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2013 (7) TMI 668 - BOMBAY HIGH COURTSection 8(5) of the CST Act as amended by Finance Act 2002 - whether the power of the State Governments to grant exemption under Section 8(5) is restricted only in respect of the transactions covered under Section 8(1) and not in respect of the transactions covered under Section 8(2) of the CST Act? - Held that:- As in State of Tamil Nadu V/s. Sitolaxmi Mills(1973 (12) TMI 75 - SUPREME COURT OF INDIA) uphelding the constitutional validity of Section 8 of the CST Act and further held that the high rate of tax imposed under Section 8(2) does not directly or indirectly impede or hamper the free flow of trade, commerce and intercourse and that in appropriate cases, the State Governments under Section 8(5) are empowered to grant total or partial exemption from the higher rate of tax payable under Section 8(2) the argument of the Revenue that the legislative policy of the Government is to discourage inter State sales to unregistered dealers cannot be sustained as the said argument is contrary to the report of the Taxation Enquiry Commission and also the decisions of the Apex court referred above. The argument of the Revenue that since it is mandatory to fulfill the requirements of Section 8(4) while exercising power under Section 8(5), it must be held that the power of the State Governments to grant total / partial exemption in public interest is restricted only to the transactions which fulfil the requirements of Section 8(4) namely the transactions covered under Section 8(1) cannot be accepted because, Section 8(5) as amended by Finance Act, 2002 not only refers to the transactions covered under Section 8(1) but also refers to the transactions covered under Section 8(2). Therefore, when Section 8(5) as amended by Finance Act 2002 specifically refers to the power of the State Governments to grant total / partial exemption from the tax payable under Section 8(1) or 8(2), it is not possible to accept the contention of the Revenue that after the 2002 amendment, the power of the State Government under Section 8(5) to grant total / partial exemption is restricted only in respect of the transactions covered under Section 8(1). Thus by retaining the words 'any person or class of persons' in the amended Section 8(5)(b) it is made clear that even after the 2002 amendment, the State Governments under Section 8(5) are also empowered to grant total / partial exemption in public interest in respect of inter State sales to any person or class of persons covered under Section 8(2) of the CST Act. Thus once it is held that the powers vested in the State Governments under Section 8(5) are not divested by the 2002 amendment and that even after the 2002 amendment, the State Governments subject to compliance of Section 8(4) have power to grant exemption in respect of transactions covered under Section 8(1) as also under Section 8(2), no reason to consider the second and the alternative argument of the petitioners that Section 8(5) as amended by Finance Act 2002 does not affect the rights vested in the petitioners under PSI 1993 to avail the exemption upto the quantum specified / period specified in the Entitlement Certificate granted to the petitioners.
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