1980 (9) TMI 267 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether sarees fitted with chumki and embroidery works should be considered as mill-made fabrics or taxable as 'embroidery'?
2. Whether the extent of embroidery work on mill-made sarees determines their classification for tax purposes?
3. Whether the matter should be remitted to the assessing authority for further investigation?

Analysis:
1. The case involved the question of whether sarees fitted with chumki and embroidery works should be classified as mill-made fabrics or taxable as 'embroidery.' The Sales Tax Officer contended that mill-made cloth fitted with chumki should be taxed as embroidery articles. The Additional Sales Tax Tribunal relied on a decision of the Gujarat High Court and concluded that chumki and embroidered sarees should be considered as ready-made garments for ladies and not tax-free. The court emphasized that the classification would depend on the nature of treatment and extent of chumki fittings, ultimately a factual question.

2. The court highlighted that the extent of embroidery work on mill-made sarees plays a crucial role in determining their classification for tax purposes. It was noted that if a saree continues to be essentially mill-made with minimal embroidery work, it would still be considered a mill-made cloth. However, extensive embroidery work could transform the saree into an article of embroidery, thereby losing the tax exemption. The court suggested remitting the matter to the assessing authority for a fresh disposal to determine whether the sarees have become new commodities like chumki or embroidered sarees, no longer qualifying as mill-made cloth.

3. The court declined to answer the question referred to them, emphasizing the need for a detailed investigation by the assessing authority to determine the tax liability of sarees fitted with chumki and embroidery works. The court directed the Sales Tax Officer to examine the specimen articles to ascertain whether the sarees had transformed into chumki or embroidered sarees, making them taxable. The decision to remit the matter for further investigation was supported by both judges, indicating the importance of a factual assessment in determining the tax classification of such products.