2004 (11) TMI 538 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether sleevings manufactured by the respondent are covered by entry 30 of Schedule B of the Punjab General Sales Tax Act, 1948.
2. Whether sleevings retain the character of yarn/textile as understood in common parlance or by the trading community.

Detailed Analysis:

Issue 1: Coverage of Sleevings under Entry 30 of Schedule B of the 1948 Act

The primary issue is whether the sleevings manufactured by the respondent fall under entry 30 of Schedule B of the Punjab General Sales Tax Act, 1948, which exempts certain textiles from tax. The respondent claimed that their products, including sleevings, should be exempt under this entry. The Assessing Authority rejected this claim, and although the Deputy Excise and Taxation Commissioner (A) exempted other products, he did not exempt sleevings, stating that the processing done on braided cords to create sleevings results in a new and different commodity. The Tribunal, however, held that sleevings are textiles within the meaning of entry 30 and are exempt from tax.

Issue 2: Character of Sleevings as Yarn/Textile

The court considered whether sleevings retain the character of yarn/textile as understood in common parlance or by the trading community. Several judgments were cited to support the argument that sleevings do not retain the character of textiles. The court emphasized that in taxing statutes, words should be construed in their common parlance and not in scientific or technical senses. It was noted that although the base material for sleevings is yarn, the extensive processing (including braiding, polishing, dyeing, and impregnating with varnish) changes its character significantly. The court referred to multiple precedents where similar items were not considered textiles due to their altered state after processing.

Legal Precedents and Interpretation:

1. Common Parlance Rule:
- The court reiterated that words in taxing statutes should be interpreted as understood in common parlance, citing cases like Ramavatar Budhaiprasad v. Assistant Sales Tax Officer and Porritts & Spencer (Asia) Ltd. v. State of Haryana. The term "textiles" should be interpreted in its popular sense, meaning the sense attributed by people conversant with the subject matter.

2. Judicial Precedents:
- The court referred to various judgments, including those from the Madras High Court and the Supreme Court, which held that processed items like sleevings do not retain their original textile character. Cases such as English Electric Company of India Ltd. v. Government of India and Standard Batteries Ltd. v. Appraiser, Appraising Deptt. were particularly noted for their relevance.

3. Specific Exclusions:
- Entry 30 of Schedule B explicitly excludes certain items like pure silken fabrics and carpets. The court observed that sleevings, after undergoing significant processing, do not fit within the common understanding of "textiles" and thus do not qualify for exemption under entry 30.

Conclusion:

The court concluded that the sleevings manufactured by the respondent do not fall within entry 30 of Schedule B of the 1948 Act. The extensive processing changes their character from yarn/textile to a different commodity, which is not covered by the exemption. The reference was answered in favor of the department and against the assessee, thereby confirming that sleevings are subject to tax.