1998 (8) TMI 578 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Is the respondent a textile mill?
2. Is the respondent entitled to the concession in the matter of levy of purchase tax under the notification dated November 23, 1979?

Issue-wise Detailed Analysis:

Reg: (i) Is the respondent a textile mill?

The court noted that the term "textile" is not defined under the Punjab General Sales Tax Act, 1948, nor in the notification. According to the New Lexicon Webster Dictionary, "textile" includes "a fabric made by weaving" and "material suitable for weaving." Similarly, Corpus Juris Secundum describes "textile" as a fabric which is or may be woven, or a material suitable for weaving.

The court concluded that the respondent, by spinning yarn, produces material suitable for weaving, thus qualifying as running a textile mill. The initial acceptance of the respondent's claim by the appellants and the absence of any adverse finding by the Sales Tax Tribunal further supported this conclusion. The court also emphasized the notification's objective to encourage the utilization of locally grown cotton, which is achieved by producing yarn.

The court referenced the Industries (Development and Regulation) Act, 1951, where "textiles" include cotton yarn, and the Cotton Textiles (Control) Order, 1948, which regulates yarn manufacture. The court held that the term "textile" should include "yarn/fibre," thus answering the first issue against the appellants and in favor of the respondent.

Reg: (ii) Is the respondent entitled to the concession in the matter of levy of purchase tax under the notification dated November 23, 1979?

The court examined the sequence of events and determined that the establishment of a textile mill involves more than just incorporation or registration as a dealer; it requires the construction of a building with machinery installation. The respondent's machinery installation and power connection occurred after December 1, 1979, and production began before December 31, 1981, meeting the notification's requirements.

Regarding the claim that the respondent dispatched yarn on a consignment basis in inter-State transactions, the court noted that the assessing authority had already taxed the respondent at 4% for such sales, which was a possible and reasonable interpretation of the notification. The court found no impropriety or illegality in the assessing authority's decision and upheld the learned single Judge's ruling.

Conclusion:

Both issues were resolved against the appellants, affirming that the respondent is a textile mill and is entitled to the concessional rate of purchase tax under the notification dated November 23, 1979. Consequently, all three appeals were dismissed without costs.