Substantive exemption conditions under the Central Sales Tax Act cannot be relaxed by local procedural rules

Section 9(2) of the Central Sales Tax Act, 1956 allows State sales tax machinery to be used for assessment and recovery of Central sales tax only within the limits of the Central Act and its rules. It cannot be invoked to create or relax substantive exemption conditions. The requirement to furnish statutory declaration forms under the Central scheme was treated as part of the substantive exemption structure, which must be strictly construed. Rule 7(3) of the Delhi Sales Tax Rules, 1975 therefore could not dispense with the mandatory declaration requirement or extend local procedural relief to Central sales tax transactions. The references were rejected and the Revenue's position upheld.

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Issues: Whether Rule 7(3) of the Delhi Sales Tax Rules, 1975 could be invoked to grant exemption from furnishing statutory declaration forms under the Central Sales Tax Act, 1956, and whether the rule was procedural so as to apply to assessments under the Central Act.

Analysis: Section 9(2) of the Central Sales Tax Act, 1956 permits the State sales tax machinery to be used for assessment, reassessment, collection and enforcement of Central sales tax, but only for that purpose and subject to the Central Act and its rules. The power conferred by the State law cannot enlarge the substantive liability or create a substantive exemption not found in the Central enactment. The requirement to furnish prescribed declarations under Section 5(3) and Section 5(4) is part of the substantive scheme governing the availability of exemption, and exemption conditions must be strictly construed. Rule 7(3) of the Delhi Sales Tax Rules could not therefore be used to dispense with the mandatory Central Act requirement or extend local relief to Central sales tax transactions.

Conclusion: The question was answered against the assessee and in favour of the Revenue.

Final Conclusion: The references were rejected on the basis that local procedural rules could not override or dilute the substantive conditions attached to exemption under the Central Sales Tax Act.

Ratio Decidendi: State sales tax machinery may be used under Section 9(2) of the Central Sales Tax Act, 1956 only for procedural assessment and recovery functions, and cannot be relied upon to create, vary, or relax substantive conditions for exemption imposed by the Central Act.

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