2016 (9) TMI 1083 - HC - VAT and Sales Tax

Taxability - classification of goods - rexine cloth - Entry 51 of Schedule B of the Act - Entry 54 of Schedule B of the Act - clarification sought from the Financial Commissioner and Principal Secretary to the Government of Haryana, Department of Excise and Taxation under Section 56(3) of the Haryana Value Added Tax Act, 2003 - Whether the product being manufactured by the applicant which is technically known as Coated Fabric and in common parlance known as Rexin falling under Central Excise Tariff Heading 5903 is covered under entry 51 of Schedule B appended to the Haryana Value Added Tax Act, 2003? - Held that - the decision in the case Allahabad High Court in Commissioner, Sales Tax, U. P. , Lucknow v. Laxmi Leather Cloth Industries Pvt. Ltd. 2003 (12) TMI 619 - ALLAHABAD HIGH COURT is relied upon. The product being manufactured by the appellant, namely, coated fabric also known as leather cloth/rexin falls in the term textile . The process for manufacture of coated fabric by the appellant is noticed in the order of the Tribunal in the following terms (i) PVC resin paste is prepared which is coated on a paper which is called release paper . (ii) A cotton fabric is pasted on the release paper. (iii) This is passed through a heated oven and the resin paste due to the process of heating is coated on the textile fabric. (iv) The release paper is removed and the final product so manufactured is called PVC Coated Fabric . Whether the product being manufactured by the appellant falls in Entry 54 of Schedule B of the Act, can still be exempted from taxation? - Entry 54 of Schedule B of the Act is in two parts. First part mentions leather cloth and inferior or imitation leather cloth ordinarily used in book binding, whereas the second part mentions rubber used tissue or synthetic water tissue or synthetic water-proof fabrics whether single textured or double textured and book binding cotton fabrics. The condition that additional excise duty in lieu of sales tax is leviable is applicable only on the products mentioned in second part. The type of goods mentioned in two parts are altogether different. The same are separated by colon . - whether the condition regarding leviability of additional excise duty in lieu of sales tax is applicable? Held that - Once a punctuation mark has a specific meaning, it has to be given effect to. It cannot be treated as otiose. Meaning thereby, there is a break in sentence at that stage. It is also evident from a plain reading of the entry itself, which uses the word and in between leather cloth & inferior or imitation leather cloth ordinarily used in book binding . Thereafter, punctuation mark colon has been used, which is followed by other types of goods mentioned therein by using the word or therein and finally using the word and with a condition that additional excise duty in lieu of sales tax is levied on them. In case, there is a break in sentence, then certainly the condition of levy of additional excise duty in lieu of sales tax will not be applicable to the goods mentioned in the first part thereof - As leather cloth, which is manufactured by the appellant, is specifically mentioned in Entry 54 of the Act and that no condition of levy of additional excise duty in lieu of sales tax is applicable thereon, the appellant will be entitled to benefits arising therefrom. If a particular goods fall in two different entries, whether it is open for the dealer to invoke any of the entries, which is more beneficial? - Held that - the principle that special will exclude general may have also to be considered - issue not considered. Appeal allowed - decided in favor of assessee.

Summary

Issues Involved:
1. Whether the product being manufactured by the applicant, which is technically known as “Coated Fabric” and in common parlance known as leather cloth/“Rexin” falling under Central Excise Tariff Heading 5903, is covered under Entry 51 of Schedule B appended to the Haryana Value Added Tax Act, 2003?
2. If the goods manufactured by the appellant fall in Entry 54 of Schedule 'B' of the Act, whether the condition of leviability of additional excise duty in lieu of sales tax is applicable thereon?
3. If a particular good falls in two different entries, whether it is open for the dealer to invoke any of the entries, which is more beneficial?

Detailed Analysis:

Issue 1: Classification of the Product
The appellant, a private limited company, sought clarification on whether its product, leather cloth/rexin, falls under Entry 51 of Schedule B of the Haryana Value Added Tax Act, 2003. The Financial Commissioner opined that the product falls under Entry 54, not Entry 51, thus making it liable for taxation. The Tribunal upheld this view by a majority decision. The minority view, however, supported the appellant's stance that the product falls under Entry 51 and is thus exempt from tax.

The court examined the manufacturing process and various definitions and judgments to determine whether the product qualifies as a textile. The manufacturing process involves coating cotton textile with PVC/PU, which retains its textile character. The court referred to several judgments, including M/s Porritts & Spencer (Asia) Ltd. v. State of Haryana and Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan, which supported the view that products like coated fabric and rayon tyre cord fabric are considered textiles.

The court concluded that the product being manufactured by the appellant, namely coated fabric also known as leather cloth/rexin, falls under the term 'textile' and thus qualifies under Entry 51 of Schedule B, making it exempt from taxation.

Issue 2: Applicability of Additional Excise Duty Condition
The court analyzed Entry 54 of Schedule 'B' to determine whether the condition of leviability of additional excise duty in lieu of sales tax applies to the appellant's product. The entry is divided into two parts by a colon. The court considered the effect of the punctuation mark and concluded that the condition of additional excise duty applies only to the second part of the entry, not the first part, which includes leather cloth.

The court referred to the previous format of the entry and various definitions and judgments to support its interpretation. It emphasized that punctuation marks in statutes should be given their true meaning and cannot be treated as otiose. The court concluded that the condition of additional excise duty does not apply to leather cloth, and thus the appellant's product is exempt from taxation under Entry 54.

Issue 3: Choice of Entry for Tax Exemption
Given the conclusions on the first two issues, the court found it unnecessary to address the third issue regarding the dealer's choice of entry for tax exemption. The principle that a special entry excludes a general one might have been considered if the first two issues were not resolved in favor of the appellant.

Conclusion
The court answered the first two questions in favor of the appellant, concluding that the product qualifies as a textile under Entry 51 and is exempt from taxation under Entry 54 without the condition of additional excise duty. The third question was not addressed due to the resolution of the first two issues. The appeals were disposed of accordingly.