Broad construction of tax-relief circular extends export exemption to purchase tax and defeats consequential interest recovery.

A tax-relief circular issued after the retrospective amendment to the export exemption provision was construed broadly to cover footwear supplied to the State Trading Corporation for export. Because purchase tax, not sales tax, was the levy attracted on the transaction, a narrow reading that excluded purchase tax would have defeated the intended relief. The circular was therefore held to extend to purchase tax as well, and the restrictive construction was rejected. As a result, the interest demand and consequential recovery proceedings based on that demand could not be sustained and were quashed.

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Issues: Whether the Commissioner's circular dated 12th April, 1977 granted relief not only from sales tax but also from purchase tax on footwear purchased in India and supplied to the State Trading Corporation for export; and whether the interest demand under section 8(1) and the consequential recovery under section 8(8) of the U.P. Sales Tax Act, 1948 could be sustained.

Analysis: The circular was issued in the background of the retrospective amendment to section 5(3) of the Central Sales Tax Act, 1956 and was intended to extend relief to dealers in respect of footwear exported through the State Trading Corporation. Its language was not confined to sales tax alone and referred broadly to remission of tax payable under both the State and Central enactments. On the transaction in question, purchase tax under section 3-D of the U.P. Sales Tax Act, 1948 was the taxable levy in place of sales tax. Reading the circular narrowly so as to exclude purchase tax would defeat the relief intended for the covered transactions.

Conclusion: The circular covered purchase tax as well, and the respondent's restrictive construction was rejected.

Final Conclusion: The interest demand and the recovery proceedings based on that demand could not be sustained and were quashed, resulting in relief to the assessee.

Ratio Decidendi: Where a tax-relief circular issued in response to a class-based export dispute uses broad language referring to taxes under both the State and Central enactments, it must be construed to extend to the levy actually attracted on the transaction, and not be confined by a narrower label that would nullify the intended exemption.

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