Duty-free shop sales and tax exemption depend on factual inquiry, while class-based tax exemptions may rest on reasonable classification.
Duty-free shop sales at airport arrival and departure halls were treated as requiring factual examination to determine whether they fall within the constitutional and statutory import exemption, rather than being finally classed as exempt in writ proceedings. The Court also noted that exemption under the State taxing exemption power may validly be confined to a distinct class of dealers where reasonable classification exists and the object of the notification is rationally served. On that basis, the challenge to the exemption granted to other operators was not accepted, while the petitioner's own exemption request was directed to be reconsidered on its merits after hearing.
Issues: (i) Whether sales effected from duty-free shops at the arrival and departure halls of an international airport are exempt from sales tax under article 286(1)(b) of the Constitution of India and sections 2(ab), 5(1) and 5(2) of the Central Sales Tax Act, 1956, or whether the petitioner must first establish the factual nature of the transactions before the statutory authorities. (ii) Whether the exemption granted only to specified other duty-free shop operators under section 10 of the Kerala General Sales Tax Act, 1963 is arbitrary, discriminatory or violative of articles 14 and 19(1)(g) of the Constitution of India, and whether the petitioner's claim for exemption required fresh consideration.
Issue (i): Whether sales effected from duty-free shops at the arrival and departure halls of an international airport are exempt from sales tax under article 286(1)(b) of the Constitution of India and sections 2(ab), 5(1) and 5(2) of the Central Sales Tax Act, 1956, or whether the petitioner must first establish the factual nature of the transactions before the statutory authorities.
Analysis: The legal position governing sales in the course of import and export was examined with reference to the constitutional bar under article 286 and the statutory test under section 5(2) of the Central Sales Tax Act, 1956. The course of import was held to continue until the goods cross the customs frontier, and the question whether goods sold through the duty-free shops had become part of the mass of goods in India depended on the factual manner in which the transactions were carried out. The materials placed by the petitioner suggested a possible claim to exemption, but the Court treated the issue as one requiring evidence and assessment by the statutory authorities rather than a final determination in writ proceedings.
Conclusion: The petitioner's claim of exemption was not finally adjudicated on merits, and the question was left to be determined by the assessing and appellate authorities under the Act.
Issue (ii): Whether the exemption granted only to specified other duty-free shop operators under section 10 of the Kerala General Sales Tax Act, 1963 is arbitrary, discriminatory or violative of articles 14 and 19(1)(g) of the Constitution of India, and whether the petitioner's claim for exemption required fresh consideration.
Analysis: Section 10 empowers the Government to grant exemption or reduction in tax to a specified class of persons in public interest and to impose conditions by notification. Applying the principles of reasonable classification, the Court held that the petitioner, a private concern, was not similarly placed with the other exempted entities, which were treated as forming a distinct class because of their public sector or public-interest character. On that basis, the notification granting exemption to them was not struck down as arbitrary or discriminatory. At the same time, the Court noticed that the petitioner was the only other duty-free operator at the airport and that the rejection of its request for exemption was made without adequate reasons, making fresh consideration appropriate.
Conclusion: The exemption notification in favour of the other operators was upheld, but the petitioner's request for exemption was directed to be reconsidered afresh by the Government after hearing the petitioner.
Final Conclusion: The writ petition succeeded only to the extent of setting aside the rejection communication and directing fresh decision on the petitioner's exemption request, while leaving the taxability issue open for determination in the proper statutory forum.
Ratio Decidendi: A claim that duty-free shop sales are in the course of import requires factual determination by the statutory authorities, and exemption granted to a distinct class of dealers under a taxing exemption power is valid if the classification is based on reasonable differentia with a rational nexus to the object of the notification.
TaxTMI 
AI Drafter ✕
TaxTMI 
