The court upheld the Tax Board's interpretation of tax exemption calculations based on percentage increases in inter-State sales, affirming that authorities acted within the notification's spirit.

JUDGMENT :

(BIRENDRA KUMAR, J.)

1. Heard the parties.

2. The petitioner is engaged in the business of manufacturing and trading of Synthetic and Acrylic Yarns in the State of Rajasthan. The State of Rajasthan in exercise of power conferred under Section 8(5) of the Central Sales Tax Act 1956 issued a notification bearing SO No.23 dated 06.05.1986 providing for partial exemption from tax payable in respect of the sales, by the assessee, of the goods in course of inter-State trade or commerce.

3. The petitioner claims 75% of exemption in the matter of inter-State Trade and the Taxing Authority has allowed only 50% exemption of the tax for the assessment year 1999-2000.

4. Initially, the Assessment Authority passed order dated 28.02.2002 allowing only 50% of deduction. The said order was challenged before the Appellate Authority in Appeal No.7/CST/01- 02. The appeal was also dismissed on 27.09.2002. The order of the Appellate Authority was challenged before the Rajasthan Tax Board in Appeal No.1586/2002. The Tax Board also dismissed the appeal by order dated 19.12.2003. Hence, this tax revision under Section 86(2) of the Rajasthan Sales Tax Act .

5. Contention of the petitioner is that the above statutory authorities have acted against mandate of law and spirit of the notification aforesaid.

Further contention is that the concept of horizontal increase applied by the Taxing Authorities would frustrate the entire legislative intent of notification dated 06.05.1986, rather in true spirit vertical increase should have been accepted by the authorities.

6. For brevity, the notification dated 06.05.1986 is being reproduced below :

“S.O.23.-In exercise of the powers conferred by S.8(5), CST Act, 1956, the State Govt.(.2.) in supersession of the FD notfn No.F.4(72)FDGr/IV/81-36 dated 3.12.1985 [S.No.584], hereby directs that, with immediate effect, any dealer, having his place of business and manufacturing goods in the State of Rajasthan, may claim partial exemption from the tax payable in respect of the sales by him of such goods in the course of inter-State trade or commerce by way of reduction at the rate of 50% of the tax so payable [on increased sales upto 50% and at the rate of 75% of the tax so payable on increased sales made over and above the aforesaid 50%), in the manner and subject to the conditions as follows:-

(1) Such reduction of tax shall be allowed to a dealer only after and in respect of the increase which is effected in the percentage of the quantum of goods sold in the course of inter-State trade or commerce out of the total quantum of goods sold within the State and in the course of inter-State trade or commerce and despatched to Head Office, Branch Office, Depot or agent outside the State for sale outside the State, during any accounting year as against such percentage during the accounting year 1984-85;

(2) in the case of a dealer who commenced the manufacture of goods in the State of Rajasthan [on or after 1.1.1985), the average of the aforesaid percentages in respect of the other manufacturers in the State in the relevant industry during the accounting year 1984-85, calculated and determined by the assessing authority with the approval of the Commissioner, shall be deemed to be the percentage in respect of such dealer for the accounting year 1984-85;

(3) This increase effected in the percentage, as referred to in clause (1) above in respect of the sales in the course of inter-State trade or commerce, to be considered shall be limited to the extent of the decrease in the percentage in respect of the despatch of goods to Head Office, Branch Office, Depot or agent outside the State for sale outside the State, during the relevant accounting year as against such percentage during the accounting year 1984-85; and (4) No claim for such reduction of tax shall be allowed in respect of levy-cement.

Note-Claim for partial exemption under this notfn dated 6.5.1986 [S.No.625]