Second-hand machinery qualifies for sales tax exemption where the notification does not exclude it for medium and large units.

Imported second-hand plant and machinery used for a medium or large scale industrial unit could be included in fixed capital investment for sales tax exemption under the Kerala notification, because the notification excluded second-hand machinery only for sick small scale industrial units and did not impose that restriction on other units. Any ambiguity in an exemption notification had to be construed in favour of the assessee. The sales tax exemption manual could not add a new condition or narrow the statutory notification, as a manual or circular cannot override the notification issued under the Act; the disallowance and demand notices were therefore unsustainable.

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Issues: Whether the value of imported second-hand plant and machinery used for setting up a medium and large scale industrial unit could be included in the fixed capital investment eligible for exemption under the sales tax notification issued under section 10 of the Kerala General Sales Tax Act, 1963, and whether the sales tax exemption manual could restrict the scope of that statutory notification.

Analysis: The notification defined fixed capital investment to include plant and machinery required for industrial purposes, while the exclusion of second-hand machinery appeared only in the clause dealing with sick small scale industrial units. The absence of any similar exclusion for medium and large scale units indicated that the notification did not bar second-hand machinery from being reckoned for exemption. Where the language of an exemption notification admits of doubt, the construction beneficial to the assessee must prevail. The manual approved by Government was intended only as an awareness document and could not add a new condition or whittle down the scope of the statutory notification. A circular or manual cannot override a statutory notification issued under the Act.

Conclusion: The imported second-hand machinery was eligible to be counted towards fixed capital investment for exemption, and the manual could not defeat the statutory benefit. The disallowance and demand notices were unsustainable.

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