1984 (2) TMI 97 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of pile carpets under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959.
2. Applicability of item 21 of the First Schedule to the Central Excises and Salt Act, 1944.
3. Treatment of pile carpets as woollen fabrics for tax purposes.

Detailed Analysis:

1. Classification of Pile Carpets under Item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959:
The primary issue was whether pile carpets fall under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959, which includes cotton fabrics, woollen fabrics, and rayon or artificial silk fabrics. The Tribunal held that pile carpets do not fall under this category, relying on an order by the Government of India, Ministry of Finance, dated 14th April, 1972, which stated that carpets manufactured by Bharat Carpets Limited do not fall under item 21 of the Central Excise Tariff. The Tribunal concluded that pile carpets should not be treated as woollen fabrics.

2. Applicability of Item 21 of the First Schedule to the Central Excises and Salt Act, 1944:
Item 21 of the First Schedule to the Central Excises and Salt Act, 1944, defines 'woollen fabrics' as all varieties of fabrics manufactured wholly of wool or containing 40% or more by weight of wool, including blankets, lohis, rugs, shawls, and embroidery in the piece, in strips, or in motifs. The Tribunal found that pile carpets, which are intended to cover flooring or staircases, do not fit within this definition as they are not used for covering the body or bedding. The Government of India had previously held that the carpets manufactured by Bharat Carpets Ltd. were wool tufted jute fabrics, not woollen fabrics, and thus not liable for excise duty under item 21.

3. Treatment of Pile Carpets as Woollen Fabrics for Tax Purposes:
The assessee contended that pile carpets should be classified as woollen fabrics under item 21 of the First Schedule to the Central Excises and Salt Act, and consequently under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act. However, the Tribunal and the High Court upheld that pile carpets, having a jute base with woollen tufts, do not qualify as woollen fabrics. The High Court referred to the Supreme Court's interpretation in Union of India v. Gujarat Woollen Felt Mills and Porrits & Spencer (Asia) Ltd. v. State of Haryana, which emphasized that 'woollen fabrics' refer to materials used for covering the body or bedding, not items like carpets.

Conclusion:
The High Court upheld the Tribunal's decision that pile carpets do not fall under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act or item 21 of the First Schedule to the Central Excises and Salt Act. Consequently, the turnover in question was correctly treated as relating to pile carpets, and the tax case was dismissed with costs.