1981 (11) TMI 159 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Whether cotton-coated fabric is unconditionally exempt from sales tax u/s 4 of the U.P. Sales Tax Act as per Notification No. ST-40641 X-960(4)58 dated 25th November 1958.
2. Whether the assessing authority was justified in classifying the turnover of the dealer-opposite party as an unclassified item.
3. Interpretation of the term "cotton fabrics of all varieties" in the context of the notification and relevant statutes.

Summary:

Issue 1: Exemption from Sales Tax
The Commissioner of Sales Tax contested the Sales Tax Tribunal's decision affirming that cotton-coated fabric is unconditionally exempt from sales tax u/s 4 of the U.P. Sales Tax Act as per Notification No. ST-40641 X-960(4)58 dated 25th November 1958. The notification provided an unconditional exemption for "cotton fabrics of all varieties." The Tribunal, supported by the Assistant Commissioner (Judicial), Sales Tax, concluded that cotton-coated fabric fell within this category.

Issue 2: Classification by Assessing Authority
The assessing authority classified the turnover of the dealer-opposite party as an unclassified item, arguing that the commodity in question, described as coated fabric, was in reality leather cloth. However, the Assistant Commissioner (Judicial), Sales Tax, and the Tribunal assumed it to be cotton-coated cloth. The Tribunal's decision was based on the concession by the learned counsel for the Commissioner that cotton-coated fabric was exempt.

Issue 3: Interpretation of "Cotton Fabrics of All Varieties"
The term "cotton fabrics of all varieties" was not defined in the notification. Section 14 of the Central Sales Tax Act, referring to item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944, includes fabrics impregnated, coated, or laminated with preparations of cellulose derivatives or other artificial plastic materials. The court referred to previous judgments, including Commissioner of Sales Tax v. Ashok Elastic Works and Porritts & Spencer (Asia) Limited v. State of Haryana, which supported a broad interpretation of "textiles" and "cotton fabrics." The Supreme Court's decisions emphasized interpreting such terms according to their popular sense and the evolving nature of textiles.

The Commissioner of Sales Tax's circular dated 27th June 1977 confirmed that cotton-coated fabrics were covered by the notification dated 25th November 1958. The dealer's past treatment of cotton-coated fabric as falling within "cotton fabrics of all varieties" corroborated this interpretation.

Conclusion:
The Tribunal's view that cotton-coated fabrics were exempt from sales tax under the notification dated 25th November 1958 was upheld. The application for revision was dismissed as it lacked merit, and the parties were directed to bear their own costs.

Petition dismissed.