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Reliance Trading Company Versus State of Kerala (and other appeals)

2006 (3) TMI 320 - SUPREME COURT OF INDIA

Whether cotton based tarpaulin is exigible to sales tax under the Kerala General Sales Tax Act, 1963? - Held that:- Appeal allowed. Refering to the exclusion clause in entry 11 in the Third Schedule to the KGST Act it means that where duty has not been levied under the ADEA such goods would be excluded from the purview of entry 11; to put it simply, the goods would lose their exemption under the KGST Act. For this reason also, we hold that cotton based tarpaulin is exempted from sales tax un .....

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e Court was made by B.N. SRIKRISHNA J.-The issue involved in these appeals is identical and hence they can be decided by a common judgment. We shall take the facts in Civil Appeal No. 6621 of 2000 for deciding the issue. The period involved is 1986-87 to 1993-94; the question is whether cotton based tarpaulin is exigible to sales tax under the Kerala General Sales Tax Act, 1963 ( the KGST Act ). Section 5 of the KGST Act is the charging section which provides for the incidence and levy of sales .....

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er the KGST Act in respect of the sale or purchase of such goods. Section 10 is an enabling power of the State Government to grant exemption from tax, with which we are not concerned presently. Prior to March 31, 1984, there was no specific entry for tarpaulin in Schedules I and II. Tarpaulin was classified as a separate item under entry 100-C of the First Schedule and made taxable at a specified rate at the point of first sale in the State with effect from April 1, 1984. This position continued .....

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1992. Under the Kerala Finance Act, 1992 a new entry 106 read as Rain coat, tarpaulin and products of water-proof cloth, rexine and PVC cloth was added. The rate of tax was also increased to 10 per cent without any change in the point of levy. According to the Revenue, tarpaulin falls under entry 100-C or 152, as the case may be, and is taxable at 8 per cent at the first point of sale from April 1, 1984 to March 31, 1992 and from April 1, 1992 it falls under entry 106 taxable at 10 per cent at .....

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d the relevant entry for cotton fabrics was now to be found in entry 52.06 of the First Schedule to the Central Excise Tariff Act, 1985; entry 7 of the Third Schedule to the KGST Act continued till it was amended in 1992. On April 1, 1992, entry 7 was recast and renumbered as entry 11. The recast entry 11 grants exemption to different goods falling under the Central Excise Tariff Act, 1985, including cotton fabrics and contains an exclusion clause which is of relevance to us and reads: Excluding .....

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ute book has been considered and explained by this court in the judgment in Godfrey Phillips India Ltd. v. State of U. P. [2005] 2 SCC 515 See [2005] 139 STC 537., vide paragraph 63. Shorn of details, the reason for bringing this Act on the statute book was to discourage different States levying sales tax at different points at different rates on goods considered to be of special importance and simultaneously to ensure that the States did not lose revenue, by charging an additional excise duty u .....

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process of bleaching, mercerising, dyeing, printing, water-proofing, organdie processing or any other process or any two or more of these processes with the aid of power or steam. The case of the appellant-assessee is that tarpaulin may be manufactured either from cotton cloth or by other methods. As far as cotton based tarpaulin is concerned, the assessee claimed that it was exempted from payment of tax as it fell within the term cotton fabrics under entry 7 of the Third Schedule till March 31, .....

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igible to additional duty under the ADEA, would be exempt from sales tax under the KGST Act. Moreover, the exclusion clause to entry 11, according to the appellant, fortifies this view. By way of an alternative argument, the appellant contended that, cotton fabrics being goods declared to be of special importance in inter- State trade or commerce vide section 14 of the Central Sales Tax Act, 1956, sales tax levied on cotton based tarpaulin cannot, in any event, exceed four per cent, as stipulate .....

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ct that tarpaulin was specifically included in entry 100C with effect from April 1, 1984, entry 152 with effect from July 1, 1987 and entry 106 with effect from April 1, 1992 in the First Schedule to the KGST Act, consequently, it never enjoyed exemption from exigibility to sales tax under the KGST Act from April 1, 1984. The contention is that during the relevant periods, First Schedule to the KGST Act was amended so as to make tarpaulin exigible to sales tax. In view of the specific inclusion .....

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n between cotton based tarpaulin and the goods specified in tariff entry 52.06 of the Central Excise Tariff Act, 1985. We are unable to countenance this argument for the simple reason that the Tribunal had specifically gone into it and after referring to a number of judgments, it was held that cotton based fabrics have always been included in the term cotton fabrics falling under entry 52.06 of the Central Excise Tariff Act, 1985. Thus, undoubtedly cotton based tarpaulin was always covered by th .....

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l principle that when there are two taxing entries-one general and the other specific-then the specific entry would have to be given priority as compared to the general entry. In our view, this principle has no application in the facts of the present appeal as it was not a case of goods being exigible to tax under two entries. On the other hand, the appellant s case is one where the goods had been granted a special exemption provided they were already subjected to tax under the ADEA. The High Co .....

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as to defeat the object of the statute; is also not tenable. In the first place, there could be nothing like exemption from tax unless goods are exigible to tax. Thus, unless the goods were specified in Schedule I or II of the KGST Act, the goods would not be liable to tax at all and, therefore, there would be no question of granting exemption from tax. Thus, it would be unnecessary to specify them in the Third Schedule, unless by reason of section 5 read with Schedule I or II, the goods were ex .....

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tinue to be leviable to tax under the ADEA, and by reason of entry 7/entry 11 of the Third Schedule the said goods would be exempted from exigibility to sales tax under the KGST Act. This legal result would follow irrespective of whatever might have been the presumed intention of the Legislature in amending the First Schedule. The intention of the Legislature has to be gathered from the words used in the statute, and as long as entry 11 in the Third Schedule remains unamended, the legal result o .....

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