General State tax exemption on cotton-seeds made the corresponding inter-State turnover nil under Central Sales Tax law.

Cotton-seeds sold under a State exemption notification were held to be exempt from tax generally under the Tamil Nadu sales tax law, so the corresponding inter-State turnover attracted nil tax under section 8(2A) of the Central Sales Tax Act, 1956. The Explanation to that provision did not apply because the exemption was commodity-based and not confined to specified circumstances, conditions, stages, or a tax measured otherwise than by turnover. The inter-State sale turnover was therefore not taxable, and the Tribunal's view was sustained.

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Issues: (i) Whether cotton-seeds sold under a State exemption notification were exempt from tax generally so that the inter-State turnover attracted nil tax under section 8(2A) of the Central Sales Tax Act, 1956.

Issue (i): Whether cotton-seeds sold under a State exemption notification were exempt from tax generally so that the inter-State turnover attracted nil tax under section 8(2A) of the Central Sales Tax Act, 1956.

Analysis: Section 8(2A) provides that where the sale or purchase of goods is exempt from tax generally under the sales tax law of the appropriate State, the tax payable under the Central Sales Tax Act on the corresponding turnover is nil. The Explanation excludes only cases where exemption operates in specified circumstances or under specified conditions, or where tax is levied at specified stages or otherwise than with reference to turnover. The State notification under section 17 of the Tamil Nadu General Sales Tax Act, 1959 granted exemption in respect of the commodity sold, and there was no basis to treat that exemption as a limited or conditional one falling within the Explanation.

Conclusion: The inter-State turnover was not taxable and the assessee succeeded on this issue.

Final Conclusion: The revision failed, and the Tribunal's view that the inter-State sale turnover was not liable to tax was sustained.

Ratio Decidendi: Where the sale of goods is exempt from tax generally under the relevant State sales tax law, section 8(2A) of the Central Sales Tax Act, 1956 makes the tax on the corresponding inter-State turnover nil unless the exemption is confined to specified circumstances or conditions within the Explanation.

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