2013 (10) TMI 395 - HC - VAT and Sales Tax

Exemption of tax - whether woolen carpet yarn is exempted from tax? - Whether woolen yarn and woolen carpet yarn are different products - Held that - A cumulative reading of these three notifications clearly and unequivocally reveals that the intention of the Government for issuance of these notifications was to serve the interest of public at large and while issuing these notifications the State Government has formed a definite opinion that issuance of such notifications is necessary or expedient in the public interest. Whether woolen yarn and woolen carpet yarn are different products - Held that - Exemption from tax for sale or purchase of woolen carpet yarn is envisaged in the Notification dated 13th of June 1994 issued by the State Government. Moreover the subsequent Notification dated 20th of March 1997 which has been given retrospective effect and the same has been made effective from 15th of June 1994 clarifies that woolen yarn and woolen carpet yarn fall within the ambit of exempted category for levy of tax on its sale and purchase by showing the true intention of the earlier Notification of 13th of June 1994 - Decided against Revenue.

Issues Involved:

1. Interpretation of Notifications dated 13th June 1994 and 20th March 1997 regarding tax exemption on woolen carpet yarn.
2. Applicability of Notification dated 20th March 1997 to the assessment years 1995-96 and 1996-97.
3. Distinction between woolen yarn and woolen carpet yarn for tax exemption purposes.

Issue-wise Detailed Analysis:

1. Interpretation of Notifications dated 13th June 1994 and 20th March 1997:

The primary legal question was whether the learned Tax Board was justified in construing the Notifications dated 13th June 1994 and 20th March 1997 to conclude that woolen carpet yarn is exempted from tax. The petitioner argued that the language of the Notification dated 13th June 1994 clearly exempted only woolen yarn manufactured within Rajasthan and did not extend to woolen carpet yarn. The respondent contended that woolen carpet yarn is a subcategory of woolen yarn and thus falls within the exemption provided by the Notification dated 13th June 1994. The court examined the definitions and concluded that both woolen yarn and woolen carpet yarn are forms of raw wool and thus fall within the ambit of the tax exemption.

2. Applicability of Notification dated 20th March 1997:

The petitioner argued that the Notification dated 20th March 1997, which explicitly included woolen carpet yarn, was not applicable to the assessment years 1995-96 and 1996-97. However, the respondent highlighted that the Notification dated 20th March 1997 was given retrospective effect from 15th June 1994. The court agreed with the respondent, noting that the retrospective application of the Notification clarified the Government's intention to exempt woolen carpet yarn from tax from the earlier date, thereby validating the Tax Board's decision.

3. Distinction between Woolen Yarn and Woolen Carpet Yarn:

The petitioner emphasized that woolen yarn and woolen carpet yarn are distinct products and should not be conflated for tax exemption purposes. The respondent countered by arguing that woolen carpet yarn is a type of woolen yarn and thus should be covered under the same exemption. The court examined the definitions and common uses of woolen yarn and woolen carpet yarn, concluding that both fall under the broader category of raw wool. The court found that the Notifications aimed to serve public interest by exempting raw wool, including woolen carpet yarn, from tax.

Conclusion:

The court concluded that the Tax Board was correct in its interpretation of the Notifications dated 13th June 1994 and 20th March 1997, and that woolen carpet yarn is indeed exempt from tax. The retrospective effect of the Notification dated 20th March 1997 further supported this conclusion. The court dismissed all three revision petitions, affirming the Tax Board's decision and ruling in favor of the respondent-assessee. No order as to costs was made.

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