2024 (5) TMI 360 - HC - VAT and Sales Tax

Exemption from Tax - Classification of goods sold - emery cloth - unclassified item or not - tarpaulins - cotton fabrics or not - covered by item-174 of First Schedule to APGST Act or not - whether the first sales of emery cloth and tarpaulins are not excisable to the tax under APGST Act? - HELD THAT - In Feno Plast Pvt. Ltd. 1994 (12) TMI 309 - ANDHRA PRADESH HIGH COURT it has been held that the words cotton fabrics, man-made fabrics and woolen fabrics in item-5 must therefore be read as item-59.03 of the First Schedule to the Additional Duties Act 1957, which refers to textile fabrics, impregnated cloth-covered or laminated. It is evident from the impugned judgment that it was not disputed before the Appellate Tribunal that the based material for emery material was cloth and it was described as textile fabrics in item-59.03 which was to cover of any cloth which was impregnated covered or laminated. The emery cloth even if is based with, sand, for the purpose of its use, that does not change the basic nature of it being a cloth covered in item-5 read with item-59.03 of the First Schedule to the Additional Duties Act. With respect to tarpaulin, in Binny Limited 1997 (9) TMI 555 - MADRAS HIGH COURT it was held that tarpaulin falls within the meaning of the expression cotton fabrics under item-5 of the Fourth Schedule to APGST Act. By reason of Section 8 of APGST Act, Tarpaulin cloth was exempt from tax and the inclusion of this item in item No. 174 made no difference - The Appellate Tribunal rightly concluded that once tarpaulin falls under cotton fabrics in item-5 of the Fourth Schedule to the APGST Act, inclusion of it in item-174 of the First Schedule would make no difference. A perusal of the Order of the learned Appellate Tribunal (at internal page-3) shows that the emery cloth was covered under item-59.03 and was exempted as the same was liable for additional duties of excise under the Additional Duties of Excise (Goods of Special Importance) Act 1957. There are no illegality in the order of the Appellate Tribunal. No case is made out for interference, inasmuch as the Appellate Tribunal has neither failed to decide any question of law nor has decided the question of law erroneously. The Tax Revision Case is dismissed.

Summary

Issues Involved:

1. Classification and taxability of emery cloth.
2. Classification and taxability of tarpaulins.

Summary:

Issue 1: Classification and Taxability of Emery Cloth

The Tax Revision Case u/s 22(1) of the Andhra Pradesh General Sales Tax Act was filed by the State challenging the Order dated 18.06.2001, passed by the Sales Tax Appellate Tribunal. The Commercial Tax Officer had assessed the turnover relating to the sale of emery cloth as an unclassified item and levied tax accordingly. The Appellate Tribunal held that emery cloth is covered in Item-59.03 of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and therefore is exempted under the Fourth Schedule to the APGST Act as it is liable for additional duties of excise. The Tribunal concluded that emery cloth is cotton-coated fabric and thus exempt from tax. The High Court upheld this decision, noting that the emery cloth, even if based with sand, does not change its basic nature of being a cloth covered under item-5 read with item-59.03 of the First Schedule to the Additional Duties Act.

Issue 2: Classification and Taxability of Tarpaulins

The Commercial Tax Officer had assessed the turnover relating to the sales of tarpaulins and levied tax at the rate of 9%, treating it as covered by item-174 of the First Schedule to the APGST Act. The Appellate Tribunal, however, held that tarpaulin, which is waterproof with the base as cloth, falls under cotton fabrics in item-5 of the Fourth Schedule to the APGST Act and is exempt from tax. The Tribunal placed reliance on the case of State of A.P. v. Binny Limited and the decision of the Hon'ble Apex Court in State of A.P. v. Feno Plast Pvt. Ltd., which held that the inclusion of item-174 of the First Schedule would make no difference. The High Court affirmed this view, stating that tarpaulin falls within the meaning of the expression 'cotton fabrics' under item-5 of the Fourth Schedule to the APGST Act, and its inclusion in item-174 of the First Schedule does not affect its tax-exempt status.

Conclusion

The High Court dismissed the Tax Revision Case, finding no illegality in the order of the Appellate Tribunal. The Tribunal had correctly exempted emery cloth and tarpaulins from tax under the relevant provisions, and the inclusion of these items in other schedules did not alter their exempt status. The Court concluded that no case was made out for interference as the Appellate Tribunal had neither failed to decide any question of law nor had decided any question of law erroneously.