1988 (4) TMI 402 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of proposition notices issued under the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979.
2. Interpretation of the term "textiles" as used in the Act.
3. Applicability of definitions from the Karnataka Sales Tax Act and Central Excise Act to the Entry Tax Act.
4. Common parlance test in the interpretation of tax statutes.

Detailed Analysis:

1. Validity of Proposition Notices:
The petitioner, a registered partnership firm, challenged the validity of proposition notices issued by the second respondent for the assessment years 1983-84 to 1986-87 under the Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale Therein Act, 1979 (the Act). The notices required the petitioner to register as a dealer and file returns, making it liable to pay entry tax. The petitioner approached the court under Article 226 of the Constitution, arguing that the second respondent acted without jurisdiction as the goods in question did not fall within the purview of item I in the Schedule to the Act.

2. Interpretation of the Term "Textiles":
The second respondent's notices were based on the interpretation that the goods (P.V.C. rexine leather cloth) were textiles or cotton fabrics, citing precedents like Porritts & Spencer (Asia) Ltd. v. State of Haryana and Varma Industrials Ltd. v. Commercial Tax Officer. The petitioner contended that the interpretation of "textiles" should be specific to the Entry Tax Act and not borrowed from the Karnataka Sales Tax Act (KST Act) or Central Sales Tax Act (CST Act).

3. Applicability of Definitions from Other Acts:
The court acknowledged that the scope of the Entry Tax Act and the KST Act are different. The Entry Tax Act taxes goods on their entry into a local area, while the KST Act taxes the sale or purchase of goods. Section 2(B) of the Entry Tax Act states that words not defined in the Act should have the meaning assigned in the KST Act. However, the term "textiles" is not defined in either Act. The court emphasized that the meaning of "textiles" should be determined based on the specific language of the Entry Tax Act and not by importing definitions from other statutes like the Central Excise Act.

4. Common Parlance Test:
The court applied the common parlance test to interpret the term "textiles," referencing the Supreme Court's decision in Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan. The court held that "textiles" should be understood in the sense it is used in trade by dealers and consumers. The court found that P.V.C. leather cloth, made by a mechanical process and not in mills or powerlooms, does not fit the common parlance understanding of "textiles." The court also noted that the process described by the Central Board of Excise and Customs indicated that P.V.C. leather cloth is a fabric impregnated or coated with plastic materials, not manufactured in mills or powerlooms.

Conclusion:
The court concluded that P.V.C. leather cloth does not fall within the meaning of "textiles" as per item 1 of the Schedule to the Entry Tax Act. Consequently, the impugned proposition notices were quashed. The petitions were allowed, and each party was ordered to bear its own costs.

Petitions allowed.