# INDIAN ALUMINIUM CABLES LTD v. STATE .OF HARYANA

- **Citation:** [1976] 3 S.C.R. 992
- **Court:** Supreme Court of India
- **Decided:** 1976-04-02
- **Bench:** A. N. Ray, M. H. Beg, Jaswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/indian-aluminium-cables-ltd-v-state-of-haryana-6859
- **Pages:** 6

## Headnote

Exemption froni
tax liability-General Tax exemption--Central Sales
Tax .A.ct (74 of 1956)-Section 8(2A) and Explanation thereto-Meaning of
"exempt from tax geenrally".
Punjab Sales Tax Act-Section
5(2) (a) (iv)
-Nature of exemption granted under the Section-Whether in specified circuni·
stances or under specified conditions.
Under section 5(2)(a)(iv) of the Punjab Sales Tax Act "taxable turnover"
meant that part of a dealer's gross turnover during any period which remains
after deducting therefrom, his turnover during ·that period on sales to any
undertaking supplying electrical energy to the public under a licence or sanction. granted under the Indian Electricity Act, 1910. of goods for use by it
in the generation or distribution of such energy.
Under section 8 of the Central Sales Tax, every dealer~ who in the course 4t
of inter state trade or commerce sells to the Go~ernment any goods; or 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 the Act, which
shall be three per cent of his turnover. Section 8(2A) reads as follows:-
"Notwithstanding anything contained in sub-section (IA) of section
6 or sub section (1) or sub section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the §ale or,
as the case may be, the purchase of which is. under the sales tax law
of the appropriate state, exempt, from tax generf!llY, or subject to tax
~enerally at a rate which is lower than three per cent, (whether called a
tax or fee or by any other name), shall be riil or, as the case may be,
shall be calculated at the lower rate.
Explanation : For the purpose of this sub-section or sale or purchase of
any goods shall not be deemed to be exempt from tax generally under
the sales tax law of the appropriate state, if under the law the sale or
purchase of such goods is exempt only in specified circumstances or
under specified conditions or the tax is levied on the sale or vurchase of
such g_9ods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods
at specified stages or otherwise than with reference to the turnover of the
goods."
The appellants were suppliers of poles and cables to the Delhi Electric
Sup_ply Undertaking and the sales were in the course of inter state trade or
commerce and admittedly exempt under the state sales tax u/s 5(2)(a)(iv)'.
The state assessed tax u/s 8 of the Central Sales Tax Act, 1956 on the ground
that the exemption granted ufs 5(2)(a)(iv) of the state Act fell under Explanation to s. 8(2A) of the Central Sales Tax Act. The High Court held that the
sales by the undertaking supplying electrical energy were not exempt from tax
generally within the meaning of section 8 ( 1A) of the Central Act read with
section 5(2)(a)(iv) of the State Act.
Dismissing the appeal, by special leave, the Court.
HELD : (1) General exemption means that goods should be totally exempt
from tax before similar exemption from the. levy of central s~es .tax
can
become available. Where the exemption from taxation is conferred by conditions or in certain circumstances there is no exe1nDtion from tax generally.
Section 6 of the State Act does not speak of exemption but deals with tax free
goods. Section 6 deals with specified goods on '\Vhich no tax
is:
payable~
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INDIAN ALUMINIUM CABLES v. H"-RYANA (Ray, CJ.)
993
Section 5 of the State Act deals with what has to be excluded from taxable
turnover of the dealer. Both the sections deal with goods which do not sulfer
from sales tax. Section 8(2A) of the Central Act exempts goods from inter
state sales tax where a tax law of the state has exempted them from sales tax.
The explanation to section 8(2A) of the Central Act takes away the exemption
where it is not general and has been granted in specified circumstances or under
•peci

## Text

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992
INDIAN ALUMINIUM CABLES LTD.
v.
STATE .OF HARYANA
April 2, 1976
[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.]
Exemption froni
tax liability-General Tax exemption--Central Sales
Tax .A.ct (74 of 1956)-Section 8(2A) and Explanation thereto-Meaning of
"exempt from tax geenrally".
Punjab Sales Tax Act-Section
5(2) (a) (iv)
-Nature of exemption granted under the Section-Whether in specified circuni·
stances or under specified conditions.
Under section 5(2)(a)(iv) of the Punjab Sales Tax Act "taxable turnover"
meant that part of a dealer's gross turnover during any period which remains
after deducting therefrom, his turnover during ·that period on sales to any
undertaking supplying electrical energy to the public under a licence or sanction. granted under the Indian Electricity Act, 1910. of goods for use by it
in the generation or distribution of such energy.
Under section 8 of the Central Sales Tax, every dealer~ who in the course 4t
of inter state trade or commerce sells to the Go~ernment any goods; or 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 the Act, which
shall be three per cent of his turnover. Section 8(2A) reads as follows:-
"Notwithstanding anything contained in sub-section (IA) of section
6 or sub section (1) or sub section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the §ale or,
as the case may be, the purchase of which is. under the sales tax law
of the appropriate state, exempt, from tax generf!llY, or subject to tax
~enerally at a rate which is lower than three per cent, (whether called a
tax or fee or by any other name), shall be riil or, as the case may be,
shall be calculated at the lower rate.
Explanation : For the purpose of this sub-section or sale or purchase of
any goods shall not be deemed to be exempt from tax generally under
the sales tax law of the appropriate state, if under the law the sale or
purchase of such goods is exempt only in specified circumstances or
under specified conditions or the tax is levied on the sale or vurchase of
such g_9ods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods
at specified stages or otherwise than with reference to the turnover of the
goods."
The appellants were suppliers of poles and cables to the Delhi Electric
Sup_ply Undertaking and the sales were in the course of inter state trade or
commerce and admittedly exempt under the state sales tax u/s 5(2)(a)(iv)'.
The state assessed tax u/s 8 of the Central Sales Tax Act, 1956 on the ground
that the exemption granted ufs 5(2)(a)(iv) of the state Act fell under Explanation to s. 8(2A) of the Central Sales Tax Act. The High Court held that the
sales by the undertaking supplying electrical energy were not exempt from tax
generally within the meaning of section 8 ( 1A) of the Central Act read with
section 5(2)(a)(iv) of the State Act.
Dismissing the appeal, by special leave, the Court.
HELD : (1) General exemption means that goods should be totally exempt
from tax before similar exemption from the. levy of central s~es .tax
can
become available. Where the exemption from taxation is conferred by conditions or in certain circumstances there is no exe1nDtion from tax generally.
Section 6 of the State Act does not speak of exemption but deals with tax free
goods. Section 6 deals with specified goods on '\Vhich no tax
is:
payable~
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INDIAN ALUMINIUM CABLES v. H"-RYANA (Ray, CJ.)
993
Section 5 of the State Act deals with what has to be excluded from taxable
turnover of the dealer. Both the sections deal with goods which do not sulfer
from sales tax. Section 8(2A) of the Central Act exempts goods from inter
state sales tax where a tax law of the state has exempted them from sales tax.
The explanation to section 8(2A) of the Central Act takes away the exemption
where it is not general and has been granted in specified circumstances or under
•pecified conditions. 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 ml!St be to an
undertaking engaged in supplying electrical energy to the public under a licence
or sanction granted under the Indian Electricijy Act,. 191-0. 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. The expression "generation or distribution of such
energy" specifies the condition under which exemption is granted.
[996H,
997A-D]
Commissioner of Sales Tax, M.P. v. Kapoor Dari Niwar &: Co., Gwalior 22
STC p. 152; Hindustan Safety Glass Works (P) Ltd. v. The State of U.P. and
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Anr. 34 STC 209, discusse<lCIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 68 of 1974
and 936 of 1975.
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Appeals by Special Leave from the Judgment and Order dated
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5-11-1973 of the Punjab & Haryana High Court in Sales Tax Reference Nos. 12 and 11 of 1969.
R. S. Desai, (In CA No. 936/75), P. C. Bhartari, R. Narain, K.
J. John, 0. C. Mathur for the Appellants.
B. Sen, (In CA No. 68/74), and R. N. Sachthey for the Respondent.
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P. C. Bhariari for Applicant/Interveners (In CA No. 68/74).
The Judgment of the Court was delivered by
RAY, C.J.
This appeal by special leave is on the question whether
the appellant is exempt from inter-State tax on the sales of poles and
cables to the Delhi Electric Supply Undertaking by reason of the proviF
sions contained in section 5 (2)(a)(iv) of the Punjab Sales Tux Act
hereinafter referred to as the State Act.
Section 5(2)(a)(iv) of the State Act is as follows:
"5 (2) In this Act the expression
"taxable turnover"
means that part of a dealer's gross turnover during any period
which remains after deducting therefromG
(a) his turnover during that period on-
(iv) sales to an~ undertaki".g supplying electrical energy
to the public under a licence or sanction granted or
deemed to have been granted under the Indian Electricity Act, 1910, of goods for use by it in the generation
or distribution of such energy."
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Under section 8 of the Central Sales Tax Act hereinafter referred
to as the Central Act, every dealer, who in the course of inter-State
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99~
SUPREME COUR'J: REPORTS
[1976] 3 S.C.R.
trade or commerce sells to the Government [lny goods; or sells to a
registered dealer other than the Government goods of the desc~iption
referred to in sub-section (3) shall be liable to pay tax under this Act,
which shall be three per cent of his turnover.
The provisions in section 8(2A) of the Central Act are as follows:-
"Noitwithstandrng anything contained
in sub-section
(IA) of section 6 or sub-section ( 1) or sub-section (2) of
this section, the tax payable under this Act by a dealer on his
turnover in so far as the turnover or any part thereof relates
to the sale of any goods, the sale or, as t_he case may be, the
purchase of which is, under the sales t'ax law of the appropriate State, exempt from tax generally or subject to tax
generally at a rate which is lower than three_ per cent,
(whether called a tax or fee or by any other name), shall be
nil or, as the case may be, shall be calculated at the lower
rate.
EXPLANATION: For the purposes, oL this sub-section
a sale or purchase of any goods shall not be deemed to be .
. exempt from tax generally under the sales tax law of the
appropriate State if under that law the sale or purchase of_
such goods is exempt only in SJl_ecified circumstances or under
specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with
reference to the tnrnover of the goods."
The contention on behalf of the appellant is that by reason of the
Explanation to section 8 (2A) of the Central Act read with section
5 (2)(a) (iv) of the State Act the appellant is exempt from payment
of inter-State sales tax. The words "goods for use by it in the generation or distribution of such energy" occurring in section 5(2)(a)(iv)
of the State Act are said by counsel for the appellant to be descriptive
of the goods.
fa short, the appellant's contention is that goods for
use by the undertaking supplying electrical energy are generally exempt
from taxation, and, therefore, they should not be included in the turnover.
The contention on behalf of the State is that the exemption granted
under sectio.:i. 5(2)(a)(iv) of the State Act is exemption in specified
circumstances and under specified conditions. The specified circumstances are said to be sales to an undertaking supplying electriC'al energy
to the public under the Indian Electricity Act, 1910. The specified
conditions are that the goods are for use by the undertaking in· the
generation or distribution of such energy.
The answer to the question in this appeal is whether the exemption
mentioned in section 5(2) (a) (iv) -0f the State Act is in specified circumstances or under specified conditions, as the c-ase may be, or it i£
a general exemption as the appellant contends in cases of sales of goods
to an Electric Supply Undertaking for use by it in the generation or
distribution of such energy.
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INDIAN ALUMINIUM <;A1JJ,ES V. HARYANA (Ray, C.J.)
995
The appellant referred to Schedule B read with section 6 of the
State Act iiad in particular Items 33 and 46 to illustrate what would
be exemption under specified circumstances or specified conditions. In
Scbedule B there are two columns.
The first column describes the
goods.
The second cofomn describes the conditions which make the
goods tax free. In Item 33 in Schedule B "Photographs including Xrays photographs" mentioned in the first column are tax free "when
sold by photographers and radiologists preparing them" as mentioned
in the second column. In Item 46 "hand spun yarn" mentioned in the
first column becomes tax free "when sold by oae who deals in hand
spun yarn exclusively" as mentioned in the second column.
Section 5 (2) of the State Act deals with taxable turnover. There
is no dispute that electricity poles and cables sold to the undertakingi
supplying electric energy are exempt under the State Act from beil1g
included within the taxable turnover. The question is whether such
S'ales made in the course of inter-State trade are also exempt from the
levy of Central Sales Tax.
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The appellant contends that the exemption in the State Act is
general because exemption applies in respect of goods without iiay
enumeration or classification of goods. Further, it is said that exempD
lion is general because the sales are for use in generation and distribution of electrical energy. According to the appellant sales of all goods
to the undertaking supplyiiag electrical energy are exempt from being
included in the taxable turnover as long as the goods answer the description that they are for use in the generation or distribution of electrical energy.
The appellant relied on the decision of the Madhya Pradesh High
Court in Commissioner of Sales Tax, Madhya Pradesh v. Kapoor Dori
Niwar & Co., Gwalior(') ill support of the meaning of the expression
"exempt from tax generally". In the Madhya Pradesh case (supra)
the State Government issued a notification in the year 1959 exempting
from the payment of sales tax for a period of one year sales of niwar
by a dealer registered under the 1958 relevant State Act. The exemption was later on extended up to 31 March, 1963. The assessee a
registered dealer claimed exemption on rater-State sales of niwar. The
Madhya Pradesh High Court held that during the period of the exemption, the sales of niwar by a registered dealer were exempt from tax
generally within the meaning of section 8(2A) of the Central Act, and,
therefore, the assessee's inter-State sales of niwar were exempt from
tax under the Central Act.
The expression "exempt only in specified
circurustances or under specified conditions" occurring in the Explanation
to section 8 (2A) of the Central Act was held to mean such circumstances or conditions the n1?U-existence or non-performance of which
precludes the grant of exemption. In other words, if those circumstances do not exist or those conditions are not performed then the
sales of goods cannot be exempted from tax even if they are effected
by a class of dealers to whom exemption is granted· and durrag the
period for which exemption is granted.
(l) 22 S.T.C. 152.
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SUPREME COURT REPORTS
[1976] 3 S.C.R.
In the Madhya Pradesh case (supra) there was no dispnte that the
sales effected by the assessee fell under section 8 ( 1) of the Central
Act. The State Act granted exemption from sales_ tax on sales of l!iwar
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effected by a registered dealer. The. exemption granted to sales by a
registered dealer under the notificatidil was without any restriction or
limitation so far as sales by a registered dealer were concerned. Though
the period of exemption· was fixed, it was. not regarded as a condition
imposed in relation to the exemption. It was also contended there that
because the exemption was granted to the registered dealers the exempB
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tion was granted to a class of dealers, and, therefore, it should be
construed to be an exemption in specified circumstances or under
specified conditions. The Court repelled the contention by stating that
the exemption was to all registered dealers without any restriction or
condition.
The other decision on which the appellant relied is of the Allahabad
High Court in Hindustan Safety Glass Works (P.) Ltd. v. The State of
Uttar Pradesh & Anr.(') In the Safety Glass Works case (supra) the
company manufactured toughened glasses and mirrors in its factories.
Under a notification issued by the State Governme1,1t under the State
Act sales of mirrors and safety glasses were liab)e to sales tax either
at the point of sale by the importer of such gcoos or at the point o~
sale by the manufacturer thereof.
Subsequently, a notification was
issued by the State Government exempting toughened glasses and
mirrors manufactured by the company at Allahabad from payment of
sales tax for a period of three years. The company claimed that the
turnover of sales of toughened glasses and mirrors manufactured by
E · it, being generally exempt from tax under the State Act, was also not
liable to Central Sales Tax because of the provisions contained in section 8(2A) of the Central Act. It was held that for purposes of sectidn 8 ( 2A) of the Central Act, sale of mirrors and toughened glasses
manufactured by the company was under no condition and in no
circumstance liable to be taxed in the hands of the company. The
reasons given were that normally it will be taken that the sale of mirrors and toughened glasses by the company was exempt from tax
generally unless it could be shown ,that such goods belonged to the
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class specified in the Explanation to section 8(2A) of the Central Act.
As the toughened glasses and mirrors manufactured by the company did
not fall in such a category the turnover of the sales of those goods in
the hands of the company was not liable to tax under the Central Act.
The stipulation in the notification in the Safety Glass Works case
'(supra) that the turnover of such sales would fpr a period of three
years be exempt from payment of sales tax did not amount to exempt-
'ing the turnover of such goods from tax under specified circumstances
or specified conditions.
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
with what has to be excluded from the taxable turnover of the dealer.
(1) 34 S.T-C. 209.
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JNDIAN ALUMINIUM CABLES V. HARYANA (Ray, C.J.)
997
Both the sections deal with goods which do not suffer from.. sales tax.
Section 8(2A) of th Central Act exempts goods from inter-State sales
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tax where a tax Jaw of the State has exempted them from sales tax. The
Explamtion to section 8(2A) of the Central Act takes' away the
exemption where it is not general and has been granted jn specified
circumstances or under specified cdnditions. 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 sa'ilction
granted under the Indian 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 cdnditions are not pedormed 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
from the levy of Central sales tax can become available. Where the
f exemption from taxation is conferred by conditions or in certain circumstances there is no exemptio,1 from tax generally.
The contention of the appellant that the words "in the generation
or distribution of such energy" in section 5 (2)(a)(iv) of the State
Act are descriptive of goods is unacceptable. The expq:ssion "generation or distribution of such e'aergy" specifies the condition under which
,exemption is granted.
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For these reasons we are of opinion that the High Court was corA
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rect in holding that the sales by the undertaking supplying electrical
energy were not exempt from tax generally within the meaning of
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sectioo 8 ( 2A) of the Central Act read with se~tion 5 ( 2 )(a)( iv) of
the State Act. The appeal is cjismissed. In view of the fact that the
High Court directed the parties to pay and bear their own costs, similar
order is made here.
S.R.
Appeal dismissed .
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