1980 (10) TMI 191 - HC - VAT and Sales Tax

Summary

Issues involved: Interpretation of whether high density polyethylene (HDPE) woven fabrics qualify as "artificial silk fabrics" under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959.

The judgment of the Madras High Court addressed the question of whether high density polyethylene (HDPE) woven fabrics can be classified as "artificial silk fabrics" under the relevant tax provision. The Court analyzed the definition of "rayon or artificial silk fabrics" as per the Central Excises and Salt Act and emphasized that the term "artificial silk" encompasses various man-made fibers beyond traditional rayon. The Court highlighted that artificial silk should be understood as any silk-like substance produced by human agency, not necessarily natural silk. The Court noted that high density polyethylene, being a synthetic resin processed into fibers for fabric production, falls under the category of "artificial silk" based on its manufacturing process and characteristics.

Furthermore, the Court referred to the excise tariff under the Central Excise Act, which considers the mixture of rayon or artificial silk in excisable fabric for duty determination. The Central Government had previously exempted high density polyethylene woven fabrics from excise duty under item 22 of the First Schedule, indicating the recognition of these fabrics as akin to rayon or artificial silk fabrics. The Court observed that the departmental practice and the Central Government's exemption decision support the classification of high density polyethylene as "artificial silk," aligning with trade practices and technical understanding. Consequently, the Court concluded that high density polyethylene woven fabrics qualify as "artificial silk fabrics" under the tax provision, warranting exemption from sales tax as per the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959.

In conclusion, the Madras High Court upheld the Tribunal's decision and dismissed the revision, ruling in favor of considering high density polyethylene woven fabrics as falling within the scope of "artificial silk fabrics" for tax exemption purposes. The Court awarded costs to the assessee and concluded the judgment by dismissing the petition.