Declared goods restrictions control State taxation of rexine cloth despite insertion of a taxable schedule entry.

Rexine cloth was treated as falling within the referential expression "cotton fabrics" and therefore as declared goods, so State taxation had to comply with the restrictions under the Central Sales Tax Act and the corresponding State Act. Entry 174 in the Andhra Pradesh General Sales Tax Act could not authorise unrestricted taxation of rexine cloth and had to be read down to the extent required by the declared-goods limits. The levy was not wholly exempt, but it could operate only within the statutory ceiling and single-stage restriction applicable to declared goods.

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Issues: (i) Whether insertion of entry 174 in the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957 was valid and what was its effect on the levy of tax on rexine cloth. (ii) Whether the turnover of sale of rexine cloth was exigible to tax under the Central Sales Tax Act, 1956 and the Andhra Pradesh General Sales Tax Act, 1957.

Issue (i): Whether insertion of entry 174 in the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957 was valid and what was its effect on the levy of tax on rexine cloth.

Analysis: The expression "cotton fabrics" in the exemption schedule was held to be a referential expression taking its meaning from the legislation referred to in the exemption provision. On that construction, rexine cloth fell within "cotton fabrics" and would ordinarily remain exempt under the State Act. However, the insertion of entry 174 evidenced the State's intention to bring rexine cloth into the taxable schedule. Since the goods continued to answer the description of declared goods, the entry could not operate so as to override the statutory restrictions governing declared goods.

Conclusion: Entry 174 could not be treated as authorising unrestricted taxation of rexine cloth; it had to be read down to the extent necessary to conform to the restrictions applicable to declared goods.

Issue (ii): Whether the turnover of sale of rexine cloth was exigible to tax under the Central Sales Tax Act, 1956 and the Andhra Pradesh General Sales Tax Act, 1957.

Analysis: Rexine cloth was treated as falling within the expression "cotton fabrics" and therefore within the class of declared goods. In consequence, the State's power to levy tax on its sale was controlled by section 15 of the Central Sales Tax Act, 1956 and the corresponding provisions of the Andhra Pradesh General Sales Tax Act, 1957. The levy could not exceed four per cent and could not be at more than one stage. The assessee's claim to complete exemption was not accepted, but the State's claim to levy tax at the rate in entry 174 without regard to those statutory limits was also rejected.

Conclusion: Rexine cloth was exigible to tax only subject to the limitations applicable to declared goods, and not at the unrestricted rate in entry 174.

Final Conclusion: The writ petition succeeded to the extent that the impugned entry was controlled by the statutory restrictions on declared goods, and the tax revision cases failed after the Tribunal's order was modified accordingly.

Ratio Decidendi: Where a State sales tax entry covers goods that are declared goods, the levy must yield to the constitutional and statutory limitations governing declared goods, and a referential exemption continues to operate unless validly displaced consistently with those restrictions.

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