Alcohol remains liable for central sales tax despite State exemption

The court held that despite alcohol being exempt under the State Sales Tax Law, it remains subject to central sales tax liability. The judgment in a previous case was deemed incorrect as it misinterpreted the relevant law. The Tribunal's decision to exempt the assessee from central sales tax was overturned, and the assessing officer's order was restored. The revisions were allowed, and parties were directed to bear their own costs.

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Issues Involved:
1. Exemption of alcohol from tax under the 'sales tax law' of the State of U.P. and its impact on central sales tax liability under Section 8(2-A) of the Central Sales Tax Act.
2. Correctness of the judgment in Oudh Sugar Mills Vs. CST and other related judgments.
3. Tribunal's error in holding that the assessee was not liable to pay central sales tax on inter-State sales of alcohol.

Detailed Analysis:

Issue 1: Exemption of Alcohol from Tax under the State Sales Tax Law
The primary issue was whether the sale of alcohol was exempt under the 'sales tax law' of the State of U.P., thereby exempting it from central sales tax under Section 8(2-A) of the Central Sales Tax Act. The court examined the amendments made by U.P. Act No. 12 of 1974 and U.P. Act No. 8 of 1975, which made alcohol taxable under the United Provinces Sales of (Motor Spirit, Diesel Oil and Alcohol) Taxation Act, 1939 (1939 Act), and exempt under the U.P. Sales Tax Act, 1948 (1948 Act). The court concluded that the 1939 Act is a 'sales tax law' within the meaning of Section 2(i) of the Central Sales Tax Act, 1956, and thus, the exemption under the 1948 Act does not negate the central sales tax liability.

Issue 2: Correctness of the Judgment in Oudh Sugar Mills Vs. CST
The court scrutinized the judgment in Oudh Sugar Mills Vs. CST, where it was held that there was no liability for central sales tax under Section 8(2-A) of the 1956 Act. The court found that the learned Single Judge in Oudh Sugar Mills misinterpreted Section 8(2-A) by emphasizing the goods rather than the 'sales tax law' of the appropriate State. The court disapproved of the judgment, stating that the 1939 Act is indeed a 'sales tax law,' and the exemption under the 1948 Act does not apply to central sales tax.

Issue 3: Tribunal's Error in Holding No Liability for Central Sales Tax
The Tribunal had accepted the assessee's argument that since alcohol was exempt under the 1948 Act, there was no liability to pay central sales tax. The court found this to be erroneous, emphasizing that the 1939 Act is a 'sales tax law' and that alcohol was taxable under this Act. Therefore, the Tribunal's decision to exempt the assessee from central sales tax was incorrect.

Conclusion:
1. Exemption under State Law: The United Provinces Sales of (Motor Spirit, Diesel Oil and Alcohol) Taxation Act, 1939 is a 'sales tax law' under Section 2(i) of the Central Sales Tax Act, 1956. Alcohol being taxable under the 1939 Act means central sales tax is applicable despite the exemption under the 1948 Act.
2. Judgment in Oudh Sugar Mills: The judgment in Oudh Sugar Mills Vs. CST does not lay down the correct law. The other three judgments following it are also disapproved.
3. Tribunal's Error: The Tribunal erred in holding that the assessee was not liable to pay central sales tax on inter-State sales of alcohol. The orders of the Tribunal were set aside, restoring the order of the assessing officer.

The revisions were allowed, and the orders of the Tribunal impugned in the revisions were set aside, restoring the order of the assessing officer. Parties were directed to bear their own costs.

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