1966 (12) TMI 62 - HC - VAT and Sales Tax

Summary

Issues:
1. Classification of P.V.C. rexine cloth as leather-cloth.
2. Exemption of P.V.C. rexine cloth from sales tax under different items of the Act.

Analysis:
1. The case involved a reference under section 44(1) of the Madhya Pradesh General Sales Tax Act, 1958, to determine the classification and tax liability of P.V.C. rexine cloth sold by the assessee. The questions raised included whether P.V.C. rexine cloth is considered leather-cloth, exempt from sales tax under specific items, and taxable under other provisions of the Act.

2. The taxing authorities assessed the sales of rexine cloth under item 38 of Schedule II, treating it as "leather-cloth" subject to a seven percent sales tax. The assessee contended that rexine cloth should be exempt under item 6 of Schedule I, which lists exempted cloth varieties. Additionally, the assessee relied on a notification dated 12th December 1960, for exemption under section 12 of the Act.

3. The Sales Tax Tribunal rejected the claim for exemption, stating that rexine was not pure cloth but an article with cloth as a base and Polyvinyl Chloride coatings. The Tribunal held that P.V.C. rexine cloth fell under item 38 of Schedule II as "leather-cloth" and not covered by the notification exempting specific cloth types.

4. The Court determined that P.V.C. rexine cloth, being an artificial leather or "leather-cloth," was liable for sales tax under item 38 of Schedule II. The description of rexine indicated it was not simple cloth but a processed product resembling leather, thus not qualifying for exemption under item 6 of Schedule I.

5. However, the Court accepted the assessee's claim for exemption under the notification dated 12th December 1960. The notification's language encompassed "similar products" manufactured with cloth as a base, including P.V.C. rexine. The Court emphasized that the term "similar" indicated resemblance, not identity, and ruled in favor of exemption for P.V.C. rexine cloth.

6. The Court rejected the application of ejusdem generis principle to limit the scope of "similar products" in the notification, as the specified items did not form a distinct category. Citing precedents, the Court clarified that different categories like canvas cloth and tarpaulins could be considered "similar" under the notification.

7. Ultimately, the Court answered the questions by affirming P.V.C. rexine cloth as leather-cloth, denying exemption under item 6 of Schedule I, granting exemption under the 1960 notification, and addressing the tax liability under Schedule II. The assessee was awarded costs, and the reference was resolved accordingly.