2011 (5) TMI 885 - HC - VAT and Sales Tax

Exemption of Water-Proof H.D.P.E. Fabric from Sales Tax Upheld

Commissioner, Trade Tax, UP., Lucknow Versus Shakti Tubes

The court upheld the exemption of water-proof H.D.P.E. fabric from sales tax under the relevant notification, based on precedents supporting this ... Taxability of the high density poly ethylene fabric - Held that:- Following the view taken by Mahalaxmi Polyplast Private Limited, Muzaffarnagar [1990 (7) TMI 352 - ALLAHABAD HIGH COURT] H. D. P. E. fabric which is water proof is exempt from payment of tax under the above referred notification and, as such, there is no illegality in the impugned order of the Tribunal. Appeal dismissed. Issues involved:1. Taxability of high density poly ethylene fabric (H.D.P.E. fabric) under Uttar Pradesh Sales Tax Act, 1948.Detailed Analysis:The judgment revolves around the taxability of H.D.P.E. fabric under the Uttar Pradesh Sales Tax Act, 1948. The dealer in question was engaged in the business of H.D.P.E. filter cloth and sought exemption from tax based on certain notifications issued in 1985. The Tribunal had exempted the H.D.P.E. cloth manufactured by the dealer from tax under specific notifications. The critical issue was whether H.D.P.E. fabric falls under the exemption category as per the mentioned notifications.The relevant notifications, particularly the one dated January 31, 1985, listed various textiles exempted from tax, but excluded H.D.P.E. fabrics. However, the notification also included an Annexure specifying goods to be exempted, such as 'rubberised or synthetic water-proof fabrics.' The H.D.P.E. fabric in question was confirmed to be a synthetic water-proof fabric by authorities. The interpretation of whether H.D.P.E. fabric qualifies for exemption hinged on this distinction.A Division Bench decision from a previous case highlighted that water-proof H.D.P.E. fabric, especially when laminated, is entitled to tax exemption under the notification. This interpretation was based on the specific inclusion of synthetic water-proof fabrics in the Annexure, overriding the general exclusion of H.D.P.E. fabrics. Another single judge's opinion emphasized that H.D.P.E. fabrics are excluded from exemption unless they are water-proof fabrics, aligning with the exemption criteria set forth in the notifications.However, a conflicting view was presented by another single judge who opined that H.D.P.E. fabrics, commonly known as nylon fabric or fishnet fabric, are not exempt from tax under the textile category. This dissenting judgment failed to adequately consider the full scope of the notifications, particularly the inclusion of water-proof fabrics in the Annexure, as highlighted in previous decisions.The principle of 'stare decisis' was invoked to emphasize the importance of consistency in legal decisions and the need for compelling reasons to deviate from established precedents. The judgment underscored the significance of adhering to past rulings unless there are substantial grounds for a change. The decision in the conflicting case was deemed not binding due to its failure to discuss and analyze previous authoritative judgments and its oversight of crucial statutory provisions.Ultimately, the judgment upheld the exemption of water-proof H.D.P.E. fabric from sales tax under the relevant notification, citing precedents that supported this interpretation. The revisions challenging the taxability of H.D.P.E. fabric were dismissed, affirming the legality of the Tribunal's order granting exemption, with no costs imposed on the parties involved.