1977 (8) TMI 64 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Claim for exemption from Sales Tax under the Kerala General Sales Tax Act, 1963.
2. Interpretation of the term "Cotton Fabrics" as defined in the Central Excises and Salt Act, 1944.
3. Whether the definition in the Central Excises and Salt Act is a reference or incorporation into the Kerala General Sales Tax Act.
4. Impact of subsequent amendments to the Central Excises and Salt Act on the Kerala General Sales Tax Act.

Detailed Analysis:

1. Claim for Exemption from Sales Tax:
The petitioners sought exemption from Sales Tax under the Kerala General Sales Tax Act, 1963, for the turnover on sales of 'P.V.C. cloth' (Rexine) for the years 1971-72 and 1972-73. The claim was based on the provisions of Sections 3 and 4 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, read with Schedule II Parts II and III of the said Act.

2. Interpretation of "Cotton Fabrics":
The term "Cotton Fabrics" was defined in Item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944. The definition was amended by the Finance Act of 1969 to include fabrics impregnated or coated with preparations of cellulose derivatives or other artificial plastic materials. The claim for exemption had to be adjudged in light of these provisions.

3. Reference vs. Incorporation:
The petitioner's counsel argued that the words 'as defined in the Central Excises and Salt Act, 1944' in the Kerala General Sales Tax Act were words of "reference" and not "incorporation." The distinction between reference and incorporation was discussed with reliance on judicial decisions, including Secretary of State v. Hindustan Co-operative Insurance Society Ltd. (AIR 1931 P.C. 149) and Nathella Sampathu Chatty's Case (AIR 1962 S.C. 316). The Supreme Court had emphasized the distinction between a mere reference to one statute in another and an incorporation, which means the bodily lifting of provisions from one enactment into another.

4. Impact of Subsequent Amendments:
The Court examined whether subsequent amendments to the Central Excises and Salt Act would affect the provisions of the Kerala General Sales Tax Act. The principles laid down in Ram Sarup's case (AIR 1963 S.C. 553) and State of M.P. v. M.V. Narasimhan (AIR 1975 S.C. 1835) were considered. It was held that the amendments to the Central Excises and Salt Act should be taken into account in construing the provisions of the Kerala General Sales Tax Act. The Court noted that the concept of 'Cotton Fabrics' in the Central Excises and Salt Act was integrally linked with the provisions of the General Sales Tax Act, and the latter Act would become unworkable and ineffectual without incorporating the extended definition.

Conclusion:
The Court allowed the Tax Revision Cases, set aside the orders of the Appellate Tribunal, and remanded the cases back to the Tribunal to determine the amount due by way of refund to the petitioners, in accordance with law and in light of the observations contained in the judgment. There was no order as to costs.