2013 (1) TMI 465 - HC - VAT and Sales Tax

Court Grants Tax Exemption on Textile Fabrics, Reverses Tribunal Decision

SHALIMAR WIRES INDUS. LTD. Versus ASSTT. COMMR. OF COMMERCIAL TAXES

SHALIMAR WIRES INDUS. LTD. Versus ASSTT. COMMR. OF COMMERCIAL TAXES - 2012 (286) E.L.T. 12 (Cal.) Issues Involved:1. Classification of the product 'Synthetic Wire Fabric'2. Entitlement to exemption under Section 24 of the West Bengal Sales Tax Act, 19943. Applicability of additional excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957Issue-wise Detailed Analysis:1. Classification of the product 'Synthetic Wire Fabric':The petitioner, a manufacturer of Synthetic Wire Fabric, challenged the classification of their product by the Sales Tax Authorities, which denied them tax exemption. The product is described as a woven fabric of nylon polyester monofilament yarn. The authorities below, including the West Bengal Taxation Tribunal, held that the product was not lustrous and pliable like pure silk and thus did not qualify as textile fabric of artificial silk. The petitioner argued that the product should be classified under 'textile fabrics of all varieties' as per Serial No. 81 of the West Bengal Sales Tax Act, 1994.2. Entitlement to exemption under Section 24 of the West Bengal Sales Tax Act, 1994:The petitioner claimed exemption from sales tax under Section 24 of the 1994 Act, arguing that their product falls under Serial No. 81, which includes 'textile fabrics of all varieties made wholly or partly of cotton, rayon, artificial silk or wool.' The petitioner cited the Supreme Court's decision in Porritts & Spencer (Asia) Limited v. State of Haryana, which held that any woven fabric, regardless of the material, qualifies as a textile. The petitioner contended that the exemption should not be denied merely because additional excise duty is not being levied.3. Applicability of additional excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957:The respondent argued that the petitioner's product did not qualify for exemption as it was not covered under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. They contended that since no additional excise duty was levied on synthetic wire cloth/fabric, the product could not be exempted from sales tax. The Tribunal had earlier observed that the product lacked the essential feature of pliability and was not as soft and lustrous as artificial silk, thus not meeting the criteria for exemption.Judgment Analysis:Classification of the product:The Court found that the petitioner's product is indeed a woven fabric, satisfying the criteria for textile fabrics. The Court held that the Tribunal's approach was legally erroneous in focusing on the product's lustrous quality. The relevant factor is whether the product satisfies the attributes of textile fabrics. The Supreme Court's decision in Porritts & Spencer (Asia) Ltd. was cited, which defined textiles as any woven fabric, regardless of the material used.Entitlement to exemption:The Court concluded that the petitioner's product falls within the scope of 'textile fabrics of all varieties' under Serial No. 81 of the 1994 Act. The phrase 'textile fabrics of all varieties' was interpreted to have a broad coverage, including the petitioner's synthetic wire fabric. The Court noted that the legislative history of taxability was not relevant to the classification issue.Applicability of additional excise duty:The Court rejected the respondent's argument that the absence of additional excise duty disqualified the product from exemption. The Court emphasized that the exemption under the 1994 Act did not depend on the levy of additional excise duty.Conclusion:The Court allowed the writ petition, reversed the judgment of the learned Tribunal, and held that the petitioner's product is classified under Entry 81, thus entitled to exemption from sales tax. The judgment emphasized the broad interpretation of 'textile fabrics' and rejected the necessity of additional excise duty for tax exemption.Separate Judgments:The judgment was delivered per Kalyan Jyoti Sengupta, J., with Joymalya Bagchi, J., concurring.