2007 (11) TMI 551 - HC - VAT and Sales Tax

Whether HDPE/PP fabrics are covered by entry textile fabrics given in entry 52 of Schedule A appended to the Punjab Value Added Tax Act, 2005 (as applicable to the Union Territory, Chandigarh) and, therefore, exempt from payment of tax in the Union Territory of Chandigarh? Held that - HDPE figures at serial No. 162 in the list of taxable items under entry 58 of Schedule B. The aforementioned entry 58 under the heading industrial inputs and packing materials , has been elaborated to include HDPE, which figure at serial No. 162. Once the statute itself has included HDPE as a taxable item then it is not possible for us to take a contrary view that such an item would not be taxable or that such an item has to be considered as textile fabrics including terry towels under Schedule A , listing tax-free goods. Thus, the argument is wholly without substance and we have no hesitation to reject the same. The other arguments based on the judgment of the honourable Supreme Court would also not advance the case of the assessee-appellant because the external aid like the standardisation by Indian Standard Institute (ISI) could be resorted to in case where there is ambiguity or the item has not been included in the statute. Appeal dismissed.

Summary

Issues:
1. Interpretation of whether HDPE/PP fabrics are covered by the entry "textile fabrics" in the VAT Act, 2005.

Analysis:
The case involved an appeal filed under section 68 of the Punjab Value Added Tax Act, 2005, challenging an order passed by the Value Added Tax Tribunal regarding the taxability of HDPE/PP fabrics under entry 52 of Schedule A of the Act. The appellant claimed that the fabrics fell under the tax-free category of "textile fabric including terry towels." The Excise and Taxation Commissioner opined that the fabrics were taxable at 12.5%, not covered by the mentioned entry. The Tribunal concluded that the fabrics were covered by entry 58 of Schedule B, as industrial inputs and packing materials, attracting a tax rate of four per cent.

The appellant contended that HDPE in granular form differs from the fiber used in fabrics and relied on judgments to support the argument that HDPE fabrics should not be considered textile. However, the Court observed that the materials were primarily used as packing material, falling under the specified HDPE entry in Schedule B. The Court rejected the appellant's arguments based on judgments and emphasized that HDPE being listed as a taxable item precludes it from being considered tax-free textile fabric.

The Court analyzed the relevant entries in Schedules A and B, highlighting the distinction between tax-free goods and those taxable at four per cent. It was emphasized that the HDPE fabrics did not qualify as textile fabrics under the tax-free category. The Court dismissed the appellant's arguments based on previous judgments and external standards, asserting that the statutory inclusion of HDPE as a taxable item negated the claim that it should be considered tax-free textile. Consequently, the appeal was dismissed, upholding the Tribunal's decision on the taxability of HDPE/PP fabrics.