2004 (3) TMI 727 - HC - VAT and Sales Tax

Issues Involved:
1. Whether bedsheets, bedspreads, terry towels, and napkins are exempt from tax under entry No. 3 (old entry No. 8A) of the Fifth Schedule to the KST Act.
2. Whether these items are exigible to tax under entry 7A of Part-T of the Second Schedule to the KST Act.

Detailed Analysis:

Issue 1: Exemption from Tax under Entry No. 3 (Old Entry No. 8A) of the Fifth Schedule to the KST Act

Section 8 of the KST Act:
- Provides that no tax shall be payable on the sale of goods specified in the Fifth Schedule, subject to conditions and exceptions.

Old Entry No. 8A (Entry No. 3):
- Exempts "All varieties of textiles, namely, cotton, woollen or artificial silk including rayon or nylon, whether manufactured in mills, powerlooms or in handlooms and hosiery cloth in lengths (produced or manufactured in India) as described from time to time in column (2) of the First Schedule to the ADE Act."

Conditions for Exemption:
1. Textiles must be produced or manufactured in India.
2. Textiles must be described in column (2) of the First Schedule to the ADE Act during the relevant year.

Analysis:
- The court examined whether bedsheets, bedspreads, terry towels, and napkins fall under the general description "all varieties of textiles" and whether they are manufactured in India. Both conditions were undisputed.
- The crucial question was whether these goods are described in column (2) of the ADE Act. The ADE Act levies additional duty on goods described in its First Schedule, and the State Government receives a proportionate portion of this duty.
- The legislative intent was to exempt only those textiles subjected to additional excise duty under the ADE Act. If a textile is not described in the ADE Act's First Schedule, it is not eligible for exemption under entry No. 3 (old entry No. 8A) of the Fifth Schedule to the KST Act.

Issue 2: Exigibility to Tax under Entry 7A of Part-T of the Second Schedule to the KST Act

Entry 7A of Part-T of the Second Schedule:
- Subjects "Textile and fabrics, but excluding such textiles and fabrics as are covered, described or specified elsewhere in any of the Schedules," to tax.

Interpretation of ADE Act:
- The First Schedule to the ADE Act includes headings and descriptions from the Central Excise Tariff Act, 1985.
- The rules for interpreting the Excise Tariff Schedule prefer specific descriptions over general ones.
- Not all fabrics subjected to excise duty under the Central Excise Tariff Act are subjected to additional excise duty under the ADE Act.

Classification of Goods:
- The Central Excise Tariff Act categorizes textiles into several groups, such as silk, wool, cotton, man-made filaments, and others.
- Bedsheets, bedspreads, napkins, and terry towels fall under "bed linen, table linen, toilet linen, and kitchen linen" in Heading No. 63.02 of the Central Excise Tariff Act.
- Goods under Heading No. 63.02 are not included in the First Schedule to the ADE Act and are not subjected to additional excise duty.

Conclusion:
- Bedsheets, bedspreads, napkins, and terry towels do not fall under the textiles described in the First Schedule to the ADE Act.
- Therefore, they are not exempt from tax under entry No. 3 (old entry No. 8A) of the Fifth Schedule to the KST Act.
- These goods fall under entry No. 7A of Part-T of the Second Schedule and are subject to tax.

Judgment:
The court upheld the orders of the revisional authority, reversing the appellate authority's orders. The appeals were dismissed, affirming that bedsheets, bedspreads, napkins, and terry towels are taxable under entry 7A of Part-T of the Second Schedule to the KST Act.

← Previous Next →