TaxTMI 
TaxTMI 
2014 (6) TMI 794
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....d in manufacturing and sales of 'Cotton Coated Fabric'. 'Cotton Coated Fabric' is a 100% cotton cloth manufactured on power loom, on which PVC resin and other stabilizers are coated. The petitioner has been paying the additional duty of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (hereinafter called the "Act, 1957"). Notifications under Section 4 of the Act, 1948 were issued from time to time granting exemption for payment of trade tax on various goods including cotton fabrics on all varieties. In this context, notifications dated 31/1/1985, 05/6/1985 and 01/2/1989 were also issued. The petitioner declared his goods to be exempted from trade tax which declarations were accepted by the Assessing Authorities. After accepting the goods as exempted from trade tax after about 10 years, an issue was raised during the Assessment Year 1996-97 as to whether the "cotton coated fabric" manufactured and sold by the petitioner is covered by the exempted notification or not. The matter was taken up to the Tribunal. The Tribunal allowed the appeal and remitted the matter to the Assessing Officer to obtain information as to whether the asses....
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.... 16/1/2012. This Court passed an interim order on 24/1/2012 staying the operation of the order dated 25/11/2011 as well as the consequential notices dated 28/11/2011. We have heard Shri S.D. Singh, learned Senior Advocate assisted by Shri Nishant Mishra for the petitioner and Shri C.B. Tripathi, learned Special Counsel appearing for the State. Shri S.D. Singh, learned Senior Advocate appearing for the petitioner challenging the re-assessment proceedings submitted that there was no material to form any belief that the tax has escaped assessment and the proceedings are wholly beyond the purview of Section 21(2) of the Act, 1948. It is submitted that the Act, 1957 was enacted by the Parliament to levy additional duties of excise on sugar, tobacco and fabrics with an object that the State Legislature may not impose tax on the said items which are items of special importance in another State, trade or commerce. Respective State Legislature thereafter issued various notifications exempting payment of trade tax in different States. The State of U.P. also issued notifications granting exemption of payment of tax on all varieties of cotton fabrics vide notifications dated 31/1/1985, 05/6/....
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....ents of this Court as well as of the Apex Court which shall be referred to while considering their submissions in detail. From the pleadings of the parties, following two main issues arise for consideration: (1)Whether 'Cotton Coated Fabric' i.e. 'Textile Fabrics', impregnated, coated, covered or laminated' by PVC is the same thing as PVC fabric for the purpose of taxability under the Act, 1948. (2)Whether there was any material with the respondent authorities to form a belief that tax has escaped assessment so as to initiate proceedings under Section 21(2) of the Act, 1948 for the relevant period. The petitioner, is a manufacturer of "Cotton Coated Fabric" which is specifically supplied by the petitioner and has been noted in the relevant Assessment Years 2005-06 and 2006-07. In the Assessment Years 2005-06 and 2006-07 the "Cotton Coated Fabric" was accepted as exempted from tax. The notification dated 05/6/1985 issued under Section 4 clause (a) of the Act, 1948. Entry 53 provides as follows: "Amendments In the Schedule to the aforesaid notification- (1)for the existing entries in Column 2 against serial numbers 7,10,43 and 53, the following entries shal....
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....ommission. Provision has been made that the States that the States which levy a tax on the sale or purchase of these commodities after the 1st April, 1958 to not participate in the distribution of the net proceeds. Provision is also being made in the Bill for including these three goods in the category of goods declared to be of special importance in inter-State trade or commerce so that, following the imposition of uniform duties of excise on them, the rates of sales tax if levied by any State are subject from 1st April, 1958 to the restrictions in Section 15 of the Central Sales Tax Act, 1956":- Gaz. Of Ind., 13-12-1957, Part II-S.2, Extra p.963." Section 3 of the Act, 1957 provides that there shall be levied and collected in respect of goods described in column 3 of the First Schedule. The First Schedule under the Act, 1957 provides "heading", "sub-heading", and "Chapter" mean respectively a heading, sub-heading, and Chapter in the Schedule to the Central Excise Tariff Act, 1985. Under the heading 59.03 following was included. (1) (2) (3) (4) "59.03 TEXTILE FABRICS OF COTTON AND MAN-MADE TEXTILE MATERIALS IMPREGNATED, COATED COVERED OR LAMINATED WITH PLASTICS, OTHER THAN T....
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....etween the "cotton coated fabrics" and "P.V.C. Fabrics". It is useful to quote para 36.2 of the writ petition which is quoted below: "36.2 That broadly, the difference between 'Cotton Coated Fabrics' and 'PVC Fabrics' with regard to their manufacturing process, commercial usage and application as classification etc. are being shown in chart mentioned below:- Cotton Coated Fabric PVC sheet/PVC Fabric Manufacturing process Cotton Coated Fabric is having Cotton Cloth manufactured on power loom as its base on which PVC resin along with other plasticizers are being impregnated, coated and/or laminated. PVC sheet/ fabric is a sheet/fabric manufactured solely from PVC (Poly Vinyl Chloride) in which cloth is not being used at all. Usage manufacturing of upholstery sofa Cover, Shoe Uppers, Car Upholstery etc. PVC cloth/Fabric i.e. in bathroom curtains, manufacturing of raincoats, table covers, suit case etc. Chapter Heading Chapter 59.03 of the Central Excise Tariff Act. Chapter 39.02 of the Central Excise Tariff Act. The basis of the entire proceedings initiated against the petitioner by the respondents is the judgment of the learned Single Judg....
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....rom textile, if the intent would be to continue the exemption on PVC fabric from textile, if the intent would be to continue the exemption on PVC fabric as textile. It is settled principle of law that it is always open to the Legislature to exclude or include any item from any goods by fiction. 18. In the case of Gaurav Traders, Gorakhpur vs. Commissioner of Trade Tax 2007 NTN (Vol.34) 298, the question was whether HDPE woven fabric being excluded from textile is exempted from tax as textile. This Court held that after the exclusion from textile, it is not exempted from tax. 19. Since the PVC fabric has been specifically excluded from textile, it cannot be exempted as textile by any stretch of imagination by giving any interpretation. 20. Now coming to the alternative remedy of learned Counsel for the dealer, learned Counsel for the opposite party submitted that PVC fabric being cotton coated fabric is covered under Section 14 of the Central Act (hereinafter referred to as "the Central Act") and, therefore, liable to tax at four per cent and not as an unclassified item. Perusal of the order of the Tribunal reveals that this aspect of the matter has not been considered by the Tri....
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.....D.P.E. Fabrics is a synthetic fabric. And it is further conceded to the respondents that plain H.D.P.E. Fabrics when subjected to the process of lamination become water-proof. That being so, the article in question squarely falls within clause (vi) of the Annexure to the above notification dated June 5, 1985. Clause (vi) specifically exempts synthetic water-proof fabrics from levy of sales tax. The learned standing counsel, however, submitted that mere lamination would not take the H.D.P.E. Fabrics being mentioned by the petitioner from out of the purview of the exception specifically made under Entry 53, i.e., being H.D.P.E. Fabrics it cannot claim exemption from sales tax in view of Entry 53 which excepts various items of textiles from the benefit of exemption granted under the notification dated June 5, 1985. The learned Standing Counsel vehemently contended that even after lamination the basic character or texture of the item continues to be H.D.P.E. Fabrics. 11. We regret the submission of the learned Standing Counsel cannot be accepted. It is true that the notification specifically excepts certain item of textiles from the benefit of exemption. These items have been mention....
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....VC fabrics (Cotton Coated Fabric) are not exempted from tax, but when the issue of (Cotton Coated Fabrics) was not involved in the said case, how the said ratio can be applied in the present case where the issue of (Cotton Coated Fabrics) is involved and where the petitioner's case specifically is that his article manufactured by him is (Cotton Coated Fabrics) which is impregnated/coated and laminated by PVC. (Cotton Coated Fabrics) coated by PVC and PVC fabrics have to be given different meaning. The word "variety" which is added along with the (Cotton Fabrics) shall include (Cotton Coated Fabrics) coated by PVC or any other material. The submission of the learned counsel for the petitioner that the petitioner has been paying additional excise duty under the Act, 1957, is a relevant fact. The Additional Excise Duty was imposed so that the State may not impose trade tax on items of special importance. It is also on the record that the petitioner has been paying the additional excise duty under the Act, 1957, on the (Cotton Coated Fabrics), hence the taxability was never disputed by the Assessing Officer and when in the year 1996-97 taxability was disputed, the issue was decide....
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....d, so far as the second is concerned, provided that the tax should be levied only on the last sale or purchase inside the State and even that should not be levied when that last sale or purchase is in the course of inter-state trade or commerce as defined. Act 31 of 1958 amended Section. 15 to impose certain modified restrictions and conditions with the details of which we are not here concerned. These restrictions clearly entailed loss of revenue to the States and it was considered expedient and desirable to compensate the States for the proportionate loss of sales tax incurred by them. Thus, even before Section. 15 was brought into force, the Central Government decided to pass an Act to provide for the levy and collection of additional duties of excise on certain goods and for the distribution of a part of the net process thereof among the States in pursuance of the principles of distribution recommended by the Second Finance Commission in its report dated 30.9.1957. This proposal to levy additional duties of excise on certain special goods was a part and parcel of an integrated scheme under which sales tax levied at different rates by the States on certain goods was ultimately s....
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.... Leather Cloth Industries (supra) is not applicable in the facts of the present case. Now coming to the second issue as to whether the Additional Commissioner has rightly granted permission under Section 21 (2) of the Act, 1948 and as to when the re-assessment proceedings can be initiated under Section 21(2) of the Act, 1948 has been the subject matter of consideration before the Apex Court and this Court in large number of cases. It is useful to refer to the judgment of the Apex Court in The Commissioner of Sales Tax, U.P. Vs. Bhagwan Industries (P) Ltd., Lucknow, (1973) 3 SCC 265. The Apex Court while considering Section 21 of the Act laid down following in paragraph 9 of the said judgment which is quoted below: "9. The controversy between the parties has centered on the point as to whether the assessing authority in the present case had reason to believe that any part of the turnover of the respondent had escaped assessment to tax for the assessment year 1957-58. Question in the circumstances arises as to what is the import of the words "reason to believe", as used in the section. In our opinion, these words convey that there must be some rational basis for the assessing autho....