calling for supporting proof instead of clubbing the turnovers in one assessment. Revisional authorities were obliged to deal with the assessee's legal objections and afford a fair hearing before rejecting the revisions; mechanical disposal offended natural justice. The assessment and revisional orders were quashed and the matter remitted for fresh adjudication.

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Issues: (i) Whether the sales tax authorities were bound to consider the amended exemption notification and the material on record before including sales covered by the exemption in the taxable turnover; (ii) Whether inter-State sales could be clubbed with intra-State sales in the same assessment without separate consideration under the Central sales tax law; (iii) Whether the revisional authorities were required to consider the legal pleas raised by the assessee and afford an opportunity of hearing before rejecting the revisions.

Issue (i): Whether the sales tax authorities were bound to consider the amended exemption notification and the material on record before including sales covered by the exemption in the taxable turnover.

Analysis: The assessment was based on material seized by the Flying Squad, but the amended notification extended the exemption period and permitted the supporting statement to be furnished at any time before assessment. The authorities were therefore required to notice the amendment and examine whether the assessee's sales of exempt goods fell within the notified class. A best judgment assessment could not ignore relevant material on record or tax sales which were legally exempt.

Conclusion: The inclusion of sales covered by the exemption in the taxable turnover was not sustainable and was against the assessee.

Issue (ii): Whether inter-State sales could be clubbed with intra-State sales in the same assessment without separate consideration under the Central sales tax law.

Analysis: Inter-State sales are assessable under the Central sales tax regime and cannot be mixed with intra-State sales in a single State sales tax assessment. Even though the assessee had not filed all supporting forms, the assessing authority was still required to deal with the inter-State turnover separately and to call for the necessary proof before fastening liability. The assessment failed to apply this distinction and proceeded on an incomplete and legally defective basis.

Conclusion: The inter-State turnover could not validly be taxed along with intra-State sales in the manner adopted, and the assessee succeeded on this issue.

Issue (iii): Whether the revisional authorities were required to consider the legal pleas raised by the assessee and afford an opportunity of hearing before rejecting the revisions.

Analysis: The revisional applications contained specific legal objections and supporting material, yet the revisional orders were passed in a mechanical manner and without meaningful consideration of those objections. The revisional power, especially where legal issues affecting tax liability are raised, must be exercised judicially and in accordance with natural justice. The assessee was entitled to a fair opportunity before the revisions were rejected.

Conclusion: The revisional orders were unsustainable for want of proper consideration and opportunity, and the finding is in favour of the assessee.

Final Conclusion: The assessment and revisional orders were quashed and the matter was sent back for fresh adjudication after giving the assessee a proper opportunity on the exemption claim and the inter-State sales claim.

Ratio Decidendi: Where tax liability turns on a claimed exemption or on the separate treatment of inter-State turnover, the assessing and revisional authorities must consider the relevant material and statutory amendments, and must afford a fair opportunity before rejecting the claim on merits.

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