1987 (11) TMI 392 - HC - VAT and Sales Tax

Summary

Issues:
1. Assessment of tax on H.D.P.E. fabrics as unclassified items at 8%.
2. Exclusion of fabrics from the category of textiles.
3. Interpretation of Section 3-A of the U.P. Sales Tax Act.
4. Classification of H.D.P.E. fabrics as declared goods under Section 14 of the Central Sales Tax Act.
5. Applicability of Section 15 of the Central Sales Tax Act.
6. Jurisdiction of the Court to decide classification of goods.

Detailed Analysis:
1. The petitioners contested the assessment of tax on H.D.P.E. fabrics as unclassified items at 8% by the Sales Tax Officer. The petitioners argued that the fabrics were initially exempt from sales tax under Section 4 of the U.P. Sales Tax Act. Despite the withdrawal of exemption, they contended that the turnover of these fabrics should not be taxed at 8%. The Sales Tax Officer relied on clause (e) of Section 3-A of the U.P. Sales Tax Act for the assessment.

2. The dispute arose due to the exclusion of the fabrics from the category of textiles as per notifications dated January 31, 1985, and June 5, 1985. The petitioners sought relief from the assessment proceedings for the years 1984-85 and 1985-86, which was granted through an interim order by the Court.

3. The Court analyzed Section 3-A of the U.P. Sales Tax Act, emphasizing that the turnover of declared goods is subject to tax at the maximum rate specified in Section 15 of the Central Sales Tax Act. The petitioners argued that H.D.P.E. fabrics should be considered declared goods, limiting the tax rate to 4% as per Section 15.

4. The classification of H.D.P.E. fabrics as declared goods under Section 14 of the Central Sales Tax Act was crucial. The Court referred to previous cases and departmental interpretations to determine the classification of fabrics impregnated with cellulose derivatives or artificial plastic materials. The Court concluded that if H.D.P.E. fabrics fell under Item No. 22, they should be treated as declared goods.

5. The Court highlighted the importance of Section 15 of the Central Sales Tax Act, which restricts the tax rate on declared goods to a maximum of 4%. The petitioners argued that the turnover of H.D.P.E. fabrics should be taxed under clause (a) of Section 3-A (1) of the U.P. Sales Tax Act, not under clause (e) as determined by the Sales Tax Officer.

6. The Court asserted its jurisdiction to decide the classification of goods, stating that when the nature of an article is undisputed, the Court can determine its category to avoid prolonged litigation. Citing previous judgments, the Court justified its intervention in deciding whether H.D.P.E. fabrics should be taxed under a specific provision of the sales tax law.

In conclusion, the Court held that H.D.P.E. fabrics should be taxed under clause (a) of Section 3-A (1) of the U.P. Sales Tax Act as declared goods, limiting the tax rate to 4%. The petition was allowed, and the matter was remanded to the Sales Tax authorities for further proceedings in accordance with the Court's decision.