1967 (8) TMI 110 - HC - VAT and Sales Tax

Issues Involved:
1. Classification of Terylene, Terene, Dacron, Nylon, Nylex, etc., as "artificial silk" under the Madras General Sales Tax Act, 1959.
2. Legality of the assessing authority's decision to revise closed assessments and impose sales tax on the said goods.
3. Interpretation of the term "artificial silk" in the context of various statutes and trade practices.
4. Jurisdiction of the High Court under Article 226 of the Constitution of India to issue a writ of prohibition.

Detailed Analysis:

1. Classification of Terylene, Terene, Dacron, Nylon, Nylex, etc., as "artificial silk" under the Madras General Sales Tax Act, 1959:

The primary issue was whether Terylene, Terene, Dacron, Nylon, Nylex, etc., fall under the category of "artificial silk" as per Item 4 of the Third Schedule of the Madras General Sales Tax Act, 1959, and thus be exempt from sales tax. The petitioner argued that these goods have been traditionally understood and classified as artificial silk in trade, by the government, and by experts. The Union of India supported this stance, stating that these products are considered artificial silk for excise duty purposes. The court considered various authoritative definitions and expert opinions, concluding that these synthetic fibers, despite being petrochemical-based, are commonly understood as artificial silk.

2. Legality of the assessing authority's decision to revise closed assessments and impose sales tax on the said goods:

The petitioner contended that the assessing authority's decision to revise closed assessments and impose sales tax on these goods was arbitrary and illegal. The court noted that the assessing authority had already made up its mind to revise the assessments and impose tax, which prompted the petitioner to seek a writ of prohibition. The court found that such a pre-determination infringed on the petitioner's vested rights and was not justified, as the goods in question were indeed considered artificial silk and thus exempt from sales tax.

3. Interpretation of the term "artificial silk" in the context of various statutes and trade practices:

The court examined the interpretation of "artificial silk" in various statutes such as the Additional Duties of Excise (Goods of Special Importance) Act, 1957, the Central Excises and Salt Act, 1944, and the Central Sales Tax Act, 1956. It was observed that these statutes consistently treated synthetic fibers like Terylene, Terene, Dacron, and Nylon as artificial silk. The court also referred to authoritative dictionaries and scientific encyclopedias, which supported the classification of these fibers as artificial silk. The court emphasized the importance of popular understanding and trade practices in interpreting statutory terms, concluding that the goods in question fell within the ambit of artificial silk.

4. Jurisdiction of the High Court under Article 226 of the Constitution of India to issue a writ of prohibition:

The respondents argued that the issue involved a jurisdictional fact that should be determined by the assessing authority and not by the High Court under Article 226. However, the court held that it has the power to determine the correctness of jurisdictional facts, especially when the assessing authority's decision infringes on vested rights and is based on an erroneous assumption of jurisdiction. The court found that the assessing authority's decision to levy sales tax on the goods in question was without jurisdiction and violated the principles of uniformity in interpreting statutory terms. Therefore, the court issued a writ of prohibition to interdict the assessing authority from proceeding with the proposed action.

Conclusion:

The court concluded that Terylene, Terene, Dacron, Nylon, Nylex, etc., are indeed classified as artificial silk and are exempt from sales tax under the Madras General Sales Tax Act, 1959. The assessing authority's decision to revise closed assessments and impose sales tax on these goods was found to be arbitrary and without jurisdiction. The court issued a writ of prohibition, making the rule nisi absolute and allowing the writ petitions with costs.

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