TaxTMI 
TaxTMI 
1997 (9) TMI 555
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.... 4. In respect of these turnovers the assessee claimed exemption from tax, pursuant to entry 4 of the Third Schedule read with section 8 of the Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act No. 1 of 1959-for short, "the TNGST Act"). 5.. The Deputy Commercial Tax Officer, Assessment Zone II, Madras, rejected the claim so made in respect of those assessment years. 6.. The assessee further agitated the matter, by way of appeal before the Appellate Assistant Commissioner (CT)-I, Kuralagam Annexe, Madras-103. There also, he faced dismal failure, in the sense of all the appeals so filed in that respect having been dismissed, confirming the orders of the assessing officer. 7.. On further appeals, before the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Madras-104 (for short, "the Tribunal"), the assessee, succeeded, in the sense of all the appeals having been allowed and giving the relief as had been prayed for. 8.. Consequently, the Revenue resorted to the present actions-T.C. (R) Nos. 892 to 895 of 1995. 9.. The common question that arises for decision, in all these actions, is: "Whether, the assessee's cotton canvas, being cut into various siz....
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....the additional excise duty have to be shared by the States. It has, therefore, been considered necessary that the definition of the commodity as found in entry 4 in the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959, should correspond with the definition as found in the Central Excises and Salt Act, 1944 (Central Act 1 of 1944). The Government have accordingly decided to modify entry 4 in the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959. This has been given effect to by a notification issued under section 59(1) of the Tamil Nadu General Sales Tax Act, 1959. It is now proposed to give retrospective effect to the amendment from the 1st April, 1974." 12.. Item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944 (Central Act No. 1 of 1944-for short "the CESA") reads as under: Item No. 191--Cotton fabrics (1) (2) (3) (4) (5) or with preparations containing textile flockscotton fabrics, not subjected to any process. (a) Twenty per cent ad valorem. Five per cent ad valorem. 1.9 paise per sq.m. (b) cotton fabrics, subject....
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....shall be deemed to be predominant in such fabric and accordingly such fabric shall be deemed to fall under the applicable item. Explanation III.-This item does not include floor coverings, falling under item No. 22G." 13.. Learned counsel appearing for the assessee as well as for the Revenue drew our attention to many a decision of superior courts of jurisdiction considering the interpretation of the original entry No. 4, "textiles" and the substituted entry No. 4-"Cotton fabrics", we may now proceed to refer to some of the precedents inviting our attention. (a) In State of Tamil Nadu v. East India Rubber Works [1974] 33 STC 399 (Mad.), the question that fell for consideration was whether the sales of waterproof cloth will be exempted from tax, as falling under the original entry No. 4 in the Third Schedule of the TNGST Act. A division Bench of this Court said: "Waterproof cloth, such as rexine, P.V.C cloth, rubberised or synthetic waterproof fabrics, etc., made with cloth as base, are not textiles falling within item 4 of Schedule III of the Tamil Nadu General Sales Tax Act, 1959, inasmuch as the processed articles have different properties and characteristics and ....
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....relevant time. The Gujarat High Court, after elaborately considering all aspects of the matter, held that tarpaulin came within the enlarged definition of "cotton fabrics". (d) In Satyavijay Commercial Company v. Commissioner of Sales Tax [1984] 55 STC 186 (Bom) a similar, as the one posed for consideration in Pokardas & Brothers case [1982] 51 STC 88 (Guj) was also posed for consideration, that is to say, whether tarpaulin manufactured out of cotton fabrics and sold fell under entry No. 15 of Schedule "A" to the Bombay Sales Tax Act, 1959 and therefore would be exempt from tax. A Full Bench of the Bombay High Court, after taking into consideration the substituted entry No. 19-"Cotton fabrics" as available in Schedule I to the CESA and entry No. 15 of Schedule "A" to the Bombay Sales Tax Act, 1959, ultimately expressed, as has been expressed by the High Court of Gujarat in Pokardas & Brothers [1982] 51 STC 88, stating that tarpaulin manufactured out of cotton fabrics and sold fall under entry No. 15 of Schedule A to the said Bombay Act and would, therefore, be exempt from tax. (e) In Bharat Textiles and Proofing Industries v. State of Karnataka [1988] 71 STC 10 (Kar), what th....
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....try 19 of the Central Excises and Salt Act at the relevant time and fall within entry 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act. The use of cotton canvas as tarpaulins or its size cannot alter its character. The stitching of the edges and making of eyelets do not make any difference, and its essential character remains the same and no material change is effected. Tarpaulins as a finished product fall under entry 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act, 1957." (vide: Headnote) (g) In Porritts & Spencer (Asia) Ltd. v. State of Haryana [1978] 42 STC 433 (SC), the question that fell for consideration before the apex Court was as to whether "dryer felts" made out of cotton or woollen yarn by the process of weaving and commonly used as absorbents of moisture in paper manufacturing units is exempt from sales tax under item 30 of Schedule "B" of the Punjab General Sales Tax Act, 1948 (Act No. 46 of 1948), under the classification of "textiles". (i) The Supreme Court answered the question so posed in the following terms: "(a) Dryer felts made out of cotton or woollen yarn by the process of weaving according to the wa....
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....f otherwise they satisfy the description of "textiles". (h) In Binny Ltd. v. Collector (1986) 26 ELT 46 (Tribunal), the question that arose for consideration before the Central Excises and Gold Control Appellate Tribunal (for short, "the CEGAT") was as to whether the finished product, namely, "tarpaulin", can, ever, be said to fall under the expanded definition of "cotton fabric" under item 19 of the Central Excise Tariff. (a)(i) The Tribunal, after elaborate consideration, ultimately held that the main product, namely, finished tarpaulin was classifiable as "cotton fabric" falling under item No. 19 of the Central Excise Tariff. (ii) The Revenue, aggrieved by the decision of the Tribunal, preferred Civil Appeal No. 3538 of 1987 on the file of the Supreme Court of India in its civil appellate jurisdiction and their Lordships of the Supreme Court passed a crisp order on 10th April, 1995 as below: "In the facts and circumstances of the case, we decline to admit the appeal." 14. Reference to various decisions as above would fall under two classifications: (i) Decisions rendered, taking into account the original entry No. 4 in the Third Schedule of the TNGST Act....
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....is: (a) No doubt, the Supreme Court said that it is not the use, which determines the character of the cloths as "textiles", that is to say, the user theory is irrelevant in determining the question. While stating so, the Supreme Court categorically said that an item of cloth can fall under the classification "textile", if it otherwise satisfies the description of "textile". 18. The decisions, namely, in Pokardas & Brothers [1982] 51 STC 88 (Guj), Satyavijay Commercial Company [1984] 55 STC 186 (Bom), Bharat Textile and Proofing Industries [1988] 71 STC 10 (Kar), Binny Limited [1992] 86 STC 207 (AP)-(assessee's own case) and Binny Ltd. (1986) 26 ELT 46 (Tribunal)- (assessee's own case) as earlier stated, express the view that the finished product "tarpaulin" would fall within item No. 19 of the First Schedule to the CESA. This apart, as already indicated, the Supreme Court in Civil Appeal No. 3538 of 1987 declined to admit the appeal taken by the Revenue as against the decision of CEGAT in Binny Ltd. (1986) 26 ELT 46 (Tribunal). (a) In all these decisions, what was taken into account was whether the main goods, namely, finished product "tarpaulin" would fall under i....
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....ulin" must have to fall within the substituted entry No. 4 of the Third Schedule to the TNGST Act and consequently, the tarpaulin is liable to be exempted from tax, pursuant to the salient provisions under section 8 of the Central Sales Tax Act, 1956 (Act No. 74 of 1956-for short, "the CST Act"). (d) Further, we have to recapitulate here the Statement of Objects and Reasons while enacting Tamil Nadu Act No. 37 of 1974, which reflects thus: "...............in view of the general agreement that in respect of articles on which additional excise duty has been levied by the Central Government, the States should not levy sales tax, as a part of the proceeds of the additional excise duty have to be shared by the States. It has, therefore, been considered necessary that the definition of the commodity as found in entry 4 in the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959, should correspond with the definition as found in the Central Excises and Salt Act, 1944 (Central Act 1 of 1944). The Government have accordingly decided to modify entry 4 in the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959." 19.. As already stated, "tarpaulin", a "finished....