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TMI Blog1994 (12) TMI 309X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessment of the tax for the year 1987-88 under the Andhra Pradesh General Sales Tax Act, 1957 (for short "the APGST Act"). To appreciate the contentions urged in these cases, it would be useful to refer to the relevant facts. The assessee is a manufacturer of rexine cloth (coated cotton fabrics). It claimed exemption from the sales tax on the turnover relating to the sales of rexine cloth on the ground that the rexine cloth falls within the meaning of the expression "cotton fabrics" contained in item No. 5 of the Fourth Schedule appended to the APGST Act. The assessing authority upheld the claim of the assessee. But in exercise of the revisional powers, the Deputy Commissioner (Commercial Taxes) withdrew the exemption and assessed the turnover to sales tax. The assessee carried the matter in appeal, against the orders of the Deputy Commissioner, both under the CST Act and APGST Act, before the Sales Tax Appellate Tribunal, Hyderabad. The Tribunal, agreeing with the view of the assessing authority that the assessee was entitled to the exemption, allowed the appeals by a common order dated June 12, 1989. Hence, these two revisions are preferred by the State. The State of A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay with the scheme which was based on the understanding between the State Governments and the Central Government-under the said scheme Additional Duties of Excise (Goods of Special Importance) Act, 1957 (for short "the Additional Duties of Excise Act") was enacted by the Parliament and each State is given a share in the income derived from the additional duty of excise, as prescribed, provided the State does not levy sales tax on the goods which have suffered additional duty of excise. Having thus developed his argument, he adds that unless the State gives up its share in the income under the Additional Duties of Excise Act, it cannot tax the declared goods and as the assessee has made specific allegations in the affidavit filed in support of the writ petition that the State has received its share in the income derived from additional duty of excise, so it cannot tax the said declared goods, which have not been denied by the State and as such, the State cannot be permitted to receive the income under the said Additional Duties of Excise Act as well as levy sales tax on those goods. The learned Government Pleader for Commercial Taxes supports the impugned entry 174 on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is, under the sales tax law of any State, exempt from the tax generally or shall be calculated at the lower rate if the sale or the purchase under the State law of any State is subject to tax generally at the rate which is lower than four per cent. Section 14 of the CST Act enumerates certain goods of special importance in inter-State trade or commerce, called declared goods. Section 15 mandates that every sales tax law of the State shall be subject to the following restrictions in regard to the imposition of tax on sale or purchase of the declared goods. The restrictions and conditions, relevant for our purpose are: (1) the tax payable under the State law in respect of any sale or purchase of the declared goods inside the State shall not exceed four per cent; and (2) no tax shall be levied on the sale or purchase of the declared goods at more than one stage. There is no provision in the CST Act which exempts the turnover of the sale or purchase of declared goods. Now we shall refer to the relevant provisions of the APGST Act. Section 5 of the said Act, as it stood during the assessment year 1987-88, was in the following terms: "5. Levy of tax on sales or purchases of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were substituted by section 5(1) which is in force. There were then six Schedules to the Act. Schedules I, II, V and VI are dealt with in clauses (a) to (d) of sub-section (2). Schedule III enumerates the declared goods on which single point tax only is leviable under section 6. It is also relevant to note here section 6 of the APGST Act which deals with the declared goods. This section opens with a non obstante clause and provides that notwithstanding anything contained in section 5, the sales or purchases of declared goods by a dealer shall be liable to tax at the rate and only at the point of sale or purchase specified against each in the Third Schedule on his turnover of such sales or purchases for each year irrespective of the quantum of turnover in such goods. The rate of tax mentioned in Schedule III does not exceed 4 per cent of the turnover. The assessment and the collection of the tax shall be made in the manner prescribed which means prescribed by the Rules. The proviso to this section enacts that where any of the declared goods which suffered tax under the APGST Act, are sold in the course of inter-State trade or commerce and the turnover of that sale or purchase had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 1, 4, 19, 20, 21 and 22 of the First Schedule to the Central Excises and Salt Act, 1944. Item 19 of the First Schedule to the said Act deals with "cotton fabrics" and reads as follows: Item Description of goods Rate of duty "19. Cotton fabrics- 'Cotton fabrics' means all varieties of fabrics manufactured either wholly or partly from cotton and include dhoties, sarees, chaddars, bed-sheets, bed-spreads, counter-panes and table-cloths, but do not include any such fabric- (a) if it contains 40 per cent or more by weight of wool, (b) if it contains 40 per cent or more by weight of silk, (c) if it contains 60 per cent or more by weight of rayon or artificial silk Item 19, containing the definition of "cotton fabrics" in the Central Excises and Salt Act, fell for consideration of the Supreme Court in State of Kerala v. Attesee (Agro Industrial Trading Corporation) [1989] 72 STC 1. It was held therein that the definition of "cotton fabrics" takes in its fold P.V.C. cloth. So also in Collector of Central Excise, Hyderabad v. Fenoplast (P) Ltd. [1994] 72 ELT 513 the Supreme Court laid down that rexine cloth falls within the meaning of the expression "cotton fabrics". Here, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52.06, 52.07, 52.08, 52.09, 52.10, 52.11, 52.12, 58.01, 58.02, 58.03, 58.04, 58.05, 59.01, 59.03, 59.05, 59.06 and 60.01 of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)." Now the expression "cotton fabrics" in section 14 of the CST Act covers goods mentioned under various headings of the Schedule to the Central Excise Tariff Act, 1985, which include rexine. For purposes of both the State Act as well as the Central Act, in the assessment year 1987-88, the definition of "cotton fabrics" as contained in item 19 of the First Schedule of the Central Excises and Salt Act would not apply because with effect from February 5, 1986, before the relevant assessment year, the Schedule of the Central Excises and Salt Act was replaced by the Schedule appended to the Central Excise Tariff Act, 1985. In view of changes in the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and the Central Excises and Salt Act, 1944, referred to above, how should the expression "cotton fabrics" be understood? For answering this question it will be useful to refer to the following decisions. In State of Kerala v. Attesee (Agro Industrial Trading Corporation) [1989] 72 STC 1 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he previous Act, either expressly or by necessary intendment, applies the said provisions to the subsequent Act." On the facts of that case, their Lordships approved the conclusion reached by the High Court of Kerala that unless the extended definition of the Central Excises and Salt Act, 1944, is imported into the Sales Tax Act, the latter Act would be unworkable and ineffectual. Now reverting to the facts of our case, it has already been pointed out that both the APGST Act as well as the CST Act made a reference to the provisions of the Additional Duties of Excise Act which in turn referred to the definition of the expressions contained in the Central Excises and Salt Act, 1944. Therefore, the provisions of the said two Acts have to be imported for understanding the meaning of "cotton fabrics" for purposes of the APGST Act as well as the CST Act inasmuch as the legislations here are referential legislations in the former sense. That being the position, having regard to the interpretation of the expression "cotton fabrics", discussed above, rexine falls within its meaning and as such we would have held that rexine is exempt from sales tax under the APGST Act, had entry 174 not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in section 15 of the CST Act and section 6 of the APGST Act. It has already been noticed that under section 15(a) of the CST Act the tax on sales/purchases of declared goods inside the State shall not exceed four per cent of the turnover of the sale or purchase price thereof and such tax shall not be levied at more than one stage. Clause (b) of section 15 provides that where sales tax has been levied in respect of the sales or purchases inside the State on the turnover of the sales or purchases of the declared goods and such goods are sold in the course of the inter-State trade or commerce and thus the goods are subjected to double taxation, both under the CST Act as well as APGST Act, the tax paid under the APGST Act will have to be reimbursed to the assessee. To the same effect is section 6 of the APGST Act. It enjoins that the turnover of the sales or purchases of the declared goods by a dealer shall be liable to tax at the rate and only at the point of sale or purchase specified against each in the Third Schedule on his turnover of such sales or purchases for each year. This is so irrespective of the quantum of turnover of the dealer in such goods if they are enumerated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended the entry 5 in the Fourth Schedule often it is strange that the Explanation to that Schedule was not touched. After section 2(c) of the Additional Duties of Excise Act was deleted and Schedule I of the Central Excises and Salt Act was replaced by the Schedule appended to the Central Excise Tariff Act, 1985, the Explanation requires necessary amendments to make the definition of terms and the expressions used in items 5, 6 and 7 explicit, meaningful and intelligible. We hope that the Legislature would bestow its attention to this aspect. In our considered view the effect of inclusion of rexine in entry 174 of the First Schedule to the APGST Act cannot have the effect of taxing the turnover of the sales or purchases of rexine at the rate mentioned in Schedule I in view of the provisions of section 6 of the APGST Act read with section 15 of the CST Act, as pointed out above, and thus that entry has to be read down to authorise exigibility of sales tax on the turnover of declared goods including rexine subject to the provisions of section 6 of the APGST Act read with section 15 of the CST Act, namely, that sales tax cannot exceed 4 per cent of the turnover and that it shall n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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