State exemption for certified Khadi units extended to Central sales tax relief on shoe sales

Sale of shoes manufactured by a unit certified by the U.P. Khadi and Village Industries Board was treated as covered by a subsisting State exemption notification, and that benefit was recognised as a general exemption for the purpose of section 8(2-A) of the Central Sales Tax Act, 1956. Applying the earlier ruling on certified Khadi and Village Industries institutions, the HC accepted that the State-level exemption under the U.P. Trade Tax Act extended to the Central sales tax context. The assessee's claim to exemption was therefore maintainable and the sales were held eligible for relief under the Central Act.

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Issues: Whether the assessee was entitled to exemption under section 8(2-A) of the Central Sales Tax Act, 1956 on the sale of shoes manufactured by a unit certified by the U.P. Khadi and Village Industries Board under the State exemption notification.

Analysis: The exemption available under the State notification issued under section 4(b) of the U.P. Trade Tax Act, 1948 was examined in the light of the earlier decision holding that goods manufactured by institutions certified by the U.P. Khadi and Village Industries Board were to be treated as enjoying general exemption for the purpose of section 8(2-A) of the Central Sales Tax Act, 1956. Following that ruling, the Court accepted that the assessee's goods fell within the benefit of the Central Act exemption.

Conclusion: The exemption claim was held to be maintainable and the assessee was entitled to exemption under section 8(2-A) of the Central Sales Tax Act, 1956.

Ratio Decidendi: Where a certified Khadi and Village Industries unit is covered by a subsisting State exemption notification, the benefit is treated as a general exemption for the purpose of section 8(2-A) of the Central Sales Tax Act, 1956 unless withdrawn or displaced by law.

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