1979 (12) TMI 139 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of entry 6 in Schedule I of the Madhya Pradesh General Sales Tax Act, 1958 regarding exemption of sales tax on stitched pillow covers sold by a partnership firm.

Detailed Analysis:

1. Issue: Interpretation of entry 6 in Schedule I of the Act.

The petitioner, a partnership firm, contended that stitched pillow covers sold by them should be exempt from sales tax under entry 6 of Schedule I to the Act. The dispute arose when the Sales Tax Officer and the Commissioner of Sales Tax rejected this contention, leading to the filing of a writ petition seeking to quash these orders.

2. Analysis:

The main question was whether stitched pillow covers can be considered as "cloth manufactured in mills," as per entry 6 of Schedule I. The court examined whether stitched pillow covers retain their identity as cloth after being cut and stitched. The absence of a definition of "cloth" in the Act led to an analysis of similar terms in other statutes.

3. Judicial Precedents:

The court referred to various judicial precedents to interpret the term "cloth." The decision in L. Cotton Mills Co. Ltd. v. Sales Tax Officer highlighted that once cloth is transformed into a specific article, it ceases to be cloth. The Madras High Court and the Orissa High Court decisions also supported this view, emphasizing that articles like pillow covers lose their identity as cloth after being stitched.

4. Conclusion:

After considering the arguments and precedents, the court concluded that stitched pillow covers do not fall within the exemption under entry 6 of Schedule I. The popular understanding of the term "cloth" as unstitched fabric, along with the transformation of cloth into a specific article, led to the dismissal of the petition. The court upheld the decision of the sales tax authorities, ruling that pillow covers are not exempt from sales tax.

5. Final Decision:

The court dismissed the petition without costs and ordered the refund of the security amount to the petitioner. The judgment reaffirmed that stitched pillow covers are not covered under the exemption from sales tax provided in the Act, based on the interpretation of entry 6 in Schedule I.

This detailed analysis of the judgment from the Madhya Pradesh High Court provides a comprehensive overview of the issues involved, the legal interpretations made, and the final decision rendered in the case concerning the taxation of stitched pillow covers under the relevant provisions of the Sales Tax Act.