1993 (2) TMI 290 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of entry 21 of Schedule II, Part A of the Gujarat Sales Tax Act, 1969 regarding the classification of side strips produced from metallic yarn.

Detailed Analysis:

The Gujarat Sales Tax Tribunal referred the issue of whether side-strips sold by the applicant were covered under entry 21 of Schedule II, Part A of the Sales Tax Act. The applicant contended that the side-strips should be classified under entry 21 and not under the residuary entry 13 of Schedule III. The process of producing metallic yarn from polyester sheets was described, highlighting that side-strips are produced simultaneously with metallic yarn. The Assistant Sales Tax Commissioner observed the manufacturing process and noted that metallic yarn and side-strips are produced from the same substance, polyester film.

Upon analyzing entry 21 of Schedule II, Part A, which covers synthetic fibres, yarns, and waste thereof, it was determined that side-strips cannot be considered waste of synthetic fibres or yarns. The applicant argued that side-strips should be classified under "all other synthetic fibres and synthetic yarns" in entry 21 due to their characteristics. The Tribunal found that the side-strips were yarns of 750 deniers and above, mainly used for decorative purposes like sari borders and hangings. It was noted that the only difference between side-strips and metallic yarn was their width.

The Tribunal rejected the argument that side-strips were a type of metallic yarn, emphasizing their distinct commercial identity. However, the Court disagreed, stating that the comprehensive nature of entry 21 includes all forms of synthetic fibres and yarns. Despite being known as side-strips, they are produced from the same material as synthetic yarn and used for weaving to some extent. The Court held that the Tribunal erred in not classifying side-strips under entry 21 and ruled in favor of the assessee, concluding that the side-strips produced by the applicant are covered by the phrase "all other synthetic fibres and synthetic yarns" in entry 21 of Schedule II, Part A.

In conclusion, the Court answered the reframed question in the negative, favoring the assessee and against the Revenue, highlighting that side-strips should be classified under entry 21 of the Gujarat Sales Tax Act, 1969.