1994 (2) TMI 278 - HC - VAT and Sales Tax

Summary

Issues:
1. Interpretation of exemption under the Kerala General Sales Tax Act for woollen carpets.
2. Impact of the introduction of item 100B in the First Schedule on the exemption status of carpets.
3. Applicability of the Additional Duties of Excise Act on the levy of sales tax.
4. Compliance with section 14 of the Central Sales Tax Act regarding woollen fabrics.

Analysis:

1. The petitioner, a dealer in woollen carpets, challenged the levy of tax on their turnover for the years 1983-84 and 1984-85 under the Kerala General Sales Tax Act. The exemption status of woollen carpets was in question, with the petitioner claiming exemption under item 7 of the Third Schedule. The Appellate Tribunal set aside the assessment for 1983-84, stating that woollen carpets were still exempt. However, for 1984-85, the Tribunal held that the insertion of item 100B in the First Schedule removed carpets from the exemption under item 7. The Court emphasized that the exemption under item 7 fluctuates based on the Central Act's provisions, and since carpets were excluded from item 21 of the Central Act in 1979, they were not exempt under the KGST Act for 1984-85.

2. The petitioner contended that item 7 of the Third Schedule should override item 100B of the First Schedule to maintain the exemption status of carpets. However, the Court ruled that item 100B, being a specific entry introduced to tax pile carpets, prevails over the general entry of item 7. The amendment to the Central Act in 1979 removed carpets from item 21, aligning them with item 100B for taxation purposes under the KGST Act.

3. The petitioner argued that the Additional Duties of Excise Act's provisions on woollen fabrics should impact the levy of sales tax. The Court clarified that since carpets were no longer covered under item 21 of the Central Act due to the 1979 amendment, the state could levy sales tax on them. The Additional Duties Act does not impede the state's legislative authority to impose sales tax, as discussed in a Madras High Court decision, affirming the state's power to tax goods covered by the Act.

4. Regarding the Central Sales Tax Act, the petitioner claimed that the 15% tax on woollen carpets under item 100B violated section 14. The Court explained that section 14's applicability is tied to item 21 of the Central Act, and with carpets excluded from item 21 post-1979, section 14 restrictions no longer apply to woollen carpets. Therefore, the levy of tax at 15% on carpets under item 100B is deemed compliant with the Central Sales Tax Act.

In conclusion, the Court dismissed the petitioner's contentions, upholding the tax levy on woollen carpets for the relevant assessment years. The writ petition challenging the tax imposition was dismissed without costs.