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1991 (7) TMI 360 - HC - VAT and Sales Tax
Issues:
1. Dispute over the liability to tax on the sale of rubber beltings under the Tamil Nadu General Sales Tax Act, 1959. 2. Determination of whether rubber beltings constitute cotton fabrics for taxation purposes. 3. Interpretation of relevant provisions of the Central Excises and Salt Act, 1944, Central Sales Tax Act, 1956, and Tamil Nadu General Sales Tax Act, 1959. 4. Application of precedents regarding the classification of fabrics for tax exemption. Analysis: The High Court of Madras addressed a dispute involving the liability to tax on the sale of rubber beltings under the Tamil Nadu General Sales Tax Act, 1959. The assessee argued that the rubber beltings should not be taxed under the Act as they fell under item 19 of the First Schedule to the Central Excises and Salt Act, 1944. The Court examined the manufacturing process of the rubber beltings and found that the predominant material was cotton, with rubber used only as a binding agent. The Court emphasized that the power of taxation of declared goods is not available to the State unless the tax stage and point are clearly specified in the state's sales tax law. Regarding the interpretation of relevant provisions, the Court analyzed Section 4 of the Tamil Nadu General Sales Tax Act, 1959, which deals with declared goods and specifies the tax rates and points for taxation. Since the Second Schedule of the Act did not specify the tax rate or point for the product in question, the Court relied on the Central Excise Tariff to classify the rubber beltings as cotton fabrics falling under item 19. The Court also referred to the Central Sales Tax Act, 1956, which restricts the taxation of declared goods at more than one stage or exceeding the prescribed rate. Furthermore, the Court applied precedents such as the State of Tamil Nadu v. Navinchandra and Company and Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan to support the classification of the rubber beltings as cotton fabrics for tax exemption. The Court emphasized that the industrial use of a commodity does not alter its nature, as long as it is primarily composed of cotton fabric. Ultimately, the Court upheld the Tribunal's decision that the rubber beltings should not be taxed under the Tamil Nadu General Sales Tax Act, 1959, based on the classification as cotton fabrics under the Central Excise Tariff. The revision was dismissed, and no costs were awarded due to the absence of representation from the respondent.
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