Central sales tax exemption for alcohol turns on the whole State sales tax law, not one enactment alone.

Section 8(2-A) of the Central Sales Tax Act, 1956 applies only when the relevant goods are generally exempt under the appropriate State sales tax law as a whole. An exemption under one State enactment does not attract central exemption if the same goods remain taxable under another applicable State sales tax law. On that footing, alcohol was held not to be exempt from central sales tax merely because it was exempt under the U.P. Sales Tax Act, 1948, since it was taxable under the U.P. Act of 1939. The earlier contrary High Court view was disapproved and the Tribunal's order treating the turnover as exempt was set aside.

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Issues: (i) Whether sale of alcohol during the relevant period was exempt under the sales tax law of the State of U.P. so as to attract section 8(2-A) of the Central Sales Tax Act, 1956; (ii) whether the earlier High Court view holding that no central sales tax was payable on inter-State sales of alcohol laid down the correct law; (iii) whether the Tribunal erred in holding that no central sales tax was payable on inter-State sales of alcohol.

Issue (i): Whether sale of alcohol during the relevant period was exempt under the sales tax law of the State of U.P. so as to attract section 8(2-A) of the Central Sales Tax Act, 1956.

Analysis: Section 8(2-A) applies only where the relevant sale or purchase is exempt from tax generally under the sales tax law of the appropriate State. The United Provinces Sales of (Motor Spirit, Diesel Oil and Alcohol) Taxation Act, 1939 was treated as a State sales tax law within the meaning of section 2(i) of the Central Sales Tax Act, 1956. The fact that alcohol stood exempt under section 4 of the U.P. Sales Tax Act, 1948 did not by itself attract the exemption under section 8(2-A), because the same goods were taxable under the 1939 Act. The exemption in the 1948 Act was not sufficient to render the inter-State turnover exempt under the Central Act.

Conclusion: The inter-State sale of alcohol was not exempt so as to avoid central sales tax liability under section 8(2-A).

Issue (ii): Whether the earlier High Court view holding that no central sales tax was payable on inter-State sales of alcohol laid down the correct law.

Analysis: The earlier view proceeded on an incorrect reading of section 8(2-A) by treating the focus as being only on the goods and not on the sales tax law of the appropriate State. The Explanation to section 8(2-A) was also inapplicable on the facts because the exemption was not of the kind described there. The correct interpretation is that a dealer gets the benefit only when the goods are generally exempt under the applicable State sales tax law, and not where tax is leviable under another applicable State enactment.

Conclusion: The earlier High Court view did not lay down the correct law and was disapproved.

Issue (iii): Whether the Tribunal erred in holding that no central sales tax was payable on inter-State sales of alcohol.

Analysis: Because alcohol was taxable under the 1939 Act, the Tribunal wrongly treated the turnover as exempt merely because section 4 of the 1948 Act granted exemption. The Tribunal's approach overlooked the width of the expression "sales tax law" in section 2(i) and misapplied section 8(2-A). The impugned appellate reasoning therefore could not be sustained.

Conclusion: The Tribunal erred and its order was set aside.

Final Conclusion: The revisions succeeded, the Tribunal's orders were quashed, and the assessing authority's view was restored, leaving the assessee liable to central sales tax on the inter-State sales of alcohol.

Ratio Decidendi: For section 8(2-A) of the Central Sales Tax Act, 1956, the relevant test is whether the goods are generally exempt under the appropriate State's sales tax law as a whole; if the goods remain taxable under another applicable State sales tax law, the central sales tax exemption is not attracted.

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