1996 (9) TMI 591 - HC - VAT and Sales Tax

Summary

Issues Involved:

1. Applicability of Section 8(2A) of the Central Sales Tax Act, 1956.
2. Definition and tax exemption status of "coir" and "coconut fibre" under the Kerala General Sales Tax Act, 1963.
3. Interpretation of entries and notifications under the Kerala General Sales Tax Act, 1963.

Issue-wise Detailed Analysis:

1. Applicability of Section 8(2A) of the Central Sales Tax Act, 1956:

The primary issue in all four tax revision cases was the applicability of Section 8(2A) of the Central Sales Tax Act, 1956. The court examined whether the sale of goods, which are exempt from tax under the Kerala General Sales Tax Act, 1963, would also be exempt under the Central Sales Tax Act, 1956. Section 8(2A) states that if a commodity is exempt from tax under the state law, it should also be exempt from tax under the Central Sales Tax Act. The court concluded that if the commodity in question, "coir" or "coconut fibre," is exempt under the Kerala General Sales Tax Act, the tax payable under the Central Sales Tax Act would be nil.

2. Definition and Tax Exemption Status of "Coir" and "Coconut Fibre" under the Kerala General Sales Tax Act, 1963:

The petitioner-assessee argued that "coir," including "coir yarn," is exempt from tax under the Kerala General Sales Tax Act, 1963. The first appellate authority and the Kerala Sales Tax Appellate Tribunal had differing views on whether "coconut fibre" could be considered the same as "coir." The court examined dictionary definitions and government notifications to determine the meaning of "coir." Notifications such as S.R.O. No. 319 of 1984 and S.R.O. No. 432 of 1991 indicated that the state government considered "coir" to include "coir fibre." The court emphasized that "coconut fibre," "coir yarn," "coir products," and "bonded fibre fabrics of coir" were synonymous and should be treated as such for tax exemption purposes.

3. Interpretation of Entries and Notifications under the Kerala General Sales Tax Act, 1963:

The court analyzed entries No. 98 and No. 49 of the First Schedule to the Kerala General Sales Tax Act, which were in force during the relevant assessment years. These entries clubbed "coconut fibre," "coir yarn," "coir products," and "bonded fibre fabrics of coir" together, indicating their synonymity. The court noted that the state government consistently understood these commodities as related and granted them tax exemptions. The court also referenced the apex court's decision in Hindustan Paper Corporation Ltd. v. State of Kerala, which supported the interpretation that tax exemptions under the state law should extend to the Central Sales Tax Act.

Conclusion:

The court concluded that the petitioner-assessee is entitled to exemption under Section 8(2A) of the Central Sales Tax Act, 1956, as "coir" and "coconut fibre" are synonymous and exempt under the Kerala General Sales Tax Act, 1963. The orders of the three authorities were quashed and set aside, resulting in the dropping of proceedings under the Central Sales Tax Act, 1956, for the relevant assessment years. The revision cases were allowed, and the petitions were granted.