IMPORTANT POINT
Exemption notification and sub-section (5) of Section 8 of the Central Sales Tax, whereunder it has been issued, are not self contained notifications/provision and therefore, the condition mentioned in Section 8 to be insisted upon as a condition for obtaining the benefit under the notification.

Headnote:(i) Central Sales Tax Act, 1956-Section 8-Central Sales Tax (Registration and Turn-over) Rules, 1957-Rule 12(1)-Exemption notifications dated 26th December, 1986 and 17th April, 1990-Claim of exemption under-Whether production of a C-form is essential for availing benefit of notification?-(Yes)-Section 8 or notifications are not self contained-Levy of Central Sales Tax and prescription of rate is not by notifications but by Act itself-Power of exemption and its exercise is to be guided by and be consistent with provisions of Act.
       Held : Sub-section (5) of Section 8 is an integral part of Section 8 and the Act as such. The said power has to be exercised in public interest. The power of exemption and its exercise is to be guided by and be consistent with the provisions of the Act. More important, the levy of central sales tax and the prescription of rate is not by the notifications but by the Act itself. Section 8(1) prescribes the rate and sub-section (4) the condition that has to be satisfied for availing of the rate in sub-section (1). What the notifications do is to reduce the rate prescribed by Section 8(1) further, subject to certain conditions. The conditions prescribed by the notifications are the conditions prescribed for availing the further reduction of rate provided by the notification. The notifications merely reduce the rate of tax; they do not do away with the levy altogether. All that the notifications have done is to reduce the rate of tax from 4% to 1½ % (2½ %, as the case may be). Separate conditions are prescribed for availing the rate (which itself is a concessional rate) prescribed in Section 8(1) and for availing the further reduction provided by the Notification. Those two sets of conditions are prescribed by Section 8(4) and by the notifications respectively. One cannot conceive of the said notification independent of, or apart from Section 8(1). They merely reduce the rate in Section 8(1) as already mentioned. One must first satisfy the condition in Section 8(4) to become eligible for the concessional rate in Section 8(1). It is only thereafter that he can claim the benefit of the said notifications, for which purpose again he has to satisfy the conditions prescribed in the Notifications. It is therefore wrong to think that Section 8(5) or the notifications are self-contained and operate de hors the other provisions of the Act/Rules. The Division Bench has unfortunately failed to appreciate the Notifications in their correct perspective. (Para 9)
       (ii) Central Sales Tax Act, 1956-Section 8-Sub-section (4) is in nature of a proviso to sub-section (1)-Sub-section (4) imposes a condition which must be satisfied by dealer seeking to avail of rate of tax provided by sub-section (1). (Para 4)

JUDGMENT

B.P. Jeevan Reddy, J.-These appeals are preferred against the judgment of a Division Bench of the Rajasthan High Court allowing a batch of special appeals filed by the respondents-assessees. The special appeals were preferred against the common judgment of a learned Single Judge of that Court dismissing the writ petitions filed by them. The matter arises under the Central Sales Tax Act, 1956.

2. The respondents-assessees are manufacturers and/or dealers in edible oils and stainless steel sheets. During the relevant years, they effected a large number of inter-State sales to various dealers in Bombay and Gujarat. They obtained C-forms from the purchasing dealers and submitted them in their assessment proceedings. On survey and inquiry, it was found that many of the C-forms were either not valid or not genuine. Some of them were found to have been issued to dealers other than the respondents. Accordingly, anti-evasion proceedings were commenced against the respondents. Notices were issued calling upon them to show-cause why additional tax and penalty be not levied and recovered from them. It is at that stage that the respondents approached the Rajasthan High Court by way of writ petitions contending that since the inter-State sales effected by them are covered by the Exemption Notifications dated 26th December, 1986/17th April, 1990 and because the said notifications do not require the production of a C-form as a condition for availing the exemption provided thereby, they were under no obligation to produce the same and no action can be taken against them for producing alleged invalid or spurious C-forms. It was, of course, their case that if the C-forms are found to be invalid or spurious, the responsibility lies upon the purchasing dealers who issued them and that they themselves were in no way responsible therefor. The learned Single Judge disagreed with the legal submission (based upon Exemption Notifications) put forward by the respondents and dismissed their writ petitions. On appeal, however, the Division Bench has upheld the respondents contention and allowed the special appeals (and the writ petitions) filed by the respondents.

3. Section 8 of the Central Sales Tax Act prescribes the rates of tax on inter-State sales. Sub-section (1) provides that "Every dealer, who in the course of inter-State trade or commerce - (a) sells to the Government any goods; or (b) sells to a registered dealer, other than the Government, goods of the description referred to in sub-section (3); shall be liable to pay tax under this Act, which shall be four per cent of his turnover. "Sub-section (2) says that inter-State sales not falling under sub-section (1) shall be liable to be charged at the higher rates mentioned therein. Sub-section (3) specifies the goods for the purposes of clause (b) of sub-section (1) of Section 8. It is sufficient to mention that sub-section (3) contemplates certain goods or class of goods being specified in the certificate of registration of the purchasing dealers, which are intended either for re-sale or for being used as raw-material for manufacturing other goods or for other purposes mentioned in the sub-section.

Sub-section (4) then states :

"(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 authority; or

(b) if the goods are sold to the Government, not being a registered dealer, a certificate in the prescribed form duly filled and signed by a duly authorised officer of the Government.

Provided that the declaration referred to in clause (a) is furnished within the prescribed time or within such furth

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1996 Supreme(SC) 740

Cases Referred (1)