1960 (9) TMI 93 - HC - VAT and Sales Tax

Summary

Issues:
1. Challenge to assessment orders under the Hyderabad General Sales Tax Act, 1950.
2. Interpretation of the term "cloth" under item 22 of Schedule I of the Hyderabad General Sales Tax Act.
3. Exemption criteria for handloom cloth costing less than Rs. 3 per yard.

Detailed Analysis:
1. The petitioner, a dealer under the Hyderabad General Sales Tax Act, challenged assessment orders for the years 1952-53 and 1953-54, which included turnover from sales of handloom cloth. The challenge was based on various grounds, including the classification of handloom cloth as an essential commodity and the exemption granted to dealers under Notification No. 101. The Deputy Commissioner and Sales Tax Appellate Tribunal upheld the assessment orders, leading the petitioner to seek relief through writ jurisdiction.

2. The main argument focused on whether handloom cloth, sold in units rather than yards, fell within the purview of item 22 of Schedule I of the Hyderabad General Sales Tax Act. The petitioner relied on a previous court ruling that interpreted the term "cloth" broadly to include items like sarees and dhoties. The court agreed with this interpretation, stating that the term "cloth" encompasses all fabrics used for any purpose, including wearing apparel. Therefore, for the purposes of item 22, handloom cloth should be understood in its general sense without narrow limitations unless specified otherwise.

3. Item 22 of Schedule I exempts handloom cloth costing less than Rs. 3 per yard from taxation, provided it meets certain conditions. The court clarified that the exemption is based on the quality of the cloth itself, not on the method of sale. As long as the handloom cloth costs less than Rs. 3 per yard, it qualifies for exemption, regardless of whether it is sold in units or yards. The court found that the Sales Tax Appellate Tribunal erred in its interpretation of the provision, leading to the quashing of the orders and remanding the cases for further proceedings.

In conclusion, the court allowed the petitions, emphasizing that the exemption for handloom cloth under item 22 of the Hyderabad General Sales Tax Act is not affected by the mode of sale but is linked to the quality and cost criteria specified in the provision.