Holding

A dealer can invoke Section 8(2A) of the Central Sales Tax Act only when the sale or purchase of the goods is exempt from tax generally; a special, limited‑period exemption for specific undertakings does not satisfy this condition.

Summary

The Uttar Pradesh Government issued a Gazette notification under Section 4‑A of the U.P. Sales Tax Act, 1948, granting a three‑year sales‑tax exemption to certain newly set‑up industrial units for specified goods. Hindustan Safety Glass Works (P) Ltd claimed that, under the pre‑amendment provision of Section 8(2A) of the Central Sales Tax Act, it was entitled to a corresponding exemption from central tax. The issue was whether a special, time‑limited exemption granted to a particular undertaking qualifies as an "exemption from tax generally" contemplated by Section 8(2A). The Supreme Court examined the Explanation to Section 8(2A) and held that only a general exemption, not one confined to specified circumstances or a limited period, can trigger the central exemption. Relying on Commissioner of Sales Tax v. Pine Chemicals Ltd. and Indian Aluminium Cables Ltd. v. State of Haryana, the Court concluded that the Uttar Pradesh exemption was a special benefit and therefore did not satisfy the requirement of a general exemption. Consequently, Hindustan Safety Glass Works was not entitled to the benefit of Section 8(2A). The appeal filed by the State was allowed.

Issues considered

Whether a special, time‑limited sales‑tax exemption granted to a newly set‑up industrial unit under a State Act constitutes an "exemption from tax generally" within the meaning of Section 8(2A) of the Central Sales Tax Act.
Whether the amendment to Section 8(2A) in 1972 altered the interpretation of the provision with respect to such exemptions.

Legislation cited

Central Sales Tax Acts. 8(2A)

Subjects

sales taxexemptionSection 8(2A)Central Sales Tax ActState sales taxspecial exemptioninter‑state salestatutory interpretation

Judgment

j

A THE STATE OF UTTAR PRADESH AND ANR.
v.
M/S. HINDUSTAN SAFETY GLASS WORKS (P) LTD.

MARCH 20, 1996

B [N.P. SINGH AND SUHA5 C. SEN, JJ.]

Sales Tax:

U.P. Sales Tax Act 194&-Section 4-A-Notification, issued under-
C Granting exemption in respect of specified goods produced by specified
undertakings for a specified period-Effect of on Section 8(2A) of the Central
Sales Tax Act prior to amendment-The exemption from the Central Sales
Tax Act under the repealed provision was in respect of 'sales or purchases.....
of any goods by a dealer and granted exemption to any goods exempt from
tax genera/ly'-fleld, respondent not entitled to the benefit of S.8(2A) of the
D Central Sales Tax Act.
..
A Gazette Notification under Section 4-A of the State Act was issued
y
by the State Granting exemption from payment of sales tax to various
newly set up industrial undertakings for specified goods for a specified
E period of time. The claim of the respondent was that it was entitled to
exemption from payment of tax under Section 8 (2A) of the Central Act,
before its amendment. It was contended by the respondent that under the
unamended Section 8(2A), the exemption was in respect of a dealer
whereas under the amending Act, exemption was with respect to goods. ..
.
F Allowing the appeal, this Court .
'

HELD : 1.1. In order to take advantage of Section 8(2A) of the
Central Sales Tax Act, a dealer will have to establish that the sale or
purchase of the goods in question was exempt from tax generally. If it was
a special exemption granted to him because his undertaking was a new
G industrial undertaking or of any other reason for a limited period, then
the exemption will not be of general nature and he will not be entitled to ')I
get the benefit of this sub-section. There was an Explanation to _the old sub
section (2A) of Section 8, which made in clear that if the exemption was
only in specified circumstances or under specified conditions or in relation
H to which the tax was levied at specified stages or otherwise than with
678
STATEv. HINDUSTAN SAFETY GLASS WORKS (P) LTD. 679

reference to the tnrnover of goods, shall not to be deemed to be exemption A
from tax generally. [683-B-C]

1.2. In the instant case, the exemption has been granted only in
respect of specified goods prodnced by certain specified newly set up
undertakings mentioned in the notification. The benefit of exemption will
be available to these undertakings for a period of three years. In other B
words, at a specified stage of development of these industries they will be
given a special benefit which will not be available generally to other
industries producing goods of similar nature. In fact, it does not appear
... that by the amendment of sub-section (2A) of Section 8 any change has
been brought about in respect of meaning or the concept of sale or C
purchase of goods exempt from tax generally. [683-D-E; Fl

Commissioner of Sales Tax v. Pine Chemicals Ltd. & Ors., [1995] 1
sec 5, relied on.
2. In the Notes on Clauses to the Bill introduced for amending the D

.-
y
Central _Sales Tax Act by the Amendment Act of 1972 (61 of 72), it was
stated that "sub-clause (a) of Clause 5 sought to substitute a new sub-sec-
tion for existing sub-section (2A)-of Section 8 of the Principal Act. The new
sub-section seeks to bring out more clearly that an exemption or lower rate
of levy nnder the local sales tax law of the appropriate State would be
available in respect of the inter-State sale of the goods only if such E
exemption or lower levy is available generally with reference to such goods
under the local sales tax law". The purpose behind the amendment in
section 8(2A) was to make the existing provisions clearer. In other words,
object was not to bring about any change in the existing law but to set it
out in clearer words. [68S·D-G] F
M/s. Indian Aluminium Cables Ltd. v. State of Haryana, [1976] 4 SCC
27 and Hindustan safety Glass Works (P) Ltd. v. State of Uttar Pradesh,
(1974) 34 STC (All.), referred lo.

CIVIL APPELLATE JURISDICTION ; Civil Appeal No. 109 of G
1977 Etc. Etc.

From the Judgment and Order dated 16.5.74 and 23.5.74 of the
Allahabad High Court in C.M.W. Petition Nos. 759 and 2253 or 1974.

Raja Ram Agarwal, Joseph Vellapally, K.S. Chaudhan and R.B. H
680 SUPREME COURT REPORTS [1996) 3 S.C.R.

A Misra, Ravinder Narain Ms. Punita Singh, Ashok Sagar, Vivek Gambhir
S.K. Garnbhir and M.S. Dhillon for the appearing parties.

The Judgment of the Court was delivered by

SEN, J. This case arises out of a Gazette Notification dated 9th
B January, 1970 issued by the Government of Uttar Pradesh granting exemp-
tion from payment of sales tax to various newly set up industrial undertak-
mgs.

The notification was to the following effect :
c "Whereas, it has been brought to the notice of State Government
that the Seven Industrial Units mentioned in Schedule below have
started the manufacture of goods mentioned in Column II of the
Schedule with effect from the date noted against each;

D And, whereas, the State Government is of opinion that it is
necessary so to do for increasing the production of the said goods
manufactured by the said industrial Units; , .
Now, therefore, in exercise of the powers under section 4-A of
the U.P. Sales Tax Act, 1948 {U.P. Act No. S.XV of 1948), the
E Governor is pleased to declare that the turnover in respect of the
said goods manufactured by the said industrial Units shall be
exempt from payment of sales tax for a period of three years with
effect from the date of publication of this notification iu the official

F
Gazette;
..•
SCHEDULE
SI. Name of the Goods Date of starting
No. Industrial Units manufactured production
Column-I Column-II Column-lll
G 1. ... .. .. . .. .....
2. . .... .... . . ....
3. . .... ..... . ....
4. ... .. ..... . ....
. 5. ..... . .... . ....

H
6. ..... .... . .....
STATEv. HINDUSTAN SAFETY GLASS WORKS (P) LTD. [SEN, J.] 681

7. M/s Hindustan Mirrors and February 1969 A
Safety Glass Toughened Glass
Works Private
Ltd., Allahabad.

As a result of this notification, the notified goods became exempt
from sales tax with effect from February, 1969 for a period of three years B
from the date of publication of the notification in the official Gazette. The
claim of the respondent, Hindustan Safety Glass Works (P) Ltd., is that it
was entitled to exemption from payment of tax under the Central Sales Tax
Act by virtue of the provisions of Section 8(2A) of the Central Sales Tax
Act before its amendment by Act No. 61 of 1972 which came into force C
with effect from 1.4.1973. The position after the amendment came was
examined by this Court in the case of Commissioner of Sales Tax, J & K
and others v. Pine Chemical Ltd. and Other, [1995] 1 SCC 58. In that case,
it was held that where the sale or purchase of the goods was exempt
generally under the State Sales Tax Law, the benefit of the exemption
under Section 8 (2A) of the Central Sales Tax act would be available to an D
• • assessee. But, if the exemption granted was not of general nature, then the
assessee could not claim the benefit of any exemption provided by Section
8(2A). In that case, the Government Order No. 159 provided exemption
to large and medium scale industries in the State of Jammu & Kashmir
from payment of sales tax both on raw materials and finished products for E
a period of five years from the date on which the unit went into production.
By a subsequent government Order dated 25.8.1971, the earlier order was
modified and it was provided that the State sales tax paid by large and
medium scale industries on the raw materials procured by them for the
•• initial five years of the production would be refunded to such industries. F
Similarly such industries were granted exemption from payment of State
Sales Tax on their finished products for a period of five years from the date
the unit went into production.

It was pointed out in that case that because of the aforesaid Govern-
ment Order the assessee could not claim benefit of exemption under G
Section 8(2A) of the Central Sales Tax Act because the exemption was not
a general one, the exemption under Government Order No. 159 was not
with reference to goods or a class of category of goods, but with reference
to an industrial unit producing them and their manufacture and sale within
a particular period. H
682 SUPREME COURT REPORTS [1996] 3 S.C.R.

A In the instant case, the exemption has not been granted to the goods
generally. Specified goods (mirrors and toughened glass) produced by a
specified company have been exempted from payment of sales tax for a
specified period of time. It is not the case of the assessee that mirrors and
toughened glass have been generally exempted from payment of tax. There-
B fore, in view of the ratio laid down in the aforesaid case of Commissioner
of Sales Tax v. Pine Chemicals Ltd., (supra), it must be held that the
assessee will not be entitled to get benefit of Section 8(2A) of the Central
Sales Tax Act in the facts of this Case.

On behalf of the respondent, it has been contended by Mr. Raja Ram
C Agarwal that sub-section (2A) of Section 8 of the Central Sales Tax Act
was amended with effect from 1.4.1973. He drew our attention to the
language of the section before its amendment, which was as under:

"8(2A) Notwithstanding anything contained in sub-sect. (1) or
sub-section (2) if under the sales tax laws of the appropriate state
D the sales or purchases 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 percent (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
E 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 pur-
chase of goods shall not be deemed to be exempt from tax generally
under the sale tax law of the appropriate State if under that law it
F is exempt only in specified circumstances or under specified con-
ditions or in relation to which the tax is levied at specified stages
or otherwise than with reference to the turnover of the goods."

It has been contended that under the old Act the exemption was in
G respect of a dealer whereas under the amending Act exemption was in
respect of goods. Under the repealed provisions, it would have been
sufficient if a dealer was exempted from payment of tax generally. It was
not necessary to establish that exemption had to be granted to the goods
in order to get the benefit of the provisions of Section 8(2A).

H Having regard to the language of the section before its amendment,
STATEv. HINDUSTAN SAFETY GLASS WORKS (P) LTD. [SEN, J.] 683

we are unable to uphold the contention of Mr. Agarwal. The exemption A
from the Central Sales Tax Act under the repealed provision was in respect
o~ 'sales or purchases ....... of any goods by a dealer'. The section granted
exemption to any goods of a dealer when such goods were 'e1rempt from
tax generally... .'. In order to take advantage of this Section 8(2A), a dealer
will have to establish that sale or purchase of the goods in questiou was B
exempt from tax generally. If it was a special exemption granted to him
because his undertaking was a new industrial undertaking or for any other
reason for a limited period, then the exemption will not be of general
nature and he will not be entitled to get the benefit of this sub-section.
There was an Explanation to the old sub-section (2A) of Section 8, which
made it clear that if the exemption was only in specified circumstances or C
under specified conditions or in relation to which the tax was levied at
specified stages or otherwise than with reference to the turnover of goods,
then the sale or purchase of goods shall not be deemed to be exempted
from tax generally.

In the instant case, the exemption has been granted only in respect D
of specified goods produced by certain specified newly set up undertakings

.. y
mentioned in the notification. The benefit of exemption will be available to
these new undertakings for a period of three years. In other words, at a
specified stage of development of these industries they will be given a
special benefit which will not be available generally to other industries E
producing goods of similar nature. Therefore, we fail to see how the
aforesaid case of Commissioner of Sales Tax v. Pine Chemicals Ltd, (supra)
can be distinguished on the ground that it was a decision given under
post-amendment law. In fact, it does not appear that by the amendment of
sub-section (2A) of Section 8 any change has been brought about in respect F
of meaning or the concept of sale or purchase of goods exempt from tax
generally.

We were also referred to a decision of this Court in the case of Mis.
Indian Aluminium Cables Ltd. v. State of Haryana, [1976] 4 SCC 27. In that
case the question was whether inter-State sale of electrical goods to State G
Electricity Undertaking under Section 5(2)(a)(iv) of the Punjab Sales Tax
Act, though exempt under the State Act was not exempt from the Central
Sales Tax. After referring to the Explanations to Section 8(2A), it was held
that there would be no exemption under the Central Sales Tax Act if the
sale, which was exempted under State Act, was only 'in specified cir- H
684 SUPREME COURT REPORTS [1996] 3 S.C.R.

A cumstances or under specified conditions'. This decision goes against the
contention advanced on behalf of the respondent. In that case, this Court
pointed out that exemption under the State Act was under the specified
circumstances and that sale must be to an undertaking engaged in supply-
ing electrical energy to the public under the licence granted under the
B Indian Electricity Act. There was also specified condition that the goods
purchased by the undertaking must be used for generation or distribution
of electrical energy.

It was contended on behalf of the respondent that in the case of
.
"I:
Indian Aluminium Cables Ltd. (supra), these is a passage which seems to
c suggest that the decision of Allahabad High Court in the case of Hindustan
Safety Glass Works (P) Ltd. v. State of Uttar Pradesh, (1974) 34 STC (AIL),
was approved by this Court.

We are unable to uphold this contention. The judgment of Allahabad
D High Court in the case of Hindustan Safety Glass Works (P} Ltd. (supra)
and also some other judgments of some other High Courts were referred
to and distinguished on facts. The distinguishing feature in the case of ' .
-
Hindustan Safety Glass Works (P) Ltd. was that the stipulation that the "1
turnover of such sales would, for a period of three years be exempt from
payment of sales tax did not amount to exempting the turnover of such
E goods from tax under specified circumstances or specified conditions as in
the case of a Indian Aluminium Cables Ltd. This Court was not called upon
to hold nor did it hold that this would amount to general exemption of the
goods from the sales tax.
•
F In that case the principle underlying section 6 was explained as ii
under:

"Section 6 of the State Act does not speak of exemption, but deals
with tax free goods. In other words, Section 6 deals with specified
goods on which no tax is payable. Section 5 of the State Act deals
G with what has to be excluded from the taxable turnover of the
dealer. Both the sections deal with goods which do not suffer from
sales tax. Section 8(2A) of the Central Act exempts goods from
inter-State tax where a tax law of the State has exempted them
from sales tax. The explanation to Section 8{2A) of the Central
H Act takes away the exemption where it is not general and has been
STA1Ev. HINDUSTAN SAFETY GLASS WORKS (P) LTD. [SEN,J.] 685

granted in specified circumstances or under specified conditions. A
The provisions contained in Section 5(2)(a)(iv) of the State Act
exclude sales which are made under specified circumstances or
specified conditions. The specified circumstances are that the sale
must be to an undertaking engaged in supplying electrical energy
to the public under a licence or sanction granted under the Indian B
Electricity Act, 1910. The specified condition is that the goods
purchased by the undertaking must be used for the generation or
distribution of electrical energy. If the circumstances do not exist
or if the conditions are not performed then the sales of goods
cannot be exempted from tax. General exemption means that the
goods should be totally exempt from tax-before similar exemption C
from the lery of Central sales tax can become available. Where the
exemption from taxation is conferred by conditions of in certain
circumstances there is no exemption from tax generally."

These observations completely negate the argument now advanced
on behalf of the respondent. The exemption in the instant case has been D
granted to a few specified goods of some new industries for a specified
period of time. The exemption is not generally given to all industries or all
y similar goods manufactured and sold in Uttar Pradesh. Similar goods
produced by other industries will be taxable under the said Act.
E
Moreover it has also to be noted that in the Notes on Clauses to the
Bill introduced for amending the Central Sales Tax Act by the Amendment
Act of 1972 (61 of 72), it was stated that" sub-clause (a) of Clause 5 sought

.. to substitute a new sub-section for existing sub-section (2A) of Section 8
of the principal Act. The new sub-section seeks to bring out more clearly
that an exemption or lower rate of levy under the local sales tax law of the F
appropriate State would be available in respect of an inter-State sale of
goods only if such exemption or lower levy is available generally with
reference to such goods or such class of goods under the local sales tax
law."
G
The purpose behind the amendment of Section 8(2A) was to make
the existing provisions clear. In other words, the object was not to being
about any change in the existing law but to set it out in clearer words.

For all these reasons, we are unable to uphold that the law laid down
in the case of Commissioner of Sales Tax v. Pine Chemicals Ltd. (supra) H
686 SUPREME COURT REPORTS (1996) 3 S.C.R.

A will not apply to a case governed by Section 8(2A) before its amendment
on 1.4.1973.

In that view of the matter, the appeal is allowed. There will be no
order as to costs.

B Civil Appeals Nos. 1JO and 2961 of 1977 and Civil Appeal Nos. 4591-92 of
1996 (A1ising out of S.L.P. (C) Nos. 245-46 of 1978.

Special leave granted.

In view of our judgment in Civil Appeal Nos. 109 of 1977, the above
C appeals are allowed. There will be no order as to costs. ._

Civil Appeals Nos. 1302, 1303, 1304 1305 of 1978 and civil Appeals Nos.
4553-94 of 1996 (Alising out of S.L.P. (C) Nos. 7842 and 1522 of 1979.

Special leave granted.
D In view of our judgment in Civil Appeal No. 109 of 1977, the above
appeals are dismissed. There will be no order as to costs.
• •
R.S. Appeals dismissed.

. .