1974 (7) TMI 97 - HC - VAT and Sales Tax

Issues Involved:
1. Exemption of hosiery banyans from sales tax under item 23 of Schedule III of Notification No. STGL-AR-107/59-9134-F.T. dated 1st July, 1959.

Issue-wise Detailed Analysis:

1. Exemption of Hosiery Banyans from Sales Tax:

The primary issue in this case was whether hosiery banyans were exempt from the levy of sales tax under item 23 of Schedule III of the notification dated 1st July, 1959, as amended by the Government of Bihar under section 4 of the Bihar Sales Tax Act, 1959.

Facts and Circumstances:

The assessee, a dealer manufacturing and selling hosiery goods (ganji) and hosiery cloth, was subjected to sales tax on the sale of hosiery goods (banyans) while the sale of hosiery cloth was exempted. The assessee contended that the sale of hosiery banyans was also exempt under the notification dated 1st July, 1959. However, this contention was rejected by the appellate authority, the Deputy Commissioner of Commercial Taxes, and subsequently, the Commercial Taxes Tribunal.

Relevant Notifications:

- Notification dated 1st July, 1959: Issued by the Governor of Bihar, exempting certain goods from sales tax. Item 23 of Schedule III included "Cotton fabrics, rayon or artificial silk fabrics, woollen fabrics, sugar and tobacco, as defined in the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and handloom cloth excluding pure mill cloth."
- Notification dated 5th August, 1959: Added item 27 to Schedule III, which included "hosiery cloth sold in lengths."
- Notification dated 19th October, 1966: Added item 32 to Schedule III, which included "Cotton, silk and cotton-silk mixed hosiery goods."

Analysis of Notifications:

The court noted that "hosiery cloth sold in lengths" was expressly excluded from the levy of sales tax from 1st July, 1959, and cotton hosiery goods were excluded from 1st October, 1966. Since the period of assessment was 1964-65, hosiery goods (banyans) were not excluded from sales tax during this period.

Interpretation of "Cotton Fabrics":

The assessee argued that "cotton fabrics" as defined in the Additional Duties of Excise Act, 1957, included hosiery cloth and goods made from cotton yarn. Conversely, the revenue argued that "cotton fabrics" was used in a narrow sense and did not include hosiery cloth or goods.

Legal Definitions and Interpretations:

- Section 2(c) of the Additional Duties of Excise Act, 1957: Defines "cotton fabrics" as all varieties of fabrics manufactured from cotton, excluding those containing significant percentages of wool, silk, or rayon/artificial silk.
- Central Excises and Salt Act, 1944: Item 19 of Schedule I defines "cotton fabrics" to include specific items like dhoties, sarees, chadars, etc., but not hosiery.

The court concluded that the State Government did not intend to include hosiery in the term "cotton fabrics" as evidenced by subsequent notifications explicitly excluding hosiery cloth and goods from sales tax.

Case Law References:

- Ishwardas Kapoor and Sons v. Member, Board of Revenue, Bengal: Distinguished handloom-woven cloth with needlework from handloom-woven cloth.
- Sharfaji Rao v. Commissioner of Sales Tax: Differentiated ready-made garments from cotton cloth.
- Lakshmiratan Cotton Mills Co. Ltd. v. Sales Tax Officer: Differentiated between "cloth" and "clothes."
- Pravin Bros. v. State of Gujarat: Excluded embroidered sarees and pieces intended for ladies' underwear from "cotton fabrics."
- Vaiswaner Trading Co. v. State of Gujarat: Discussed the inclusion of rolled steel sections.
- State of Madhya Bharat v. Hiralal: Addressed the processing of raw materials for sale convenience.
- Commissioner of Sales Tax, Madhya Pradesh v. Mahajan Bros.: Distinguished hosiery goods from ready-made garments.
- Government of Madras v. Madurai Braided Cord and Tape Producers Co-operative Industrial Society: Classified braided cords as cotton fabrics.
- Commissioner of Sales Tax, U.P. v. Ashok Elastic Works: Included dori and fita as cotton fabrics.

Conclusion:

The court held that hosiery banyans were not exempt from the levy of sales tax under item 23 of Schedule III of the notification dated 1st July, 1959, for the period in question (1964-65). The question of law was answered in the negative, in favor of the department and against the assessee, with the assessee required to pay the costs of the reference.

Reference Answered: In the negative.

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