2007 (10) TMI 577 - HC - VAT and Sales Tax

Taxability of PVC sheets - whether exempted under the notification pertaining to textile? Held that - Since the PVC fabric has been specifically excluded from textile, it cannot be exempted as textile by any stretch of imagination by giving any interpretation. In the result, all the revisions are allowed. Order of the Tribunal is set aside. It is held that PVC fabric (cotton coated fabric)/leather cloth manufactured by the dealer is not exempted as textile under the Notification No. ST-II-3714/X-6 (1)/85-U.P. Act 15/48-Order-85, dated June 5, 1985. However, whether it is liable to tax as an unclassified item or as declared commodity being covered under section 14 of the Central Act, the matter is remanded back to the Tribunal to adjudicate this question.

Summary

Issues:
Taxability of PVC sheets under U.P. Trade Tax Act, 1948 and Central Sales Tax Act, 1956.

Analysis:
The case involved four revisions under section 11 of the U.P. Trade Tax Act, 1948, challenging the order of the Tribunal regarding the taxability of PVC sheets for the assessment years 1989-90 and 1990-91. The main dispute was whether PVC sheets, claimed by the dealer to be exempt as textile, were correctly taxed by the assessing authority. The Tribunal upheld the exemption based on subsequent years' assessments, despite PVC fabric being excluded from textile under Notification No. ST-II-3714/X-6(1)/85-U.P. Act 15/48-Order-85.

The learned Standing Counsel argued that each assessment year is independent, and the exemption cannot be allowed based on past mistakes. The Tribunal's decision to allow exemption on PVC fabric was deemed erroneous as PVC fabric was specifically excluded from textile under the aforementioned notification. The dealer contended that various court decisions supported PVC fabric being treated as textile and thus exempt from tax.

The judge analyzed the relevant notifications, ST-II-3714/X-6(1)/85-U.P. Act 15/48-Order-85 and ST-II-303/X-89-7(5)-88-U.P. Act-XV/48-Order-89, which excluded PVC fabric from textile. Referring to legal principles, the judge emphasized strict interpretation of tax statutes and the legislative intent to tax, construing exemption notifications strictly. The judge cited precedents where PVC fabric was excluded from textile and held that it cannot be exempted as textile.

Regarding an alternative argument on taxation under the Central Act, the Tribunal had not considered whether PVC fabric was covered under section 14 of the Central Act. The judge directed the Tribunal to address this aspect.

In conclusion, the judge allowed the revisions, setting aside the Tribunal's order and ruling that PVC fabric manufactured by the dealer was not exempted as textile under the relevant notification. The matter of taxation as an unclassified item or under the Central Act was remanded to the Tribunal for further consideration.