JUDGMENT H.N. 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.
3. 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.
4. 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.
5. 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 be 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.
6. 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.
7. In this view, we derive considerable support from the decision of the Madhya Pradesh High Court in the case of Commissioner of Sales Tax v. Kapoor Dori Niwar and Co., Gwalior, [1968] 22 S.T.C. 152. Under the Madhya Pradesh General Sales Tax Act, 1958, sale of niwar by a registered dealer had been exempted from payment of sales tax for a particular duration. The assessee claimed that in view of the exemption granted under the State Sales Tax Act it was, as provided in Section 8(2A) of the Central Sales Tax Act, not liable to pay sales tax under that Act. The learned Judges of the High Court pointed out that the expression, "exempt only in specified circumstances or under specified conditions", occurring in the explanation to Sub-section (2A) meant such circumstances or conditions, the non-existence or non-performance of which precludes the grant of exemption; so that if those circumstances do not exist or those conditions are not performed, then the sales of goods cannot be exempt from tax even if they are effected by the class of dealers to whom exemption is granted during the period of exemption The learned standing counsel relied upon certain observations of the Punjab and Haryana High Court in the case of State v. Indian Aluminium Cable Ltd., Faridabad, [1974] 33 S.T.C. 152. This case, in our opinion, does not support the submission that the period for which exemption is granted becomes either the condition for or the circumstance in which such exemption has been granted. In this case, the learned Judges approved the decision of the Madhya Pradesh High Court in the case of Commissioner of Sales Tax, Madhya Pradesh v. Kapoor Dori Niwar and Co., Gwalior, [1968] 22 S.T.C. 152, and held that the notification granting exemption in that case was materially different from the notification issued in the Madhya Pradesh case. They held that the exemption granted in that case could not be said to have been granted generally because there could be undertakings doing the same job which could be made liable to pay sales tax on similar transactions as had been entered into by the Indian Aluminium Cable Ltd. It is not necessary for us to make any comment on the correctness of this decision, as in the case before us, the learned standing counsel has failed to show that there could be some other dealer of the goods manufactured by the petitioner-company, who in any circumstance would be liable to pay tax on the sale of such goods.
8. The learned standing counsel then urged that under Section 8(2A) exemption can be granted in respect of sale of goods. While considering whether sale of goods is exempt generally under the sales tax law of a State, one has to see whether the sale of that particular goods as such is exempt from payment of sales tax. If the sale of such goods attracts sales tax at any stage and in the hands of any dealer, it would not be possible to say that the sale of such goods is exempt from tax generally. Goods cannot be said to be exempt from tax generally if the State law stipulates payment of tax in respect of its turnover. In the context, goods cannot be classified further into goods manufactured by different manufacturers. In other words, if, under the U. P. Sales Tax Act, sale of toughened glass and mirror as such has not been exempted from sales tax, it cannot be said that the sale of mirror and safety glass is exempt from tax generally merely because the State Government has granted some concession in respect of mirror and toughened glass manufactured by a particular unit. We are unable to accept this submission. For purposes of Section 8 of the Central Sales Tax Act the question whether, under the State law, the sale of a particular commodity as such is exempt from tax generally is not material. What is relevant and material is the fact whether, under the State law, the sale or purchase of goods by a particular dealer is exempt from tax generally, i. e., whether or not the sale of goods in question by the petitioner was exempt from tax generally. It follows that the Act contemplates that even though sale of a particular class of goods may be taxable in the hands of some dealer, it may still belong to the class of goods which in the hands of another dealer is exempt from tax generally. The argument that in order to attract Section 8(2A), entire class of goods as such should be exempt from tax in the hands of all other dealers, therefore, does not appeal to us. Any way, in this case it is obvious that so far as mirrors and toughened glasses manufactured by the petitioner in U. P. are concerned, their sales as per the two notifications issued under sections 3-A and 4-A of the U. P. Sales Tax Act are not liable to sales tax in the hands of any dealer in U. P. The only question that remains to be considered is whether for purposes of Section 8(2A), the goods belonging to the classes mentioned therein could be sub-classified into goods manufactured by different manufacturers. In our opinion, the U. P. Sales Tax Act does contemplate a sub-division of goods into one manufactured subsequent to or prior to a particular date, or into goods manufactured in factories or workshops established prior to and subsequent to a particular date. The provision in Section 8(2A) when it speaks of exemption from tax generally, on the sale or purchase of goods, obviously refers to such class of goods which have been selected for concessional treatment. It is not disputed that with a view to increase the production of toughened glass and mirror, it was open to the State Government to classify for the purposes of levy and collection of tax under the U. P. Sales Tax Act mirror and toughened glass manufactured by the petitioner's concern and that manufactured by others. As a matter of fact, while issuing the notification under Section 4-A of the U. P. Sales Tax Act the respondent (State of U. P.) have so classified the goods. If goods can be so classified for the purpose of granting exemption under Section 4-A of the U. P. Sales Tax Act, there is no reason for not countenancing that classification for purposes of Section 8(2A) of the Central Sales Tax Act.
9. As stated earlier, for purposes of Section 8(2A) of the Central Sales Tax Act sale of goods, i. e., sale of mirror and toughened glass manufactured by the petitioner-company was under no condition and in no circumstance liable to be taxed in the petitioner's hands, Normally, it would be taken that the sale of such goods by the petitioner was exempt from tax generally unless it could be shown that such goods belonged to the class specified in the explanation to Section 8(2A). We have already shown that the toughened glass and mirror manufactured by the petitioner did not fall in such a category. Accordingly, in the hands of the petitioner the turnover of their sales was not liable to tax even under the Central Sales Tax Act.
10. In the result the petition succeeds and is allowed with costs. The two orders passed by the Sales Tax Officer dated 25th June, 1973, and 13th December, 1973, are quashed.