1963 (11) TMI 65 - HC - VAT and Sales Tax

Summary

Issues Involved: Tax exemption under section 5(i) of the Bombay Sales Tax Act, 1959; applicability of entry 15 of Schedule A; applicability of entry 4 in Schedule D; applicability of entry 22 in Schedule E.

Issue 1: Tax Exemption under Section 5(i) of the Bombay Sales Tax Act, 1959

The petitioners contended that the sales of embroidered pieces of cloth (5 yards and 3 yards) should be exempt from tax under section 5(i) of the Bombay Sales Tax Act, 1959, as covered by entry 15 of Schedule A. The Deputy Commissioner and Tribunal disagreed, asserting that the embroidered sarees fell under entry 3(i) of Schedule E, which specifically refers to sarees that are embroidered. The High Court held that the sarees, after embroidery, could not be termed as "cotton fabrics" under item 19 of the First Schedule to the Central Excises and Salt Act, 1944, and thus did not fall under entry 15 of Schedule A. The process of embroidery was not incidental or ancillary to their manufacture as cotton fabrics, making them subject to entry 3 of Schedule E.

Issue 2: Applicability of Entry 4 in Schedule D

The Deputy Commissioner initially held that the three yards embroidered piece intended for ladies' underwear fell under entry 22 of Schedule E. The Tribunal disagreed, holding that it was covered by entry 4 of Schedule D, which pertains to ready-made garments and other articles prepared from cotton fabrics sold at a price exceeding Rs. 5 per article. The High Court, however, concluded that the three yards piece could not be considered an article prepared from cotton fabric as it was not ready for immediate use and required further stitching. Therefore, entry 4 in Schedule D did not apply, and the piece fell under the residuary entry 22 in Schedule E.

Issue 3: Applicability of Entry 22 in Schedule E

The High Court affirmed that the embroidered sarees and the three yards embroidered piece did not qualify as "cotton fabrics" under item 19 of the First Schedule to the Central Excises and Salt Act, 1944. The embroidered sarees were specifically covered under entry 3(i) of Schedule E, and the three yards piece, not being a ready-made garment or an article prepared from cotton fabric, fell under entry 22 of Schedule E.

Conclusion

The High Court answered the questions as follows:
- Question No. 1: In the negative.
- Question No. 2: In the negative.
- Question No. 3: The sale of embroidered pieces of cloth is covered by entry 22 in Schedule E and not by entry 4 in Schedule D.

The petitioners were ordered to pay the costs of both references to the State of Gujarat. The references were answered accordingly.