1977 (8) TMI 143 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Claim for exemption from sales tax under the Kerala General Sales Tax Act, 1963.
2. Definition and scope of "cotton fabrics" under the Central Excises and Salt Act, 1944.
3. Interpretation of statutory references and incorporations.
4. Judicial precedents on statutory interpretation.
5. Impact of amendments to the Central Excises and Salt Act on the Kerala General Sales Tax Act.

Detailed Analysis:

1. Claim for Exemption from Sales Tax under the Kerala General Sales Tax Act, 1963:
The primary issue in these tax revision cases is the claim for exemption from sales tax on the turnover of "P.V.C. cloth" (Rexine) under the Kerala General Sales Tax Act, 1963. The claims pertain to the years 1971-72 and 1972-73, involving amounts of Rs. 1,33,840.34 and Rs. 1,56,181.04 respectively.

2. Definition and Scope of "Cotton Fabrics" under the Central Excises and Salt Act, 1944:
The definition of "cotton fabrics" as per item 19 of the First Schedule to the Central Excises and Salt Act, 1944, was pivotal. Initially, it included all varieties of fabrics manufactured wholly or partly from cotton. The Finance Act of 1969 amended this definition to include fabrics impregnated or coated with preparations of cellulose derivatives or other artificial plastic materials. The claim for exemption had to be adjudged in light of these provisions.

3. Interpretation of Statutory References and Incorporations:
The court examined whether the words "as defined in the Central Excises and Salt Act, 1944" in item 7 of the Third Schedule to the Kerala General Sales Tax Act were words of "reference" or "citation" and not words of "incorporation." The petitioner's counsel contended that if it were an incorporation, the case for exemption would be weak. The court referred to several judicial precedents to analyze this aspect.

4. Judicial Precedents on Statutory Interpretation:
- Secretary of State v. Hindustan Co-operative Insurance Society Ltd.: The Privy Council distinguished between incorporation and reference, noting that incorporation means the provisions of one Act become part of another, while reference means the provisions are cited without incorporation.
- Nathella Sampathu Chetty's case: The Supreme Court emphasized the distinction between mere reference/citation and incorporation, stating that incorporation means the provisions are bodily lifted into the new Act.
- State of Tamil Nadu v. East India Rubber Works: The Madras High Court ruled that "waterproof cloth" like rexine did not fall under the definition of "textile" in the Madras General Sales Tax Act.
- Hind Engineering Co. v. Commissioner of Sales Tax: The Gujarat High Court held that rubber beltings were not "cotton fabrics" due to the significant change in their character and form.
- Ram Sarup's case: The Supreme Court held that the repeal of the Punjab Alienation of Land Act did not affect the definition of "agricultural land" in the Punjab Pre-emption Act.
- Ram Kirpal v. State of Bihar: The Supreme Court ruled that the incorporation of provisions from an earlier Act into a subsequent Act means the provisions are treated as if they were enacted in the later Act for the first time.
- State of M.P. v. M.V. Narasimhan: The Supreme Court held that amendments to the Indian Penal Code's definition of "public servant" were incorporated into the Prevention of Corruption Act.

5. Impact of Amendments to the Central Excises and Salt Act on the Kerala General Sales Tax Act:
The court concluded that the concept of "cotton fabrics" in the Central Excises and Salt Act is integrally linked with the provisions of the Kerala General Sales Tax Act. It determined that the extended definition of "cotton fabrics" in the Central Excises and Salt Act must be imported into the Sales Tax Act to avoid rendering the latter Act unworkable and ineffectual.

Conclusion:
The court allowed the tax revision cases, set aside the orders of the Appellate Tribunal, and remanded the cases back to the Tribunal to determine the amount due by way of refund to the petitioner, in accordance with the law and the observations contained in the judgment. There was no order as to costs. Petitions allowed.