TMI Blog2014 (6) TMI 794X X X X Extracts X X X X X X X X Extracts X X X X ..... m included in the exemption, the exemption shall not be denied to the species of the item included - although the PVC/H.D.P.E fabrics are excluded, but cotton coated fabrics of all varieties having been included, if the item manufactured by the petitioner is termed as cotton coated fabric, it is exempted from payment of Tax under Act, 1948. 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 - Held that:- There cannot be any dispute to the proposition as laid down in the above two cases. In the proposal submitted by the Assessing Officer, no other fact except the judgment of the learned Single Judge in M/s Laxmi Leather Cloth Industries (2007 (10) TMI 577 - ALLAHABAD HIGH COURT) was relied on. The Additional Commissioner, himself has observed in its order dated 25/11/2011 that the question as to whether the tax has escaped assessment is to be examined by the Assessing Officer for determining as to whether the "Cotton Coated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee has been paying the excise and additional excise duty on the goods or not. The Assessing Officer after remand by the Tribunal made inquiries from the Central Excise Authorities and held that the petitioner has been paying the additional excise duty, hence on cotton coated fabrics, the assessee is not liable to pay trade tax. The order passed by the Tribunal as well as by the Assessing Officer pertaining to the year 1996-97 were not challenged by the Department and were allowed to become final. The Assessment orders for the years 2005-06 and 2006-07 (U.P. Central) were passed by the Assessing Officer on 24/3/2009 and 27/3/2009 respectively whereby the accounts books as well as the declared turnover of sale on cotton coated fabric was accepted as exempted from trade tax. On the very next day i.e. on 25/3/200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpose 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, 05/6/1985 and 01/2/1989. The petitioner has been making the payment of Additional Excise duty till 01/3/2003, when additional excise duty has been exempted on Cotton Coated Fabrics . It is submitted that there has been already a decision of the Assessing Officer pertaining to the Assessment Year 1996-97 that the Cotton Coated Fabric manufactured by the petitioner was not liable to trade tax hence, there was no reason to initiate re-assessment proceedings against the petitioner. It is submitted that the judgment of this Court in M/s. Laxmi Leather Cloth Industries (supra) was not applicable on the goods manufactured by the petitioner since the said case was with regard to the PVC sheets and was not a case of Cotton Coated Fabric . It is submitted that the Cotton Coated Fabric manufactured by the petitioner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 shall respectively be substituted, namely:- 1 2 3 7.................. 10.................. 43................... 53. Textiles of the following varieties manufactured on powerloom, excluding durries, carpets, druggets, hosiery goods readymade garments, hessian or jute cloth and cotton, rayon or nylon tyre cord fabrics, tyre cord or tyre cord wrap sheets, PVC/HDPE fabrics and cotton beltings, but including the goods specified in the Annexure hereunder: (a) cotton fabrics of all varieties: (b) rayon or artificial silk fabrics, including staple fibre fabrics, of all varieties; (c) woollen fabrics of all varieties: (d) fabrics made of a mixture of any two or more of the above fibres, viz. cotton, rayon, artificial silk, staple fibre or wool; (e) Canvas cloth, tarpoulins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cribed 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 THOSE OIF HEADING No.59.02 5903.10 - With polyvinyl chloride 5% 5903.20-- With polyurethane 5% 5903.90 Other 5% Under the Central Excise Tariff Act, 1985, different items and articles have been classified under different Chapters. Under the Tariff Item 5903 following was provided. The words 'cotton fabrics' has not been defined either in the Act, 1948 or in The Central Excise Tariff Act, 1985. In Section 14 of the Central Sales Tax Act, 1956 declaration of cotton fabrics is covered under different heading of Goods of Special Importance in Inter-State Trade or Commerce. The words Cotton Fabrics is covered under the heading 59.03. Section 14 (iia) of the Act, 1956 is as follows: (iia) cotton fabrics covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Judge in M/s. Laxmi Leather Cloth Industries (supra). A perusal of para 2 of the said judgment indicates that in the revisions before the High Court the question relating to taxability of PVC sheets was involved. It is useful to quote para 2 of the said judgment: 2.In all the four revisions common question relating to the taxability of PVC sheets is involved. According to the claim of the opposite party/dealer (hereinafter referred to as dealer ) PVC sheets is a textile and accordingly exempted under the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tribunal. Therefore, the Tribunal is directed to consider this aspect of the matter. 21. In the result, all the revisions are allowed. Order of the Tribunal is set aside. It is held that PVC fabric (cotton coated fabric)/leather cloth manufactured by the dealer is not exempted as textile under the Notification No.ST-II-3714/X-6(1)/85-UP. Act 15/48- Order 85, dated June 5, 1985. However, whether it is liable to tax as an unclassified item or as declared commodity being covered under Section 14 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 mentioned in Entry 53 (quoted above) Among the items excepted H.D.P.E. Fabrics also finds place. But within this exception another area has been carved out consisting of items specified in the Annexure to the notification which were intended to continue to receive the benefit of exemption. Even if, therefore, in its broadest sense, laminated H.D.P.E. Fabrics would also be H.D.P.E. Fabrics but if it falls within one or the other of the items mentioned in the Annexure it would not be liabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve 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 decided in favour of the assessee after recording a finding that the petitioner is paying Additional Excise Duty. The petitioner has quoted the order of the Tribunal and the Assessing Officer with regard to the year 1996-97 in paragraphs 12 and 13 of the writ petition which fully supports his submission. The Apex Court in State of Kerala Vs. Attesee (Agro Industrial Trading Corporation) (1989) Suppl 1 SCC 733, had occasion to consider the provisions of Kerala General Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 substituted by the levy of additional duties of excise on such goods and the States were compensated by payment of a part of the net proceeds of the said additional levy on such goods. That this clearly was the genesis and object of the 1957 Act also appears from its objects and reasons set out earlier. Some of the items liable to excise duty were picked out from the Schedule to the 1944 Act. They were listed among the declared goods of Section 14 of the CST Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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 authority to form the belief that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. If such a basis exists, the assessing authority can proceed in the manner laid down in the section. To put it differently, if there are, in fact, some reasonable grounds for the assessing authority to believe that the whole or any part of the turnover of a dealer has escaped assessment, it can take action under the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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