Specific tariff entry prevails over general exemption, while interest cannot survive payment made under a valid instalment scheme.

Nylon tyre cord fabric was held not to qualify for sales tax exemption as "man made fabrics" under entry 11(ii) of the Kerala General Sales Tax Act for 1995-96, because the commodity was specifically covered by tariff entry 59.02 and a specific tariff classification prevails over a general description. The later insertion of that commodity into the exemption entry from 1 April 1999 was treated as a substantive, prospective amendment, so the exemption claim failed. Interest levied under section 23(3) was set aside, however, because the tax had been paid under the Government's instalment facility and no default arose under that scheme.

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Issues: (i) Whether nylon tyre cord fabric was entitled to sales tax exemption as "man made fabrics" under entry 11(ii) of the Third Schedule to the Kerala General Sales Tax Act, 1963 for the assessment year 1995-96; (ii) Whether interest levied under section 23(3) of the Kerala General Sales Tax Act, 1963 was sustainable when tax was paid under the instalment facility granted by the Government.

Issue (i): Whether nylon tyre cord fabric was entitled to sales tax exemption as "man made fabrics" under entry 11(ii) of the Third Schedule to the Kerala General Sales Tax Act, 1963 for the assessment year 1995-96.

Analysis: Entry 11(ii) granted exemption only to the man-made fabrics specifically covered by the tariff headings incorporated in the Third Schedule. Nylon tyre cord fabric was specifically covered by entry 59.02 of the Central Excise Tariff Act, 1985, and therefore could not be treated as falling under the general description of man-made fabrics. The rule that a specific entry prevails over a general entry governed the dispute. The later inclusion of entry 59.02 in entry 11(ii) with effect from 1 April 1999 was held to be a substantive amendment and not merely clarificatory or retrospective.

Conclusion: The exemption claim failed for the assessment year 1995-96 and the disallowance was upheld, against the assessee.

Issue (ii): Whether interest levied under section 23(3) of the Kerala General Sales Tax Act, 1963 was sustainable when tax was paid under the instalment facility granted by the Government.

Analysis: The tax arrears had been remitted in accordance with the instalment facility granted under the deferred scheme, and the payment was made without default in terms of that scheme. In those circumstances, the basis for sustaining the demand of interest for alleged delay in payment did not survive.

Conclusion: The levy of interest was set aside, in favour of the assessee.

Final Conclusion: The revision succeeded only on the interest issue, while the denial of sales tax exemption was sustained; the matter was thus allowed in part.

Ratio Decidendi: Where a statute grants exemption by incorporating specific tariff entries, a commodity specifically classified under a distinct tariff entry cannot claim the benefit of a general entry, and a later specific inclusion of that commodity in the exemption schedule operates prospectively unless the amendment is plainly declaratory.

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