Wholly exempt commodity cannot be denied Central sales tax relief for lack of a declaration form.

A commodity wholly exempt from State sales tax could not be subjected to Central sales tax relief denial merely because a declaration form was not produced. The Madras High Court held that metal polishing soap, treated as part of a cottage soap industry under the recognition certificate, fell within the exempt category; the classification depended on the nature of the industry, not the end-use of the soap. Once the product was exempt under the State notification, that exemption extended to the Central sales tax levy, and insistence on the declaration form was unsustainable. The writ petition succeeded and the disputed tax demand was set aside.

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Issues: Whether the assessee was entitled to exemption from tax on inter-State sales of metal polishing soap and whether denial of exemption for want of a declaration form was sustainable.

Analysis: The product was treated as falling within the exempted category by reference to the recognition certificate describing the industry as a cottage soap industry. The classification depended on the nature of the industry and not on the end-use of the soap. Once the product was held exempt under the State sales tax notification, the same exemption had to operate for the Central sales tax levy as well. The insistence on production of a declaration form could not survive where the commodity itself was found to be totally exempt from tax.

Conclusion: The assessee was entitled to exemption, and the disallowance of relief under the Central Sales Tax Act on the ground of non-production of the declaration form was unsustainable.

Final Conclusion: The writ petition succeeded and the tax demand in dispute was set aside.

Ratio Decidendi: Where a commodity is found to be wholly exempt from tax, a declaration form required for taxable inter-State sales cannot be insisted upon as a condition for denying the exemption.

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