1984 (2) TMI 306 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of pile carpets under the Tamil Nadu General Sales Tax Act, 1959.
2. Applicability of item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959.
3. Interpretation of "woollen fabrics" under item 21 of the First Schedule to the Central Excises and Salt Act, 1944.

Detailed Analysis:

1. Classification of Pile Carpets under the Tamil Nadu General Sales Tax Act, 1959:
The primary issue in these tax revision cases is whether pile carpets fall under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959. The assessees were assessed for the year 1974-75 under both the Tamil Nadu General Sales Tax Act and the Central Sales Tax Act. They disputed their liability on turnovers relating to the inter-State sales of pile carpets and sales of pile carpets within the state. The assessing authority treated these turnovers as sales of pile carpets and brought them to tax. The Tribunal, however, held that pile carpets do not fall under item 21 of the First Schedule to the Central Excise tariff and consequently do not fall under item 4 of the Third Schedule to the State Act.

2. Applicability of Item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959:
Item 4 of the Third Schedule includes 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 assessees argued that since pile carpets fall under item 21 of the First Schedule to the Central Excise tariff, they should be treated as woollen fabrics under item 4 of the Third Schedule to the State Act. The Tribunal, however, rejected this argument, relying on an order from the Government of India, Ministry of Finance, which stated that carpets manufactured by Bharat Carpets Limited do not fall under item 21 of the Central Excise tariff.

3. Interpretation of "Woollen Fabrics" under Item 21 of the First Schedule to the Central Excises and Salt Act, 1944:
Item 21 of the First Schedule to the Central Excises and Salt Act defines "woollen fabrics" as all varieties of fabrics manufactured wholly of wool or containing 40% or more by weight of wool, including blankets, lohis, rugs, shawls, and embroidery in the piece, in strips, or in motifs. The Tribunal interpreted this to mean materials used for covering the body or bedding, not for flooring or staircases. The Government of India had previously held that the carpets in question were wool tufted jute fabrics, not woollen fabrics, and thus not liable for excise duty under item 21. The Supreme Court in Union of India v. Gujarat Woollen Felt Mills and Porrits & Spencer (Asia) Ltd. v. State of Haryana clarified that "woollen fabrics" and "textiles" should be interpreted in their popular sense, meaning woven materials used as garments or coverings.

Based on these interpretations, the Tribunal concluded that the carpets dealt by the assessee should be treated as pile carpets with a jute base having woollen tufts, and therefore, do not fall under item 4 of the Third Schedule to the State Act or section 14(x) of the Central Sales Tax Act. Consequently, the Tribunal's decision to treat the turnover in question as relating to pile carpets was upheld, and the tax case was dismissed with costs.