1973 (9) TMI 90 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the garments supplied by the petitioner fall under the category of "ready-made garments".
2. Whether the petitioner had the right to file the writ petition without exhausting departmental remedies.
3. Whether the garments made to order are assessable as "other goods" under the Assam Sales Tax Act, 1947.
4. Determination of the sale price for garments made to order.

Issue-wise Detailed Analysis:

1. Whether the garments supplied by the petitioner fall under the category of "ready-made garments":

The court examined whether the garments supplied by the petitioner, which were tailored to the customer's measurements, could be classified as "ready-made garments" under the Assam Sales Tax Act, 1947. The definition of "ready-made" from various dictionaries was considered, which described ready-made garments as those made in standard sizes and not to customers' measurements. The court concluded that garments made to order, which involve taking the customer's measurements and stitching the garment accordingly, do not fall under the category of "ready-made garments". Instead, they are more aptly described as "garments made to order". Therefore, such garments cannot be assessed as ready-made garments under the Act.

2. Whether the petitioner had the right to file the writ petition without exhausting departmental remedies:

The respondents argued that the petitioner should have exhausted departmental remedies before filing the writ petition. The court referred to several Supreme Court decisions, including Champalal Binani v. Commissioner of Income-tax and V.V. Iyer v. Jasjit Singh, which emphasized that where an adequate statutory remedy exists, the High Court should be slow to entertain a writ petition. However, the court also noted that this rule is one of policy and discretion, not a binding rule of law. Citing the Supreme Court's decision in State of West Bengal v. North Adjai Coal Co. Ltd., the court held that it is competent to entertain a writ petition even if the petitioner has not exhausted statutory remedies, particularly when the legal points raised require clarification for the benefit of the public and the authorities.

3. Whether the garments made to order are assessable as "other goods" under the Assam Sales Tax Act, 1947:

The court examined whether garments made to order could be taxed as "other goods" under item No. 3 of Schedule II of the Act. The definition of "goods" in section 2(4) of the Act includes all kinds of movable property. The court concluded that garments made to order fall within this definition and are therefore assessable as "other goods". However, the court noted that each transaction must be individually assessed to determine its true nature. If the sale of the cloth and the order for stitching are separate transactions, the sale of the cloth may be exempt from tax, and only the price of materials used in stitching may be taxable. If the entire process is one contract, the garment made to order is taxable as "other goods".

4. Determination of the sale price for garments made to order:

The court discussed the definition of "sale" and "sale price" in sections 2(12) and 2(13) of the Act, respectively. The sale price includes the amount payable for the sale or supply of goods, including any sum charged for anything done by the dealer with or in respect of the goods at the time of or before delivery. However, for garments made to order, the sale price should exclude the cost of labor used in carrying out the contract. The court emphasized that the assessing authority must consider the definition of "sale price" while assessing the turnover of the dealer.

Conclusion:

The court found that the assessing authorities had not considered the various determining factors and relevant provisions of the Act while assessing the garments made to order. Consequently, the court allowed the writ petitions, quashed the assessment orders, and remanded the cases to the Superintendent of Taxes for reassessment in light of the court's observations. The court exercised its powers under article 227 of the Constitution and directed the respondent to proceed afresh with the assessments. The court left the parties to bear their own costs, noting that the cases were test cases involving almost res integra questions of law.

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