1980 (7) TMI 104 - HC - Central Excise

Summary

Issues:
Whether mill-made handkerchiefs are considered cotton fabrics falling within the scope of a specific entry in the Central Excises and Salt Act, thereby exempt from sales tax under the Kerala General Sales Tax Act.

Analysis:
The case revolved around the classification of mill-made handkerchiefs as cotton fabrics under the Central Excises and Salt Act for sales tax exemption under the Kerala General Sales Tax Act. The Third Schedule of the Kerala General Sales Tax Act provides exemptions for certain goods, including cotton fabrics defined in the First Schedule of the Central Excises and Salt Act. The dispute arose as the assessing authority and the Appellate Assistant Commissioner argued that handkerchiefs, being "ready-made goods," did not qualify as cotton fabrics under the relevant entry. However, the Appellate Tribunal, citing earlier decisions, ruled in favor of the assessee, maintaining that mill-made handkerchiefs fell within the definition of cotton fabrics. The State challenged this decision through a revision petition.

The assessee contended that the handkerchiefs were sold in the same condition as received from the mill, with no additional manufacturing process applied post-supply. This fact was undisputed by the department throughout the proceedings. The handkerchiefs were entirely made of cotton, and the stitching of edges during manufacturing did not alter their classification as cotton fabrics. The court emphasized that stitching edges was a common part of manufacturing various items listed in the inclusive definition of cotton fabrics under the Central Excises and Salt Act. The court also referenced a similar ruling by the Calcutta High Court, concurring with its interpretation.

Ultimately, the court upheld the Tribunal's decision, affirming the assessee's entitlement to sales tax exemption for mill-made handkerchiefs. The revision petition filed by the State was dismissed, with each party bearing their respective costs.