1982 (2) TMI 279 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Interpretation of Entry 51 of Schedule I of the Gujarat Sales Tax Act, 1969.
2. Applicability of the principle of ejusdem generis.
3. Tax liability on sales of cloth bags by the applicant.

Issue-wise Detailed Analysis:

1. Interpretation of Entry 51 of Schedule I of the Gujarat Sales Tax Act, 1969:
The primary issue in this case revolves around the interpretation of Entry 51 of Schedule I of the Gujarat Sales Tax Act, 1969. The applicant, a co-operative society, sold empty cloth bags to its members, which were used for commercial purposes. The Sales Tax Officer initially treated these sales as exempt from tax under Entry 51, which covers "ready-made garments and articles... prepared from any textile or handloom fabrics sold at a price not exceeding ten rupees per article or suit." However, the Assistant Commissioner of Sales Tax and the Tribunal later held that these sales were not exempt as the cloth bags were meant for commercial use, not domestic or personal use, thereby falling under the residuary Entry 13 of Schedule III, making them taxable.

2. Applicability of the Principle of Ejusdem Generis:
The Tribunal applied the principle of ejusdem generis to interpret Entry 51, concluding that the term "articles" should be restricted to items similar to "ready-made garments," i.e., items meant for domestic or personal use. The Tribunal relied on previous judgments and a passage from Maxwell on the Interpretation of Statutes to support this view. However, the High Court found this interpretation incorrect, stating that the generic term "articles" does not necessarily partake the nature of "ready-made garments." The Court emphasized that the words in the statute should be given their literal, grammatical, and natural sense unless ambiguity necessitates otherwise. The Court noted that the legislature's exclusion of specific items (hosiery goods and garments to which Entry 35 applies) from the term "articles" indicates a broader intended scope for the term "articles."

3. Tax Liability on Sales of Cloth Bags by the Applicant:
The High Court ultimately disagreed with the Tribunal's interpretation, stating that the cloth bags sold by the applicant should indeed fall under Entry 51 of Schedule I, thus exempting them from sales tax. The Court emphasized that when two interpretations are reasonably possible, the one in favor of the assessee should be accepted. The Court found that the Tribunal's restrictive interpretation was unjustifiable and prejudicial to the assessee. Consequently, the Court ruled in favor of the applicant, holding that the sales of the disputed cloth bags were covered by Entry 51 and thus not liable to tax under the Gujarat Sales Tax Act, 1969.

Conclusion:
In conclusion, the High Court held that the Tribunal was incorrect in its interpretation of Entry 51 of Schedule I to the Gujarat Sales Tax Act, 1969. The Court ruled that the applicant's sales of cloth bags were indeed covered by Entry 51 and therefore exempt from tax. The principle of ejusdem generis was found inapplicable in this context, and the literal, grammatical, and natural interpretation of the statute was upheld. The reference was answered in favor of the assessee, with no order as to costs.