SETH, J. - (1.) THIS petition under article 226 of the Constitution is directed against the orders dated 26th June, 1973, and 13th December, 1973, passed by the Sales Tax Officer assessing the petitioner to tax under the Central Sales Tax Act and thereafter refusing to rectify the same.
(2.) THE petitioner-company manufactures toughened glasses and mirrors in its factories at Allahabad and Calcutta. It has a branch office at Delhi. In the normal course of business, it effected certain inter-State sales of toughened glasses manufactured by it at Allahabad. The Sales Tax Officer, by his order dated 26th June, 1973, determined the turnover of such inter-State sales for the year 1970-71 and assessed the petitioner to sales tax accordingly. Subsequently, the petitioner, relying upon a notification dated 9th January, 1970, issued by the State Government in exercise of its powers under section 4-A of the U.P. Sales Tax Act, declaring that the turnover in respect of mirrors and toughened glasses manufactured by the petitioner at Allahabad shall be exempt from payment of sales tax for a period of three years with effect from February, 1969, claimed that the turnover of sales of toughened glasses and mirrors, manufactured by it, being generally exempt from tax under the U.P. Sales Tax Act, it was not liable to Central sales tax either, as provided in section 8(2A) of the Central Sales Tax Act. It accordingly moved an application under section 22 of the U.P. Sales Tax Act read along with the Central Sales Tax Act for rectification of the assessment order dated 26th June, 1973. The Sales Tax Officer, Allahabad, by his order dated 13th December, 1973, rejected the application for rectification on the ground that the turnover of sales of toughened glasses and mirrors was not generally exempt from payment of sales tax under the U.P. Sales Tax Act. As such, the petitioner could not derive any advantage from the provisions of section 8(2A) of the Central Sales Tax Act and its turnover had been rightly assessed under that Act. Being aggrieved by the two orders mentioned above, the petitioner has approached this court under article 226 of the Constitution and prays that they be quashed. Section 8(2A) of the Central Sales Tax Act runs thus : "Notwithstanding anything contained in sub-section (1) or sub-section (2), if under the sales tax law of the appropriate State, the sale or purchase, as the case may be, of any goods by a dealer is exempt from tax generally or is subject to tax generally at a rate which is lower than two per cent (whether called a tax or fee or by any other name), the tax payable under this Act on his turnover in so far as the turnover or any part thereof relates to the sale of such goods 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 goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State if under that law it is exempt only in specified circumstances or under specified conditions or in relation to which the tax is levied at specified stages or otherwise than with reference to the turnover of the goods." Accordingly, if under the sales tax law of the U.P. State, the turnover of sales of mirrors and toughened glasses manufactured in the petitioner's factory at Allahabad, by a dealer (in the instant case by the petitioner), is exempt from tax generally, the tax payable by it under the Central Sales Tax Act on such part of its turnover shall be nil. Normally, the sale of particular goods by a dealer would, under the U.P. Sales Tax Act, be considered to be exempt from tax generally if the turnover of sales of that particular goods by the dealer is in no circumstance liable to be taxed under that Act. However, the legislature added an explanation to section 8(2A) and provided that although under the State law, the sale of a particular goods by a particular dealer may in no circumstance attract the payment of sales tax, it would still not be considered that the sale of such goods by him is exempt from tax generally if the goods sold belong to the class of goods specified therein, viz., (1) if under the State law, the sale of such goods is exempt only in specified circumstances or under specified conditions, or (2) if under the State law the sales tax is payable on the sale of such goods at specified stages or otherwise than with reference to the turnover of the goods. It follows that although under the State law the turnover in respect of sale of particular goods in the hands of a particular dealer may in no circumstance be liable to sales tax and, in that sense, the turnover of such goods in his hands may be generally exempt from payment of tax, yet for the purposes of section 8(2A), sale of such goods would not be considered to be exempt from tax generally if under the State law, sale of such goods is exempt from tax only in specified circumstances or under specified conditions or in relation to which the tax is levied at specified stages or otherwise than with reference to the turnover of the goods. We will, therefore, have to see whether under the U.P. Sales Tax Act, the petitioner's turnover of sale of mirrors and toughened glasses manufactured by it is in no circumstance liable to be taxed and, if it be so, whether mirrors and toughened glasses manufactured by the petitioner are goods belonging to the classes of goods specified in the explanation to section 8(2A) regarding which a fiction, that notwithstanding the fact that the turnover of sale of such goods has, in no circumstance, been made taxable in the hands of the dealer, it would still not be considered to be exempt from tax generally, has been created. Section 3 of the U.P. Sales Tax Act is the general charging section which makes a dealer liable to pay sales tax in respect of its turnover. Section 3-A enables the State Government to issue a notification that the turnover in respect of any goods or class of goods shall not be liable to tax except at such single point in the series of sales by successive dealers as the State Government may specify. Acting under section 3-A, the State Government issued notifications from time to time declaring glasswares other than hurricane lantern chimneys, optical lenses and bottles, if imported from outside U.P. as goods liable to be taxed at the point of sale made by the importer and if manufactured in U.P. to be taxed at the point of sale by the manufacturer. Last such notification being Notification No. ST/7094/X - 1012-1965 dated 1st October, 1965. Accordingly, in this State, the sale of mirrors and safety glasses became liable to sales tax either at the point of sale by the importer of such goods or at the point of their sale by the manufacturer thereof. Section 4-A(1) then provides that notwithstanding anything contained in sections 3 and 3-A where the State Government is of opinion that it is necessary so to do for increasing production of any goods, it may, by notification in the official Gazette, declare that the turnover of such goods by the manufacturer shall during such period not being less than three years, but not exceeding five years, as may be specified, be exempt from sales tax or liable to tax at such reduced rate as it may fix. As the State Government formed the requisite opinion, it issued a notification dated 9th January, 1970, exempting the goods manufactured by the petitioner's unit from payment of sales tax for a period of three years with effect from February, 1969, with the result toughened glasses and mirrors manufactured by the petitioner's unit, which by virtue of notification issued under section 3-A could be taxed only at the point of sale made by it became for a period of three years from February, 1969, exempt from tax even at that point. Accordingly, the sale by the petitioner of the mirrors and toughened glasses manufactured by it could not, for a period of three years, be taxed at all and, as such, was for that period exempt from payment of tax generally, and the turnover of such goods would not attract even the Central Sales Tax Act unless they belong to the class of goods specified in explanation to section 8(2A) of the Central Sales Tax Act.
(3.) THE explanation to section 8(2A) takes out from the ambit of the expression "sale or purchase of any goods by a dealer is exempt from tax generally", sale of only such goods which are of the nature or belong to the class described therein, i.e., goods in respect of which sales tax under the State law is payable when they are sold under specified circumstances or under specified conditions or in relation to which tax is levied at specified stages or otherwise with reference to their turnover. The learned standing counsel appearing for the State did not urge that in respect of mirrors, lanterns and toughened glasses manufactured by the assessee, tax was leviable at specified stages or otherwise with reference to their turnover. He urged that, according to the notification issued under section 4-A, sale of mirrors and toughened glasses by the petitioner is exempt on condition that such goods were manufactured by it in its factory at Allahabad. It was, therefore, a conditional exemption and, as such, it could not be said that the turnover of sale of such goods by the petitioner was exempt from tax "generally" under the U.P. Sales Tax Act. In our opinion, there is no force in this submission. The exemption under section 4-A has been granted in respect of a particular class of goods, i.e., mirrors and safety glasses manufactured by the petitioner. So far as this class of goods is concerned, it has not been laid down anywhere that the sale of goods would be liable to be taxed on the fulfilment or non-fulfilment of any condition. The learned standing counsel has not been able to point out any circumstance in which the petitioner's turnover of sale of safety glass and mirror manufactured by it would attract the payment of sales tax under the Sales Tax Act. The stipulation in the notification that the turnover of such sales would, for a period of three years, be exempt from payment of sales tax does not, in our opinion, amount to exempting the turnover of such goods from tax under specified circumstances or specified conditions. The period for which such exemption has been granted can neither be described as a condition for exemption nor as a circumstance in which the exemption has been granted. In our opinion, it is open to the legislature to provide, with a view to increase the production of a particular class of goods, for the grant of unconditional exemption from tax liability for a particular duration. If such an exemption has been granted for a particular duration, it cannot be said that it has been granted in specified condition or circumstance.;