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2015 (10) TMI 210 - HC - VAT and Sales TaxClassification of HDPE/PP Woven Fabric - Whether Artificial silk - Rate of VAT - Entry 51 of Schedule B of Haryana VAT Act, 2003 - Held that - The Hon ble Supreme Court in Porritts & Spencer s case 1978 (9) TMI 72 - SUPREME COURT OF INDIA was considering the same entry as in the present case and held that the word textiles is derived from Latin texere which means to weave and it means any woven fabric. - In the aforesaid case, Hon ble Supreme Court further held that the use does not determine the character as textile. Therefore, an argument that dryer felts are used only as absorbents of moisture in the process of manufacture which does not fall within the category of textiles , was rejected. In view of the judgment in Porritts & Spencer s case (supra) and keeping in view the test that in a taxing statute words of everyday use must be construed not in their scientific or technical sense but as understood in common parlance and the fact that textile means any woven fabric and therefore the fabric manufactured out of HDPE by warp and weft pattern is a textile falling within entry 51 of Schedule B. It will thus be a good exempted - The entry 51 is inclusive entry. It includes all varieties of cotton, woolen or silken textiles and also rayon, artificial silk or nylon. Thus any textile may be cotton, woolen or silk either from natural fiber or man made fiber falls within the scope of exempted goods. The clarification issued by the Financial Commissioner-cum- Principal Secretary, Government of Haryana, Excise and Taxation Department on 10.12.2009 that the products manufactured by similar manufacturers are not covered under entry 52 and 53 of Schedule B nor under Schedule C of the Act, therefore, an unclassified good is liable to be taxed at the rate of 12.5%. We find that such clarification runs counter to meaning of the expression textile including artificial silk given by Supreme Court. In view of the interpretation of the similar provision, in respect of the present assessee itself, we find that the clarification could not be issued against an order passed by the competent authority interpreting similar provision. HDPE woven fabric falls within entry 51 of Schedule B of Haryana VAT Act, 2003 and is exempted from payment of tax. - Decided in favor of assessee.
Issues Involved:
1. Classification of HDPE/PP Woven Fabric under Haryana VAT Act, 2003. 2. Applicability of tax exemption under Entry 51 of Schedule B. 3. Interpretation of "artificial silk" and its inclusion within tax-exempt categories. 4. Validity of the clarification issued by the Financial Commissioner-cum-Principal Secretary, Government of Haryana. Issue-wise Detailed Analysis: 1. Classification of HDPE/PP Woven Fabric under Haryana VAT Act, 2003: The appellant is engaged in manufacturing HDPE/PP fabric and contends that HDPE fabric is similar to PP fabric. The appellant's return for the assessment year 2005-06 classified the sale of HDPE fabric as tax-free under Entry 51 of Schedule B of the Haryana VAT Act, 2003. The assessing officer initially accepted this classification. However, a revision notice was issued, proposing that HDPE/PP fabric should be taxed, leading to the creation of a tax liability. The Deputy Excise and Taxation Commissioner, exercising revisional powers, relied on a clarification dated 10.12.2009 issued by the Financial Commissioner-cum-Principal Secretary, Government of Haryana, Excise and Taxation Department. 2. Applicability of tax exemption under Entry 51 of Schedule B: The appellant argued that HDPE fabric qualifies as "artificial silk" and thus should be exempt from tax under Entry 51 of Schedule B. The Haryana Tax Tribunal dismissed the appeal, relying on its earlier decisions, including the case of M/s Rishab Farms & Industries Ltd. Gurgaon Vs. State of Haryana, which held that HDPE attracts a tax rate of 4% as per Schedule C. The Tribunal's decision was challenged in the present appeals. 3. Interpretation of "artificial silk" and its inclusion within tax-exempt categories: The appellant cited the Madras High Court judgment in 'The State of Tamil Nadu Vs. Polyweb Private Ltd.', which held that HDPE woven fabrics fall under "artificial silk" as defined in Item 22 of the First Schedule to the Central Excises and Salt Act, 1944. The court noted that artificial silk includes man-made fibers like HDPE. The appellant also relied on the Allahabad High Court's decision in 'Commission of Sales Tax Vs. Kanpur Plastic Pack (P.) Ltd.' and the Supreme Court's judgment in 'Indo International Industries Vs. Commissioner of Sales Tax, U.P.', which emphasized interpreting tax statutes based on popular meaning rather than scientific definitions. On the contrary, the respondent cited the Punjab & Haryana High Court's judgment in 'Lakshmi Polyfab Vs. Union Territory of Chandigarh', which held that HDPE fabric is not covered by the entry "textile fabric including terry towels" in Schedule A of the Punjab VAT Act, 2005. 4. Validity of the clarification issued by the Financial Commissioner-cum-Principal Secretary, Government of Haryana: The court examined whether the clarification dated 10.12.2009, which stated that products manufactured by similar manufacturers are not covered under Entry 52 and 53 of Schedule B nor under Schedule C, was valid. The court found that this clarification contradicted the Supreme Court's interpretation of "textile" and "artificial silk" and could not override an order passed by a competent authority. Conclusion: The court referred to the Supreme Court's judgment in 'Porritts & Spencer (Asia) Ltd. v. State of Haryana', which held that the word "textiles" should be interpreted in its popular sense, meaning any woven fabric. The court concluded that fabric manufactured from HDPE by the warp and weft pattern qualifies as a textile under Entry 51 of Schedule B and is thus exempt from tax. The court also noted that similar entries had been interpreted in favor of the appellant in previous cases under the Haryana General Sales Tax Act, 1973. Judgment: The court held that HDPE woven fabric falls within Entry 51 of Schedule B of the Haryana VAT Act, 2003, and is exempt from payment of tax. All the VAT Appeals were disposed of accordingly.
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