State sales-tax concession on raw material can apply to inter-State sales if the sale situs lies within the State.

A fiscal concession linked to tax paid on raw wool could extend to inter-State sales of finished goods if the sales had situs in Rajasthan, because situs was treated as relevant for the notification even though the transactions remained beyond the State's taxing power under the Central sales tax regime. The later notification was not treated as a mere clarificatory extension of the earlier concession, since the real benefit related to the earlier purchase of raw material and not to Central sales tax on finished goods. The matter therefore turned on the proper statutory basis and factual determination of situs.

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Issues: (i) Whether the notification dated 30 December 1985 under section 4(2) of the Rajasthan Sales Tax Act, 1954 extended the benefit of partial exemption to sales made in the course of inter-State trade or commerce when the situs of such sales was in Rajasthan. (ii) Whether the notification dated 26 December 1986, though issued under section 8(5) of the Central Sales Tax Act, 1956, merely clarified the earlier notification or required a different statutory basis.

Issue (i): Whether the notification dated 30 December 1985 under section 4(2) of the Rajasthan Sales Tax Act, 1954 extended the benefit of partial exemption to sales made in the course of inter-State trade or commerce when the situs of such sales was in Rajasthan.

Analysis: The notification granted partial exemption in respect of tax paid on raw wool used in manufacturing goods sold within the State, and the question was whether inter-State sales could still be treated as sales within the State for the purpose of that concession. The governing principle applied was that, for a fiscal benefit of this kind, the situs of the sale may be relevant as a matter distinct from exigibility to tax under the Central Sales Tax Act. Onkarlal Nandlal was treated as controlling for the proposition that an inter-State sale may nonetheless have a situs inside the State for a different statutory purpose. The majority held that, if the situs of the sale of carpet woollen yarn in inter-State trade was in Rajasthan, the dealer could claim the partial exemption to the extent of the difference between the tax paid on raw wool and the concessional rate under sections 5C and 5CC.

Conclusion: The notification of 30 December 1985 was held capable of extending the partial exemption to inter-State sales having situs in Rajasthan, and the assessee was held entitled to that benefit subject to factual determination of situs.

Issue (ii): Whether the notification dated 26 December 1986, though issued under section 8(5) of the Central Sales Tax Act, 1956, merely clarified the earlier notification or required a different statutory basis.

Analysis: The majority held that the second notification did not create the exemption for Central sales tax on the finished goods, because the real concession related to the earlier taxable event, namely the purchase of raw wool. Since the concession was only against Rajasthan sales tax paid on raw material, the notification could not properly be treated as one granting Central sales tax exemption, and its true character was inconsistent with the statutory source recited in it. The later notification was therefore not treated as a mere clarification of the earlier one, and the question of retrospective clarification did not arise for decision.

Conclusion: The notification dated 26 December 1986 was not treated as a clarificatory extension of the 30 December 1985 notification; the matter turned instead on the proper statutory basis and on the situs of sales.

Final Conclusion: The review succeeded in part, the earlier dismissal was set aside, the assessment and rectification orders were quashed, and the matter was sent back for fresh determination of the situs issue and the resulting entitlement to set-off.

Ratio Decidendi: A dealer may claim a State sales-tax concession tied to raw-material purchases even for inter-State sales of finished goods if those sales have situs within the State, because the situs may be relevant for the concessional notification even though the sale remains beyond the State's taxing competence under the Central sales tax regime.

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