Case Note & Summary
The case involves a sales tax reference under Section 61(1) of the Bombay Sales Tax Act, 1959, made by the Maharashtra Sales Tax Tribunal at the instance of the Commissioner of Sales Tax. The respondent, M/s. Polyfab Industries, is a manufacturer of HDPE yarn, HDPE cloth, and filament products. The respondent claimed that HDPE cloth manufactured from HDPE yarn using looms is exempt from sales tax as it falls within the description of 'cloth' in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1958. The respondent filed an application under Section 52 of the Bombay Act on 3rd June, 1997 to settle the doubt regarding tax liability. The determining authority ruled against the respondent, but the Tribunal allowed the appeal, holding that HDPE cloth is exempt. The Commissioner then sought a reference to the High Court. The High Court considered the questions of law and upheld the Tribunal's decision, concluding that HDPE cloth is a man-made fabric and qualifies as 'cloth' under the relevant Schedule, thereby exempt from sales tax. The court answered the reference in favor of the respondent and against the applicant.
Headnote
A) Sales Tax - Exemption - HDPE Cloth as Man-Made Fabric - Section 52, Bombay Sales Tax Act, 1959 - The respondent manufactured HDPE cloth from HDPE yarn using looms and claimed exemption from sales tax as 'cloth' under the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1958. The court held that HDPE cloth is a man-made fabric and falls within the meaning of 'cloth' as described in the said Schedule, thus exempt from sales tax. (Paras 2-10)
B) Sales Tax - Reference - Question of Law - Section 61(1), Bombay Sales Tax Act, 1959 - The Commissioner of Sales Tax referred questions of law to the High Court regarding the classification of HDPE cloth. The court answered the reference in favor of the respondent, affirming the Tribunal's decision that HDPE cloth is exempt. (Paras 1-15)
Issue of Consideration
Whether HDPE cloth manufactured from HDPE yarn using looms is exempt from sales tax under the Bombay Sales Tax Act, 1959, being described as 'cloth' in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1958.
Final Decision
The High Court answered the reference in favor of the respondent, holding that HDPE cloth manufactured from HDPE yarn using looms is exempt from sales tax under the Bombay Sales Tax Act, 1959, as it is a man-made fabric described in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1958.
Law Points
- Exemption from sales tax
- Interpretation of 'cloth'
- Man-made fabric
- HDPE cloth
- Bombay Sales Tax Act
- 1959
- Additional Duties of Excise (Goods of Special Importance) Act
- 1958
- Section 52
- Section 61(1)
Case Details
2017 LawText (BOM) (06) 55
Sales Tax Reference No.31 of 2009 in Reference Application No.76 of 2003
S.C. Dharmadhikari, Prakash D. Naik
Mr. Himanshu Takke (AGP for Applicant), Mrs. Nikita Badheka (Advocate for Respondent)
The Commissioner of Sales Tax, Maharashtra State
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Nature of Litigation
Sales tax reference under Section 61(1) of the Bombay Sales Tax Act, 1959.
Remedy Sought
The Commissioner of Sales Tax sought reference of questions of law to the High Court regarding the classification of HDPE cloth for sales tax exemption.
Filing Reason
The respondent claimed exemption from sales tax for HDPE cloth as man-made fabric, which was disputed by the Commissioner.
Previous Decisions
The Maharashtra Sales Tax Tribunal allowed the respondent's appeal, holding HDPE cloth exempt. The Commissioner then filed a reference application.
Issues
Whether HDPE cloth manufactured from HDPE yarn using looms is exempt from sales tax under the Bombay Sales Tax Act, 1959, as 'cloth' in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1958.
Submissions/Arguments
The respondent argued that HDPE cloth is a man-made fabric and falls within the description of 'cloth' in the First Schedule to the Additional Duties of Excise Act, 1958, thus exempt from sales tax.
The Commissioner contended that HDPE cloth is not 'cloth' as commonly understood and is not exempt.
Ratio Decidendi
HDPE cloth manufactured from HDPE yarn using looms is a man-made fabric and falls within the meaning of 'cloth' as described in the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1958, and is therefore exempt from sales tax under the Bombay Sales Tax Act, 1959.
Judgment Excerpts
This reference is made vide Section 61(1) of the Bombay Sales Tax Act, 1959 by Maharashtra Sales Tax Tribunal at Mumbai.
The opponent (original appellant) is the manufacturer of HDPE yarn, HDPE cloth and filament products.
The opponent claims that the cloth manufactured out of HDPE yarn being a manmade fabric is exempted from levy of sales tax being described in the Column 3 of First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1958.
Procedural History
The respondent filed an application under Section 52 of the Bombay Sales Tax Act, 1959 on 3rd June, 1997. The determining authority ruled against the respondent. The respondent appealed to the Maharashtra Sales Tax Tribunal, which allowed the appeal on 30th April, 2003. The Commissioner then filed Reference Application No.76 of 2003 before the Tribunal, which referred the questions to the High Court via Sales Tax Reference No.31 of 2009. The High Court pronounced judgment on 5th June, 2017.
Acts & Sections
- Bombay Sales Tax Act, 1959: Section 52, Section 61(1)
- Additional Duties of Excise (Goods of Special Importance) Act, 1958: First Schedule
