1976 (9) TMI 153 - HC - VAT and Sales Tax

Summary

Issues:
1. Classification of bed sheets, napkins, towels, and pillow covers under the Orissa Sales Tax Act.
2. Interpretation of entry No. 33 of the Schedule of exempted goods under the Orissa Sales Tax Act.

Analysis:
The petitioner, a business dealing in mill-made cloth, contested the liability to sales tax on items like pillow covers, bed sheets, towels, and napkins. The assessing officer assessed the petitioner under section 12(5) of the Orissa Sales Tax Act, rejecting the petitioner's claim that these items were tax-exempt under entry No. 33. The key contention was whether these items, after being processed, were still considered mill-made cloth. The court examined the definition of mill-made fabrics under the Act, emphasizing that conversion into different goods would not qualify for exemption. However, for bed sheets and towels, where the process involved cutting and stitching without substantial alteration, the court held that they remained mill-made cloth and qualified for exemption under entry No. 33. Conversely, the court found that pillow covers, due to significant changes in size and stitching, did not fall under the exemption.

In a reference to a similar case in the Calcutta High Court, the court reiterated that cutting and stitching mill-made cloth into different shapes did not create new products. The court's decision aligned with this principle, emphasizing that minor alterations did not change the fundamental nature of the goods. Ultimately, the court ruled that bed sheets, napkins, and towels, despite being cut and stitched, retained their classification as mill-made fabrics and were exempt from sales tax under entry No. 33. However, the court concluded that pillow covers, due to substantial changes in size and preparation for use, did not qualify for the exemption. The judgment was delivered jointly by Misra R.N. and Panda K.B., JJ., with the latter concurring with the decision.