1992 (2) TMI 342 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether "cotton canvas" or "tarpaulin" falls under "cotton fabrics" in item No. 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act, 1957, and is therefore exempt from tax under section 8 of the Act.

Issue-wise Detailed Analysis:

1. Classification of "Cotton Canvas" or "Tarpaulin" under "Cotton Fabrics":

The primary question was whether "cotton canvas" or "tarpaulin" sold by the assessee falls under "cotton fabrics" in item No. 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act, 1957, and thus, is exempt from tax under section 8 of the Act. The relevant assessment year was 1983-84.

The Commercial Tax Officer assessed the turnover relating to tarpaulin sales as multi-point taxable goods. On appeal, the Appellate Deputy Commissioner held that while "cotton fabrics" may include "tarpaulin cloth" in rolls, it did not include finished tarpaulin, which is a different product. The Tribunal, however, upheld the assessee's contention that the turnover of tarpaulin sales was not assessable to tax, relying on precedents from the Karnataka High Court and the Andhra Pradesh High Court.

Arguments Presented:

- Government Pleader's Argument: The Government Pleader argued that applying the user test, tarpaulin cannot fall under "cotton fabrics." He contended that the process of making tarpaulin involves significant changes to the cotton fabric, making it a different product. He cited decisions from the Madras High Court to support his argument.

- Assessee's Argument: The assessee's counsel relied on decisions from the Gujarat High Court and the Karnataka High Court, which directly addressed the issue. He also cited a decision from the Andhra Pradesh High Court, which held that "cotton fabrics" include those subjected to processes like rubberizing. He argued that there is no difference between "cotton canvas" and "tarpaulin" as the latter does not undergo significant changes when cut to size and stitched.

Legal Provisions and Definitions:

The court referred to item No. 5 of the Fourth Schedule, which includes "cotton fabrics," and the explanation that these terms have the same meanings as in the Additional Duties of Excise (Goods of Special Importance) Act, 1957. The definition of "cotton fabrics" in item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944, includes fabrics impregnated, coated, or laminated with preparations of cellulose derivatives or other artificial plastic materials.

Court's Analysis:

The court noted that the definition of "cotton fabrics" is inclusive and meant to enlarge the meaning of the term. It cited Supreme Court rulings that the word "includes" in a definition is used to broaden the term's scope. The court found that the goods in question, being waterproof cloth with the requisite cotton content, fell within the definition of "cotton fabrics" as they were fabrics impregnated or coated with preparations of cellulose derivatives or other artificial plastic materials.

The court also referred to its previous decisions and those of other High Courts, which supported the view that tarpaulin falls within the meaning of "cotton fabrics." It distinguished the decisions of the Madras High Court, which dealt with different statutory provisions and contexts.

Conclusion:

The court concluded that the Tribunal correctly held that "tarpaulin" falls within the meaning of "cotton fabrics" under item No. 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act. It dismissed the tax revision case, finding no error of law in the Tribunal's judgment.

Final Judgment:
The tax revision case was dismissed, and the Tribunal's decision that "tarpaulin" is exempt from tax under the relevant statutory provisions was upheld. No costs were awarded, and the advocate's fee was set at Rs. 250.