GRACE PAPER INDUSTRIES LTD Vs. STATE OF GUJARAT

JUDGEMENT

(1.) At the instance of the assessee, the Gujarat Sales Tax Tribunal, Ahmedabad, has referred the following question of law arising out of its decision in Second Appeal No. 67 of 1988 for the opinion of this Court as contemplated by Section 69 of the Gujarat Sales Tax Act, 1969 ("the Act" for short):

(2.) When purchases are made on payments of tax and sales of goods manufactured therefrom are exempt from tax under Entry 118(3), whether the amount of tax that otherwise would have been admissible as set off under Rule 42 should be adjusted towards the amount of tax exempted under Entry 118(3) and the net amount remaining after such adjustment should only be taken into consideration for the purpose of aggregation of tax exemption limit?

(3.) The assessee is a dealer registered under the provisions of the Act as well as under the Central Sales Tax Act, 1956. It set up a new industry in a backward area. Therefore, it was granted necessary eligibility certificate by the Industries Department and Exemption Certificate under Entry 118 of the Government Notification issued under Section 49(2) of the Act. While assessing the applicant for the period from July 1, 1982 to June 30, 1983, the Sales Tax Officer aggregated the benefits utilized by the assessee by including the notional tax on the sales which are considered as exempt under Entry 118(3) of the aforesaid Notification. He also included the notional tax in respect of the Inter-State sales made, which are considered as exempt under Section 8(5) of the Central Sales Tax Act read with the Notification issued under that Section. The assessee had made purchases against Form-I as prescribed under Entry 118(2) according to which the sales of the registered dealers who had effected such sales to the applicant against such Form were exempted from tax. The contention raised by the assessee that the notional tax on the sales be worked out after allowing the set off under Rule 42 of the Gujarat Sales Tax Rules, 1970, was negatived by the Sales Tax Officer.