1987 (1) TMI 478 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Exigibility of tax on the sale of rayon yarn waste and staple fibre waste.
2. Rebate on the sale of rayon yarn.

Detailed Analysis:

1. Exigibility of Tax on the Sale of Rayon Yarn Waste and Staple Fibre Waste:
The primary issue in these tax revision cases was whether the sales of rayon yarn waste and staple fibre waste are liable to be taxed under the Central Sales Tax Act, 1956. The Tribunal had held that these sales were incidental to the business of manufacturing and selling rayon yarn and staple fibre yarn and thus were not liable to be taxed. This conclusion was based on the fact that the definition of "business" under the Tamil Nadu General Sales Tax Act, which includes incidental or ancillary transactions, was not incorporated in the Central Sales Tax Act at the material time.

The Revenue argued that the Tribunal's decision was contrary to law, citing the Supreme Court's decision in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1, which had not been considered by the Tribunal. The Revenue contended that the sale of by-products like rayon waste and staple fibre waste should be taxable as they are incidental to the main business.

The court noted that the Central Sales Tax Act was amended in 1976 to include a definition of "business" under Section 2(aa), which was not available during the relevant assessment years (1968-69 to 1974-75). The court also referred to the decision in State of Tamil Nadu v. Burmah Shell Co. Ltd. [1973] 31 STC 426, which held that incidental transactions were not taxable under the Tamil Nadu General Sales Tax Act before its amendment in 1964. The court concluded that the Tribunal's decision was correct since the Central Sales Tax Act did not define "business" during the relevant period.

2. Rebate on the Sale of Rayon Yarn:
The second issue involved the amount given as a rebate on the sale of rayon yarn. The Tribunal had set aside the orders of the Appellate Assistant Commissioner, which had confirmed the assessing officer's decision to deny the rebate claimed by the respondent. The court did not delve deeply into this issue, as the primary focus was on the taxability of rayon yarn waste and staple fibre waste.

Conclusion:
The court upheld the Tribunal's decision that the sales of rayon yarn waste and staple fibre waste were not liable to be taxed under the Central Sales Tax Act, 1956, during the relevant assessment years. The court dismissed the tax revision cases filed by the Revenue, affirming that the absence of a definition of "business" in the Central Sales Tax Act at the material time justified the Tribunal's conclusion. The petitions were dismissed with costs, and the counsel's fee was set at Rs. 500.