Strict construction of exemption notifications bars CST relief for dealers lacking a valid exemption certificate.

An exemption notification under section 8(5) of the Central Sales Tax Act was construed strictly and, read with rule 28A of the Haryana General Sales Tax Rules, was held to be dealer-specific rather than an exemption attached to the goods. The benefit extended only to a dealer holding a valid exemption certificate for goods manufactured by an eligible unit, and not to another dealer merely because the goods originated from an exempted unit. Inter-State sales by a dealer without such certificate were therefore not exempt from Central sales tax. The reference was answered in favour of the revenue, and the claimed exemption was denied.

---

---

Issues: (i) Whether the notification dated 4 September 1995 issued under section 8(5) of the Central Sales Tax Act, 1956 relates to the exemption of goods or to the dealer selling them; (ii) whether inter-State sales of goods purchased from an exempted unit are exempt from Central sales tax in the hands of a dealer who does not hold a valid exemption certificate under rule 28A of the Haryana General Sales Tax Rules, 1975.

Issue (i): Whether the notification dated 4 September 1995 issued under section 8(5) of the Central Sales Tax Act, 1956 relates to the exemption of goods or to the dealer selling them.

Analysis: The notification was read with section 8(5) of the Central Sales Tax Act, 1956 and rule 28A of the Haryana General Sales Tax Rules, 1975. The scheme of rule 28A(2)(n) and rule 28A(4)(c) shows that exemption is linked to an eligible industrial unit holding a valid exemption certificate and to goods manufactured by such unit at the successive stages contemplated by the rule. The notification, though not happily worded, was held to operate only in favour of the dealer holding the exemption certificate and not as a general exemption attached to the goods irrespective of who sells them.

Conclusion: The notification was held to be dealer-specific and not an unconditional exemption attached to the goods.

Issue (ii): Whether inter-State sales of goods purchased from an exempted unit are exempt from Central sales tax in the hands of a dealer who does not hold a valid exemption certificate under rule 28A of the Haryana General Sales Tax Rules, 1975.

Analysis: The Court held that rule 28A(4)(c) protects successive intra-State stages of sale or purchase of goods manufactured by an exempted unit, but the notification dated 4 September 1995 does not extend that benefit to a dealer who is not the holder of the exemption certificate. Emphasis was placed on the language of the notification, which specifically referred to goods manufactured by a dealer holding a valid exemption certificate and required that no tax under the Central Sales Tax Act must have been charged by such dealer on the sale of those goods. Applying strict construction to the exemption provision, the Court rejected the broader reading advanced for the petitioner.

Conclusion: Inter-State sales by a dealer without a valid exemption certificate were held not to be exempt from Central sales tax merely because the goods had been purchased from an exempted unit.

Final Conclusion: The reference was answered in favour of the revenue, and the claimed exemption under the notification was held unavailable to the petitioner.

Ratio Decidendi: An exemption notification under section 8(5) of the Central Sales Tax Act, 1956 must be strictly construed and, where its language confines the benefit to a dealer holding a valid exemption certificate, the exemption cannot be extended to another dealer merely because the goods originated from an exempted unit.

---