1978 (12) TMI 170 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Applicability of entry 40 of Schedule I to the Gujarat Sales Tax Act, 1969, to fabrics manufactured outside India.
2. Applicability of entry 67 of the Government notification issued under section 49 of the Gujarat Sales Tax Act, 1969, to fabrics manufactured outside India.
3. Applicability of residuary entry 13 of Schedule III to the Gujarat Sales Tax Act, 1969, to the sales of imported artificial fabrics.

Detailed Analysis:

Issue 1: Applicability of entry 40 of Schedule I to the Gujarat Sales Tax Act, 1969, to fabrics manufactured outside India
The primary contention was whether the artificial silk fabrics sold by the assessee, which were manufactured outside India, could be exempt from tax under entry 40 of Schedule I of the Gujarat Sales Tax Act, 1969. The Tribunal had held that entry 40 applied only to fabrics manufactured in India, interpreting the definition of "rayon or artificial silk fabrics" in item 22 of the First Schedule to the Central Excises and Salt Act, 1944, as applicable only to goods manufactured in India due to the excise duty levied on domestically manufactured goods.

The Court disagreed with the Tribunal's interpretation, emphasizing that entry 40 of Schedule I merely adopted the definition of "rayon or artificial silk fabrics" from the Excise Act without incorporating the entire excise law. The Court held that the word "manufactured" in the definition should be interpreted in its ordinary, natural meaning without the qualification "in India." Thus, the Court concluded that entry 40 of Schedule I covered artificial silk fabrics regardless of whether they were manufactured in India or abroad.

Issue 2: Applicability of entry 67 of the Government notification issued under section 49 of the Gujarat Sales Tax Act, 1969, to fabrics manufactured outside India
The second issue was whether the exemption under entry 67 of the Government notification applied to artificial silk fabrics that were manufactured outside India. The Tribunal had upheld the revenue's contention that the definition of "artificial silk fabrics" in entry 40 of Schedule I should also apply to entry 67, thereby requiring the fabrics to be manufactured in India to qualify for the exemption.

The Court, assuming the Tribunal's approach to be correct, held that since the definition of "artificial silk fabrics" in entry 40 did not necessitate that the fabrics be manufactured in India, the same interpretation should apply to entry 67. Consequently, the Court ruled that the exemption under entry 67 applied to artificial silk fabrics regardless of their place of manufacture.

Issue 3: Applicability of residuary entry 13 of Schedule III to the Gujarat Sales Tax Act, 1969, to the sales of imported artificial fabrics
The third issue regarding the applicability of residuary entry 13 of Schedule III was not pressed by the assessee and thus did not require an answer.

Conclusion:
The Court answered the first two questions in the negative, in favor of the assessee and against the revenue, and did not address the third question. The State of Gujarat was ordered to pay the costs of the reference to the assessee.