Referenced exemption provisions must track Central law changes, and a specific carpet tax entry can override the general sales tax exemption.

A State sales tax exemption that adopts a Central enactment by reference changes with amendments to that Central definition, so woollen carpets ceased to qualify for exemption once carpets were excluded from the Central definition of woollen fabrics. A specific taxing entry for pile carpets then prevailed over the general exemption entry and validly brought the goods to tax from 1 April 1984. The levy was also not barred by the Additional Duties of Excise (Goods of Special Importance) Act, 1957 or by sections 14 and 15 of the Central Sales Tax Act, 1956, because those restrictions applied only to goods still within the Central definition.

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Issues: (i) whether woollen carpets continued to be exempt under item 7 of the Third Schedule to the Kerala General Sales Tax Act, 1963 after the amendment to the Central Excises and Salt Act, 1944; (ii) whether item 100B of the First Schedule to the Kerala General Sales Tax Act, 1963 prevailed over the general exemption entry; (iii) whether the levy was barred by the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and sections 14 and 15 of the Central Sales Tax Act, 1956.

Issue (i): whether woollen carpets continued to be exempt under item 7 of the Third Schedule to the Kerala General Sales Tax Act, 1963 after the amendment to the Central Excises and Salt Act, 1944.

Analysis: Item 7 of the Third Schedule was a referential provision which took its content from item 21 of the First Schedule to the Central Excises and Salt Act, 1944. When item 22-G was introduced into the Central Act and Explanation III excluded floor coverings from item 21, carpets ceased to fall within the definition of woollen fabrics for the relevant period. The exemption under item 7 therefore fluctuated with the Central Act and could not survive once carpets were taken out of item 21.

Conclusion: The carpets were not exempt under item 7 for the assessment year 1984-85.

Issue (ii): whether item 100B of the First Schedule to the Kerala General Sales Tax Act, 1963 prevailed over the general exemption entry.

Analysis: Item 100B was a specific taxing entry introduced to bring pile carpets to tax, while item 7 was a general exemption entry. Applying the principle that a specific entry overrides a general one, item 100B operated to tax the goods in question from 1 April 1984.

Conclusion: Item 100B applied and the levy under that entry was valid.

Issue (iii): whether the levy was barred by the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and sections 14 and 15 of the Central Sales Tax Act, 1956.

Analysis: Section 2(c) of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 adopted the same meaning of woollen fabrics as in item 21 of the Central Excises and Salt Act, 1944, so carpets that had been excluded from item 21 were outside its protection. The Additional Duties Act did not remove the State's power to levy sales tax. Likewise, section 14 of the Central Sales Tax Act, 1956 applied only to woollen fabrics as defined in the Central Act, and once carpets ceased to fall within that definition, the restriction in section 15 no longer governed them.

Conclusion: The levy was not barred by either enactment.

Final Conclusion: The challenge to tax on woollen carpets failed because the Central law amendments removed carpets from the exemption base and the specific taxing entry under the State Act validly applied.

Ratio Decidendi: Where a State sales tax exemption adopts the definition in a Central enactment by reference, the scope of the exemption changes with amendments to the Central enactment, and a specific taxing entry can validly override the general exemption for the same goods.

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