1991 (3) TMI 357 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944 in relation to the classification of 'rubberised cotton hose pipes' and 'rubberised cotton-cum-synthetic fibre hose pipes' under the Gujarat Sales Tax Act, 1969.

Analysis:
The case involved a reference under section 69 of the Gujarat Sales Tax Act, 1969, regarding the classification of products manufactured and sold by the opponent-firm under the definition of 'cotton fabrics' as per item No. 19 in the First Schedule to the Central Excises and Salt Act, 1944. The opponent sought clarification on the tax liability of their products from the Deputy Commissioner of Sales Tax, who determined that the products fell under a specific entry in Schedule III, making them liable to tax. The opponent contended that their products should be exempt from sales tax under entry 37 of Schedule I.

Upon appeal to the Tribunal, it was argued that the products in question fell within the definition of "cotton fabric" as per item No. 19 of the First Schedule to the Central Excises and Salt Act, based on the process of rubberising the cotton fabric to manufacture hose pipes. The Tribunal considered the amended definitions of "cotton fabric" and "manufacture" under the Central Excises and Salt Act and concluded that the products indeed qualified as "cotton fabric."

The High Court analyzed the process to which the cotton fabric was subjected during manufacturing, specifically the rubberising process, which involved coating the fabric with rubber to produce hose pipes. The Court noted that the products were predominantly made from cotton fabric, with varying percentages of rubber content. Referring to the definition of "manufacture" under the Central Excises and Salt Act, the Court agreed with the Tribunal's interpretation that the rubberising process fell within the meaning of "cotton fabric" as per item No. 19.

In light of the above analysis and considering a previous judgment on a similar issue, the High Court upheld the Tribunal's decision, ruling that the 'rubberised cotton hose pipes' and 'rubberised cotton-cum-synthetic fibre hose pipes' were indeed classified as 'cotton fabric' under item No. 19 of the First Schedule to the Central Excises and Salt Act. Consequently, the sales of these products were deemed exempt from taxes under the Gujarat Sales Tax Act, 1969.

In conclusion, the High Court answered the reference question in favor of the opponent, against the State, with no order as to costs. The decision aligned with the interpretation of the relevant legal provisions and definitions, ultimately determining the tax liability status of the products in question.