1981 (8) TMI 210 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the articles in question fall within entry 51 of Schedule I to the Gujarat Sales Tax Act, 1969.
2. Whether the articles in question fall within entry 37 of Schedule I to the Gujarat Sales Tax Act, 1969.
3. Whether the articles in question should be taxed under the residuary entry 13 of Schedule III to the Gujarat Sales Tax Act, 1969.

Issue-wise Detailed Analysis:

1. Whether the articles in question fall within entry 51 of Schedule I to the Gujarat Sales Tax Act, 1969:

The opponent-firm initially contended that the sales of collar cuttings would fall under entry 51 of Schedule I to the Gujarat Sales Tax Act, 1969, as they are articles prepared from any textile or handloom fabrics and sold at a price not exceeding Rs. 10 per article. However, this contention did not find favor with the Deputy Commissioner, who believed that the articles did not qualify as ready-made garments or articles that can be used by consumers. The Tribunal, upon appeal, did not find it necessary to delve into this alternative contention after determining that the articles fell under entry 37. The High Court agreed with this approach, stating that collar-lining cannot be considered an article prepared and made ready for immediate use, as it is intended for use by tailors to stiffen collars. Therefore, the articles do not fall under entry 51.

2. Whether the articles in question fall within entry 37 of Schedule I to the Gujarat Sales Tax Act, 1969:

The Tribunal concluded that the collar cuttings in question, sold by the opponent-firm, would be considered cotton fabrics under entry 37 of Schedule I to the Act. Entry 37 specifies cotton fabrics as defined in item 19 of the First Schedule to the Central Excises and Salt Act, 1944, which includes all varieties of fabrics manufactured wholly or partly from cotton and fabrics impregnated or coated with preparations of cellulose derivatives or other artificial plastic materials. The High Court agreed with the Tribunal's conclusion, emphasizing that the definition of "cotton fabrics" is inclusive and covers fabrics impregnated with plastic materials. The process of cutting the cloth to the required shape and superimposing it with plastic materials does not change its classification as cotton fabric. Therefore, the articles fall within entry 37.

3. Whether the articles in question should be taxed under the residuary entry 13 of Schedule III to the Gujarat Sales Tax Act, 1969:

The Deputy Commissioner had initially subjected the articles to tax under the residuary entry 13 of Schedule III, as there was no specific provision under which these articles could be taxed. However, the Tribunal rejected this approach, and the High Court upheld the Tribunal's decision. The High Court noted that the mere cutting of cotton cloth to the required size and shape does not transform it into a different article. The inclusive definition of "cotton fabrics" in item 19 of the Central Excises and Salt Act, 1944, includes fabrics impregnated with plastic materials. Therefore, the articles should not be subjected to tax under the residuary entry 13.

Conclusion:

The High Court affirmed the Tribunal's decision, holding that the articles in question fall within entry 37 of Schedule I to the Gujarat Sales Tax Act, 1969, and should not be taxed under the residuary entry 13 of Schedule III. The reference was answered in the affirmative, in favor of the opponent-assessee and against the department. The State Government was ordered to pay the costs of the reference to the opponent-assessee.