1983 (1) TMI 243 - HC - VAT and Sales Tax

Issues Involved:
1. Interpretation of Section 8 of the Tamil Nadu General Sales Tax Act, 1959 regarding exemption from sales tax.
2. Applicability of Entry 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959.
3. Relevance of the Central Excises and Salt Act, 1944 definitions to the Tamil Nadu General Sales Tax Act.
4. Validity of the Tribunal's decision to deny exemption for foreign-made textiles.
5. Legislative intent behind amendments to Entry 4 in the Third Schedule.
6. Role of rule-making authority under Section 8 and the impact of Rule 6(a) of the Tamil Nadu General Sales Tax Rules, 1959.
7. Double exemption and the legislative intent.

Issue-wise Detailed Analysis:

1. Interpretation of Section 8 of the Tamil Nadu General Sales Tax Act, 1959:
Section 8 provides that dealers dealing in goods specified in the Third Schedule are exempt from sales tax, subject to prescribed restrictions and conditions. The court emphasized that the exemption is clear and not intended to tax everything under the sun. The Third Schedule specifies exempted items, and the rules prescribe any conditions or restrictions.

2. Applicability of Entry 4 of the Third Schedule:
Entry 4 specifies "Cotton fabrics, woollen fabrics and rayon or artificial silk fabrics, as defined in items 19, 21 and 22 respectively of the First Schedule to the Central Excises and Salt Act, 1944." The court ruled that any cotton, woollen, rayon, or artificial silk fabrics, whether manufactured in India or outside, are exempt, provided they meet the description in the Central Excises Act.

3. Relevance of the Central Excises and Salt Act, 1944 definitions:
The court noted that the reference to the Central Excises Act is only to define the fabrics and does not impose a condition that they must be manufactured in India or bear Central excise duty. The Tribunal's error was in conflating the specification of exempt goods with the imposition of conditions for exemption.

4. Validity of the Tribunal's decision:
The Tribunal denied exemption based on the fabrics being foreign-made and not excisable under the Central Excises Act. The court found this interpretation incorrect, emphasizing that the Third Schedule's function is to specify exempt goods without imposing conditions.

5. Legislative intent behind amendments to Entry 4:
The court examined the legislative changes and found that the amendment did not alter the structure of Section 8. The legislative intent was to align the definition of textiles with the Central Excises Act, not to impose additional conditions for exemption.

6. Role of rule-making authority and Rule 6(a):
The court criticized Rule 6(a) for misunderstanding Section 8 and the Third Schedule. Rule 6(a) allows deductions for Third Schedule items but does not impose any conditions or restrictions. The court emphasized that the rule-making authority has not prescribed any conditions affecting the exemption.

7. Double exemption and legislative intent:
The Government Pleader argued against double exemption for foreign fabrics. The court rejected this, stating that double exemption is a matter of legislative discretion and cannot be controlled by judicial interpretation. The court emphasized that exemptions under different taxing statutes must be decided based on the specific provisions of each statute.

Conclusion:
The court allowed the tax revision case, directing the deletion of Rs. 32,063.81 from the assessee's sales tax assessment for 1974-75. The State Government was ordered to pay the costs of the assessee, with counsel's fee set at Rs. 250.

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