TaxTMI 
TaxTMI 
1996 (10) TMI 445
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....pplication No. 341 of 1996 pertains to the assessment period from April 1, 1989 to June 14, 1990 (1989-90) for which too an assessment order was made on March 29, 1990, by the nonapplicant under section 9 of the CST Act read with section 7B, old RST Act. Both these orders flow from an inspection made on June 14, 1989 of the applicant's premises by the non-applicant. 3.. By these assessment orders tax at 10 per cent under the CST Act had been imposed on the inter-State sales of footwear of value up to Rs. 20 and not manufactured or marketed by large scale or medium scale industries holding that the exemption from tax granted by the State Government under the old RST Act did not exempt footwear generally within the meaning of section 8(2-A) of the CST Act as they were exempt only in specified circumstances and under specified conditions. Interest and penalty under sections 11B and 16(1)(e) respectively of the old RST Act were also imposed. 4.. On first appeal, the Deputy Commissioner (Appeals) by an order dated September 10, 1991 set aside the penalty leaving the rest undisturbed. The applicant was, however, given the option to furnish declarations in form "C". The Board....
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....e case may be, the purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than four per cent (whether called a tax or fee or by any other name), shall be nil or, as the case may be, shall be calculated at the lower rate. Explanation.-For the purposes of this sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods. (3)................. (4) The provisions of sub-section (1) shall not apply to any sale in the course of inter-State trade or commerce unless the dealer selling the goods furnishes to the prescribed authority in the prescribed manner- (a) a declaration duly filled and signed by the registered dealer to whom the goods are sold containing the prescribed particulars in a prescribed form obtained from the prescribed....
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.... Commissioner of Sales Tax v. Pine Chemicals Ltd. [1995] 96 STC 355, inasmuch as the excerpts reproduced in the Board's judgment do not occur in the Report; (v) the Supreme Court's decision in Pine Chemicals' case [1995] 96 STC 355 applied only to the exemption granted in the specific case before them, i.e., under the Jammu and Kashmir General Sales Tax Act to industries which commenced manufacturing within five years and sold their product within the same period and the goods or the persons to whom the exemption applied was not specified or identified; (vi) section 4(2) of the old RST Act permits exemption of goods or class of goods (i.e., footwear up to the value of Rs. 20) as well as persons or class of persons (i.e., small-scale industry) and these would also be exempt under section 8(2-A), CST Act: (vii) if interest is held to be leviable then it should either be from December 30, 1994, the date of the Supreme Court's decision in Pine Chemicals' case [1995] 96 STC 355, or from the date of quantification (decisions of the Supreme Court in Sales Tax Officer v. Darling Dairy Products [1994] 94 STC 93; STI 1994 SC 54 and J.K. Synthetics Ltd. v. Commercial Taxes Officer [1....
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....t a basis adopted a ratio that ran counter to it. Indian Aluminium [1976] 38 STC 108 (SC) did not arise out of the Jammu and Kashmir State sales tax law. 16.2. The Supreme Court in its decision on review in Pine Chemicals [1995] 96 STC 355, dissected sub-section (2-A) of section 8, CST Act, at page 358 of the Report as follows: "A reading of the sub-section yields the following features: (a) The sub-section opens with a non obstante clause which gives an overriding effect to the rule contained therein over the provisions contained in subsection (1-A) of section 6 and in sub-section (1) or clause (b) of sub-section (2) of section 8 itself; (b) where the turnover (or any part thereof) of a dealer relates to the sale of any goods, the sale or purchase of which is under the sales tax law of the appropriate State exempt from tax generally or is taxable at a rate lower than four per cent; (c) the Central sales tax shall equally be exempt or shall be charged at such lower rate, as the case may be; (d) the Explanation which defines the expression 'generally' occurring in the sub-section clarifies that a sale or purchase of any goods shall not be deemed to be exempt....
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....ly under the State sales tax enactment? The answer can only Here italicised. be in the negative. Such goods are exempt from tax only when they are manufactured in a large or medium scale industrial unit within five years of its commencement of production and sold within the said period, i.e., in certain specified circumstances alone. The exemption is not a general one but a conditional one. The exemption under the Government Order No. 159 is not with reference to goods or a class or category of goods but with reference to the industrial unit producing them and their manufacture and sale within a particular period. For the purposes of the Government order, the nature, class or category of goods is irrelevant; it may be any goods. It is concerned only with the industrial unit producing them and the period within which they are manufactured and sold. Can it be said in such a case that it is an instance where the sale is of goods, the sale or purchase of which is under sales tax law of the appropriate State, exempt from tax generally? Certainly not. Exemption provided by Government Order No. 159, to repeat, is not with reference to goods but with reference to the in....
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....means that the goods should be totally exempt from tax before similar exemption from the levy of Central sales tax can become available. Where the exemption from taxation is conferred by conditions or in certain circumstances there is no exemption from tax generally. (Emphasis* added). In our respectful opinion, the ratio of this decision clearly concluded the question arising in Pine Chemicals [1992] 85 STC 432 (SC); [1992] 2 SCC 683, against the assessees inasmuch as it was not a case where goods were 'totally exempt from tax'. It was a case where the exemption operated or was attracted only if it was established that such goods were manufactured in a large or medium industrial unit within five years of its going into production and were sold within that period. As pointed out hereinbefore, the exemption was not with reference to goods but with reference to the unit manufacturing the goods. In International Cotton Corporation (P.) Ltd. v. Commercial Tax Officer, Hubli [1975] 35 STC 1 (SC), a Bench of this Court comprising four learned Judges observed that 'the object of sub-section (2-A) of section 8 is to exempt transaction of sale of any goods if they are wholly exempt from ....
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....rally. An exemption that comes with strings attached is not a general exemption. 16.5. In the matter before us the exemption granted under section 4(2) of the old RST Act is not to footwear generally but is seen to be subject to the following conditions: (i) they must cost less than Rs. 20; (ii) they must not be manufactured by large or medium scale industries; and, (iii) they must not be marketed by large or medium scale industries. Footwear are not exempt generally. Therefore this exemption from levy of tax under section 8(2-A), CST Act would not be available. The ratio of Pine Chemicals [1995] 96 STC 355 (SC) and Indian Aluminium [1976] 38 STC 108 (SC) applies with full force. 16.6. The Board therefore applied the ruling in Pine Chemicals [1995] 96 STC 355 (SC) to the present controversy quite correctly even when while purportedly quoting the Supreme Court the Board had, it would appear, inadvertently reproduced the head-notes. Head-notes can be misleading though in this case, fortunately, they were not. 17.. This Tribunal too had while disposing of Sales Tax Revision Nos. 5 of 1996 and 6 of 1996, Commercial Taxes Officer v. Shiv Sainath Rubber....
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.... conditions are met the exemption is available generally. This would militate against the ratio adopted by the Supreme Court in the cases cited and defeat the very purpose of section 8(2-A), CST Act as it stands. 18.. In Manish Plastics v. Commissioner of Commercial Taxes [1995] 99 STC 293 (Kar) relied on by the learned counsel for the non-applicant, the Karnataka High Court had before it a practically identical matter in which footwear not costing more than Rs. 30 per pair were exempt from tax under the Karnataka Sales Tax Act. The question arose whether they were also exempt under section 8(2-A), CST Act. It was held that they were not despite a clarification by the Commissioner, Commercial Taxes, that chappals costing less than Rs. 30 were exempt from tax both under the Karnataka Sales Tax and Central Sales Tax Acts. The ruling in Pine Chemicals [1995] 96 STC 355 (SC) was applied after tracing the chronological development of the law on the subject. Indian Aluminium [1976] 38 STC 108 (SC), International Cotton Corporation (P.) Ltd. [1975] 35 STC 1 (SC), Pine Chemicals [1992] 85 STC 432 (SC) were discussed. It was additionally contended before the Karnataka High Court, as i....
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....ion of the learned counsel for the applicant is that if tax under the CST Act on inter-State sales of the goods in question is payable then interest should be levied, if at all, from either December 30, 1994 the date of Supreme Court's decision in Pine Chemicals [1995] 96 STC 355 or from the date of quantification as the matter remained in controversy till then and the applicant in the bona fide belief that the inter-State sales of the goods in question were exempt from tax under the CST Act had neither collected nor deposited tax. The case should not therefore be treated as one of delayed payment. Sales Tax Officer v. Darling Dairy Products [1994] 94 STC 93 (SC); STI 1994 SC 54 and J.K. Synthetics Ltd. v. Commercial Taxes Officer [1994] 94 STC 422 (SC); [1994] 2 STO 54 were cited in support. 21.1. This question has been examined in detail and dealt with at length by the Board in its impugned order in paras 9-13. The Board observed that the power to charge interest on the arrears of tax was a power incidental to the power to tax and the charging section for this purpose was section 11B of the old RST Act. The liability to pay interest on delayed payment of tax, etc., w....
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....essing authority assessed the turnover in ice-cream to tax. The High Court treated it as exempt. The Supreme Court at first upheld the High Court's decision. On review it set aside its own order as well as that of the High Court and restored the order of the assessing authority in view of a decision of another Bench of the Supreme Court in Commissioner, Sales Tax v. Agra Belting Works [1987] 66 STC 1, that the taxing scheme incorporated in the Act permitted that when a rate of tax was prescribed for goods which had been exempted earlier under another provision of the Act the exemption would stand withdrawn. At that stage on behalf of the respondent-dealer it was submitted that setting aside the order of the High Court at that distance of time would expose the respondent-dealer to penalties and other penal consequences in addition to tax. The Supreme Court observed: "In our opinion the said apprehension is unfounded. No such proceeding for levying penalty or for visiting other penal consequences has been initiated so far. In any event, the facts of this case-particularly the conflict of opinion in the High Court on this pointmake it appear that it may not be a case calling for levy ....
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.... unpaid tax as well as on tax paid with delay from the date by which he was required to pay the tax by or under provisions of the Act until the date of payment. The language is absolutely unambiguous. Clause (f) of sub-section (1) of section 11B relates to cases where the liability to pay tax is quantified and again provides for liability to pay interest from the date by which the tax was payable until the date of quantification. The Explanation to this clause clarifies that the expression "liability to pay tax is quantified" means determination of the tax liability under sections 7A, 7B, 10, 10A, 12, 13, 14 or 17 of the Act. The case before us arises out of assessment orders made under section 7B of the old RST Act read with section 9, CST Act and not under section 7(2A) of the old RST Act as inadvertently mentioned by the Board in its impugned order. Be that as it may, the point still remains that the liability to pay interest was from the date by which he was required to pay the tax. The question of computing interest from the date of assessment would not arise particularly when as in the instant case the interest has been levied by an order under section 7B which pertains to as....