Sales tax exemption scheme bars collection of non-payable tax by small-scale industries under the governing conditions.

Small-scale industries receiving a sales tax holiday under the Government orders were granted only a limited tax exemption, not a right to collect exempted tax from buyers and retain it. Read with the eligibility certificate conditions, the scheme distinguished exemption for small-scale industries from deferment for larger units, and section 9 of the Andhra Pradesh General Sales Tax Act, 1957 permitted exemption subject to conditions while section 30-B barred collection where no tax was payable. The condition prohibiting collection of sales tax during the exemption period was therefore valid, and collection of such tax would be unauthorised.

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Issues: Whether small-scale industries granted a sales tax holiday under the Government orders were entitled to collect sales tax from buyers and retain it without remitting it to the State.

Analysis: The incentive scheme distinguished between deferment of sales tax for medium and large industries and exemption from sales tax for small-scale industries. The scheme, read with the relevant Government Orders and eligibility certificate conditions, showed that the benefit for small-scale industries was a tax exemption for a limited period and up to a ceiling, not a right to collect exempted tax as cash subsidy. Under section 9 of the Andhra Pradesh General Sales Tax Act, 1957, the Government could grant exemption from tax and impose conditions, and section 30-B prohibited collection of tax where no tax was payable. The Court held that collection of sales tax in such cases would be unauthorised.

Conclusion: The small-scale industries were not entitled to collect and appropriate sales tax during the exemption period; the impugned condition prohibiting such collection was valid.

Final Conclusion: The writ petitions failed because the sales tax holiday was only an exemption incentive and did not confer any right to collect exempted tax from consumers.

Ratio Decidendi: Where the statutory scheme grants sales tax exemption rather than deferment, the beneficiary cannot collect tax that is not payable, and any condition prohibiting such collection is valid if the enabling provision permits restrictions on the exemption.

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