1967 (7) TMI 122 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of the exemption under the Third Schedule to the Madras General Sales Tax Act, 1959 for braided cords.
2. Applicability of the exemption to inter-State sales.
3. Comparison of definitions of cotton fabrics under the Madras General Sales Tax Act and the Central Sales Tax Act.
4. Consideration of inter-State sales tax liability for braided cords.

Analysis:
The judgment by the High Court of Madras dealt with the assessment of a turnover involving braided cords and the applicability of tax exemptions under the Third Schedule to the Madras General Sales Tax Act, 1959. The Tribunal initially classified braided cords as laces, exempting them from tax under item 4 of the Third Schedule. However, a previous case involving the same assessee established that braided cords should be considered a variety of textile under the same item. The State argued that the exemption was only for local sales, not inter-State transactions. The Court acknowledged the State's contention but delved into the definitions of cotton fabrics under the Central Sales Tax Act, 1956, and the Madras Act. It concluded that braided cords could be classified as cotton fabrics, falling under the ambit of section 8(2)(a) of the Central Sales Tax Act for inter-State sales.

Furthermore, the Court highlighted the introduction of entry (ii-a) in section 14 of the Central Sales Tax Act, specifically covering cotton fabrics. It noted that braided cords could be considered declared goods for inter-State sales, subject to the tax rates applicable within the respective States. Despite the exemption for local sales of similar goods under the Madras Act, inter-State sales of braided cords were not subject to tax under section 8(2)(a) of the Central Act due to the lack of a prescribed rate in local taxation.

Additionally, the judgment addressed an exemption granted by the State Government under section 8(5) of the Central Act for textiles, excluding cloth made of pure silk or staple fiber. It clarified that the absence of an exemption under the Central Act did not render inter-State sales of braided cords taxable under section 8(2)(a), as this provision applied to declared goods. Ultimately, the Court dismissed the tax case, ruling that no costs were to be incurred, thereby upholding the exemption for inter-State sales of braided cords based on the interpretation of relevant tax laws and definitions of cotton fabrics.