HC upholds GST exemption on Canteen Stores Department sales under Notification dated 31.01.1985

The HC upheld the Tribunal's decision dismissing revisions challenging GST exemption on sales by Canteen Stores Department outside U.P. The Court held that Notification dated 31.01.1985 extended exemption benefits to Canteen Stores Department and U.P. Govt. Employees Welfare Corporation, subject to conditions. The Circular of 23.07.1987, issued to reconcile contradictions in earlier notifications, must be read harmoniously with the 1985 Notification. The Court noted that circulars by tax authorities are not binding on assessees but are binding on the department. Consequently, the department's plea against the exemption was rejected, and no interference with the Tribunal's order was warranted. All revisions were dismissed.

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Issues:
1. Granting exemption under Section 8 of the Central Sales Tax Act.
2. Interpretation of Notification No.7037 dated 31.01.1985.

Analysis:

Issue 1: Granting exemption under Section 8 of the Central Sales Tax Act
The case involved multiple revisions arising from judgments allowing second appeals filed by the Assessee regarding the exemption on the sale of goods by the Canteen Stores Department. The Assessing Authority had initially refused to grant exemption under Section 8 (2A) of the Central Sales Tax Act. The Tribunal, however, allowed the appeals and held the sales exempted from Central Sales Tax under Section 8(2A)/8(2C). The State Counsel argued against the exemption, citing conditional nature of Notification dated 31.01.1985. The Assessee contended that the Circular issued by the Commissioner Trade Tax was binding and supported their claim for exemption under Section 8(2A) of CST.

Issue 2: Interpretation of Notification No.7037 dated 31.01.1985
The Notification provided exemptions subject to specified conditions, including sales to Canteen Stores Department/ Military Canteens. The Circular dated 23.07.1987 reconciled earlier notifications and clarified exemptions for sales made to certain institutions. The Tribunal relied on this Circular to grant exemption under Section 8(2A). The Court analyzed the Notification and Circular, emphasizing that the Circular clarified existing contradictions and extended benefits under Section 8(2A) of CST. The Court held that the Circular was clarificatory in nature and resolved the exemption controversy.

In conclusion, the Court dismissed all revisions, upholding the Tribunal's decision to grant exemption under Section 8 of the Central Sales Tax Act. The judgment favored the Assessee, emphasizing the binding nature of the Circular issued by the Commissioner Trade Tax and the resolution of exemption issues through the Circular dated 23.07.1987. The Court clarified the interpretation of the Notification No.7037 dated 31.01.1985 and affirmed the Tribunal's decision in granting the exemption.

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