1975 (10) TMI 87 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of taxability of khadi silk and tassar cloth under Orissa Sales Tax Act for the years 1966-70.

Detailed Analysis:
1. The references were made under section 24(1) of the Orissa Sales Tax Act regarding the taxability of khadi silk and tassar cloth. The main question was whether these items fall under the tax-free category or are taxable at a specific rate as per the provisions of the Act.

2. The dispute arose as the assessee claimed that the sale of silk and tassar products should be tax-exempt under a specific entry, while the taxing department argued that these items were taxable at a higher rate under a different entry. The Sales Tax Officer initially held both items taxable at seven percent, but the first appellate authority disagreed regarding tassar goods, taxing them at five percent.

3. The Tribunal determined that tassar goods should be tax-free, while silk goods should be taxed at seven percent for the first three years. However, for the last year, both tassar and silk goods were deemed taxable at seven percent. The Tribunal's decision was based on the specific entries in the tax notification related to silk and tassar products.

4. The court analyzed the relevant provisions of the Orissa Sales Tax Act, including section 5(1) allowing for a higher rate of tax not exceeding seven percent, and section 6 granting the State Government the power to exempt certain goods from tax. The dispute centered around whether tassar should be considered silk and taxed accordingly or treated separately under a different entry.

5. The court concluded that tassar should be exempt from tax as it does not fall under the entry for taxable silk goods. However, regarding silk goods, the court found them taxable at seven percent based on the specific entry in the list of taxable goods. The court directed a remand for further investigation regarding the turnover of handloom silk items priced over rupees ten a piece for the first three years.

6. The court answered the referred questions by affirming that khadi silk is taxable at seven percent under the relevant entry, while tassar cloth should not be taxed as per the entry in the schedule of taxable goods. The judgment was divided, and each party was directed to bear their own costs.

7. The judgment was delivered by Misra R.N. and Panda K.B., JJ. with the reference being answered accordingly.