2004 (4) TMI 567 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the Tribunal was legally justified in knocking off the tax on Cotton coated fabrics cell?

Analysis:
The dispute in this case pertains to the assessment year 1986-87, where the dealer carried out the business of purchasing and selling cotton coated cloth and plastic film sheets. The assessing authority initially rejected the dealer's contention that cotton coated fabrics are not taxable due to containing less than 40% cotton. However, the Assistant Commissioner and subsequently the Tribunal set aside part of the assessment order. The first appellate authority found discrepancies in the assessing authority's sample verification process and concluded that the commodity in question contained more than 40% cotton. Additionally, the dealer had paid additional excise duty on the cotton coated fabrics, leading to the opinion that no sales tax should be levied on the commodity.

Moreover, a notification issued by the Governor of Uttar Pradesh granted exemption to textiles, including cotton fabrics of all varieties, from payment of tax under the U.P. Sales Tax Act. The court referred to previous judgments, such as Commissioner, Sales Tax v. Arora Material Stores and Agrawal Transport Company v. Commissioner of Trade Tax, U.P. Lucknow, which supported the exemption of cotton coated fabrics under specific entries in notifications.

Furthermore, the Tribunal disagreed with the assessing authority's conclusion regarding the percentage of cotton in the commodity and the taxability based on the form XXXI for imported goods. The Tribunal held that the use of form XXXI for imports does not automatically make the goods taxable, as its purpose is merely to inform the department about imports without determining the tax liability. As no legal error was found in the Tribunal's decision, the revision was dismissed.

In conclusion, the judgment clarified the tax exemption status of cotton fabrics, upheld previous decisions supporting the exemption of cotton coated fabrics, and emphasized that the use of form XXXI for imports does not determine the taxability of goods, leading to the dismissal of the revision.