1985 (3) TMI 74 - HC - VAT and Sales Tax

Issues Involved:

1. Whether the sales turnover of Rs. 41,189.80 relating to the sales of stove wicks is exigible to tax under section 8 of the Tamil Nadu General Sales Tax Act, 1959 for the assessment year 1975-76.
2. Whether stove wicks made of cotton fall under "cotton fabrics" as defined in item 19 of the First Schedule to the Central Excises & Salt Act, 1944, and consequently under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959.

Detailed Analysis:

Issue 1: Taxability of Sales Turnover of Stove Wicks

The core issue was whether the sales turnover of Rs. 41,189.80 from stove wicks should be included in the taxable turnover. The assessing authority included this turnover in the taxable turnover, which was upheld by the Appellate Assistant Commissioner. However, the Sales Tax Appellate Tribunal disagreed, concluding that stove wicks made of cotton fall within "cotton fabrics" as described in item 19 of the Central Excises & Salt Act, 1944, thus exempting them from tax. The State challenged this order in the High Court.

Issue 2: Classification of Stove Wicks as "Cotton Fabrics"

The Tribunal's decision was based on the interpretation that stove wicks made of cotton threads by bonding and braiding fall under "cotton fabrics" in item 19 of the First Schedule to the Central Excises & Salt Act, 1944. The State contended that neither in common nor commercial parlance could cotton wicks be considered "fabrics." However, the assessee argued that the wicks, being fabricated out of cotton threads, should be classified under "cotton fabrics."

Legal Provisions and Definitions:

The relevant legal provisions include section 8 of the Tamil Nadu General Sales Tax Act, 1959, which exempts dealers from paying tax on goods specified in the Third Schedule. Item 4 of the Third Schedule includes "Cotton fabrics" as defined in item 19 of the First Schedule to the Central Excises & Salt Act, 1944. Item 19 defines "Cotton fabrics" as all varieties of fabrics manufactured wholly or partly from cotton, including specific items but excluding fabrics containing certain percentages of other materials.

Court's Analysis:

The High Court examined whether stove wicks fall under "cotton fabrics" within the meaning of item 19. The definition of "fabric" was considered, covering all textiles irrespective of construction or material. The court referred to various dictionary definitions and legal precedents, concluding that bonding cotton threads into a wick by braiding constitutes a fabric. The court noted that the inclusive nature of item 19's definition supports this interpretation.

Precedents:

The court cited several decisions supporting the broad interpretation of "fabric" and "weaving," including:
- State of Tamil Nadu v. T.T. Gopalier: Weaving includes any form of using threads to create a pattern and utility product.
- Deputy Commissioner of Commercial Taxes v. Madurai Printing Tape Factory: Tapes made of threads bound together without interlocking still qualify as woven fabrics.
- Narasimha Agencies v. State of Tamil Nadu: Collar stiffening materials made of cotton qualify as "cotton fabrics."
- Narayan Venkat & Co. v. State of Andhra Pradesh: Cotton rags remain "cotton fabrics" despite their form.
- State of Tamil Nadu v. Navinchandra and Company: Cotton belts are "cotton fabrics" as they are fabricated from cotton.
- Delhi Cloth and General Mills Company Limited v. State of Rajasthan: Rayon tyre cord fabric qualifies as textile fabric.
- State of Gujarat v. Ghanshyam Stores: Interlining collar cuttings made of cotton are "cotton fabrics."
- Palco Lining Company v. Sales Tax Officer: Collar linings made of cotton remain "cotton fabrics."

Conclusion:

The High Court concluded that the stove wicks made from cotton fall within the definition of "cotton fabrics" under item 19 of the First Schedule to the Central Excises & Salt Act, 1944. Consequently, they fall under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959, and are exempt from sales tax under section 8 of the Act. The Tribunal's decision was upheld, and the tax revision case was dismissed without any order as to costs.

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