T R C No.61, 62 of 1976. Case: Ateesee Vs State Of Kerala. Supreme Court (India)

Case NumberT R C No.61, 62 of 1976
JudgesGopalan Nambiyar, C J.
IssueKerala General Sales Tax Act
Citation1977 (6) CTR 67
Judgement DateDecember 14, 1976
CourtSupreme Court (India)

Judgment:

These Tax Revision Cases relate to the claim for exemption from the sales tax under the Kerala General Sales Tax Act, 1963, in respect of the turnover on sales of P.V.C. cloth (Rexine). T.R.C. No. 61 of 1976 relates to the year 1971-72 and the claim is in respect of an amount of Rs. 133,40.34; T.R.C. No. 62 of 1976 is in respect of 1972-73 and the claim is for Rs. 1,56,181.104. The genesis and the statutory background on the claim is as follows:

Under Article 286(3) of the Constitution of India.

Any law of a State shall, in so far it imposes, or authorises the imposition of, a tax on the sale or purchase of goods declared by Parliament by law to be special importance in interstate trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify.

In accordance with the above constitutional provisions, the Central Sales Tax Act, 1956, was passed by Parliament. S. 14 declared goods of special importance in interstate trade or commerce. Sub-clause (ii-a) of the said section is:

Cotton fabrics, as defined in item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944 (I of 1944);

And item 19 of the Schedule of the Central Excises and Salt Act, 1944, in so far as it is material, read:

Cotton fabrics mean all varieties of fabrics manufactured either wholly or partly from cotton, and include dhoties, sarees, chadders, bed-sheets, bed-spreads, counter-panes and table cloths, but do not include any such fabric -

This was the definition till it was amended by the Finance Act of 1969. The amended definition, (to notice only its relevant portion) reads:

19 Cotton Fabrics -

Cotton fabrics means all varieties of fabrices either wholly or partly from cotton and includes dhoties, sarees, chadders, bed-sheets, bed-spreads, counter-panes, table-cloths, embroidery in the piece, in strips or in motifs and fabrics impregnated or coated with preparations of cellulose derivatives or of other artificial plastic materials but does not include any such fabric if it contains -

The underlined words are new. The claim for exemption has to be adjudged in the light of the above provisions.

This legislative device (by no means uncommon), of referring to the definition in another Act, is repeated in sub-clauses (vii), (viii) and (ix), all of which refer back to the definition of the relevant expressions contained in the Central Excises and Salt Act, 1944. The claim for exemption from Sales Tax was based on the provisions of S. 3 and 4 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, read with Schedule III authorises the levy and collection in respect, inter alia, of cotton fabrics, rayon or artificial silk fabrics produced or manufactured in India, of duties of excise at the rates specified in the I Schedule. These are to be in addition to the duties of excise chargeable under the Central Excises and Salt Act, 1944. The provisions of the said Act of 1944 and the Rules thereunder, including those relating to refunds and exemptions are to apply in relation to the levy and collection of additional duties int eh same way in which they apply to the same way in which they apply to the levy and collection of duties in the same way in which they apply to the levy and collection of duties of excise. Under S. 4 during each financial year, payment is to be made out of the consolidated fund of India to the States in accordance with the provisions of the II Schedule, of such sums representing a part of the proceeds of the additional duties levied and collected during the financial year. Part III of the II Schedule shoes Rs. 38,00,000 (Rs. 38 lakhs) against Kerala. There is a provision clause (vi) (b)(ii) of Part III of the II Schedule that, if during the financial year, there is levy an collection in any State specified (Kerala is one such State) on the sale and purchase of cotton fabrics, etc. by or under any law of the State, no sums shall be payable to that State under clause (b) in respect of that financial year. (b) in respect of that financial year. By the Kerala General Sales Tax (Amendment) Ordinance of 1957, mill-made textiles and sugar and tobacco were exempt with effect from 14th December 1957 form the levy of sales tax under the General Sales Tax Act, 1125, in view of the levy of Additional Excise Duties by the Central Government. The Ordinance was replaced by S. 54 of the Kerala General Sales Tax Act. The said section exempted the dealer of mill-made textiles, tobacco and sugar from taxation under S. 3(1) of the General Sales Tax Act. When the General Sales Tax Act. When the General Sales Tax Act of 1125 M.E. was repealed and replaced by the Kerala General Sales Tax Act, 1963, S. 9 of the Act conferred the exemption in respect of goods specified in the III Schedule. Item 7 of the said schedule is as follows:

Cotton fabrics, wollen fabrics and rayon or artificial silk fabrics as defined in item Nos. 19, 21, 22 respectively of the First Schedule to the Central Excises and Salt Act, 1944".

Under the Kerala General Sales Tax Act, 1963, unlike in the Act of 1125, the definition of cotton fabrics, etc. is geared directly to the I Schedule to the Central Excises and Salt Act, 1944.

Counsel for the petition contended that the words as defined in the Central Excise and Salt Act, 1944, in item 7 of the III Schedule to the Sales Tax Act are words of reference or citation and not words of incorporation. He placed the strongest reliance on the decision of the Privy Council in Secretary of State vs. Hindustan Co-operative insurance Society Ltd. One of the questions there considered was whether a farther appeal lay to the Judicial Committee from an award of the Tribunal constituted under the Calcutta Improvement Act, 1911, referred to, in the opinion of the Board, a the Local Act, in contra-distinction to the Land Acquisition Act of 1894, referred to as the General Act. Under the General Act, it is well known that the value of the land acquired is determined, in the first instance, by the Collector by his award, against which, there is provision for objection or reference before a Court, terminating again, in an award, from which an appeal lies to the High Court under S. 54. On these provisions it was ruled in Rangoon Botatoung Co. vs. Collector of Rangoon, that no appeal lay to the Judicial Committee as proceedings throughout, were in the nature of arbitration proceedings. But the local Act the Board of Trustees was given power to carry out improvement schemes within the Municipal limits of Calcutta to facilitate expeditious...

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