Back
2006 Supreme(SC) 294
IN THE SUPREME COURT OF INDIA
B.N Srikrishna, Dalveer Bhandari, Ruma Pal, JJ.
RELIANCE TRADING COMPANY
Versus
STATE OF KERALA, AND OTHER APPEALS.
Civil Appeal No. 6621 of 2000 with Civil Appeals Nos. 6622 to 6634 of 2000 (Appeals from the judgment dated January 27, 2000 of the Kerala High Court in T.R.C. Nos. 104 to 108, 110, 111, 130 to 132 of 1997, 132, 133, 235, 362 and 377 of 1998 and 12 and 21 to 23 of 1999)
Decided On: Decided On : 30-03-2006
Joseph Vellapally - Appellant.
T. L. Viswanatha Iyer - Respondent.
Important Points
Subject
Tax Law - Indirect Tax
Act Referred
Headnote
(B) Interpretation of Taxing and Exemption Entries - The general principle that a specific entry is given priority over a general entry applies when goods are potentially exigible to tax under two different taxing entries; it does not apply when a specific taxing entry is weighed against a special exemption provided to goods already subjected to tax under central legislation.
(C) Legislative Intent - The intention of the legislature must be gathered from the words used in the statute; as long as an exemption entry in the Third Schedule remains unamended, the legal result of exemption cannot be avoided by simply adding the item to the taxable First Schedule.
Facts of the case:
The dispute pertains to whether cotton based tarpaulin is exigible to sales tax. The revenue department contended that because "tarpaulin" was specifically included in the First Schedule of the state sales tax act, it should be taxable at the specified rates. The assessee argued that cotton based tarpaulin falls under the definition of "cotton fabrics" in the Third Schedule, which grants exemption from sales tax for goods that are subject to additional duty under the central act for goods of special importance.
Findings of Court:
The court found that cotton based tarpaulin is undoubtedly covered by the term "cotton fabrics" as specified in the central excise tariff. It further held that the exclusion clause in the exemption entry confirms that goods subject to duty under the central act for goods of special importance are exempt from the state sales tax.
Issues: The main issue was whether the specific inclusion of "tarpaulin" in the taxable schedule of the state act overrides the general exemption granted to "cotton fabrics" in the exemption schedule, particularly when such goods are subject to duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.
Ratio Decidendi: The court ruled that the principle of "specific over general" is inapplicable to the interaction between a taxing entry and an exemption entry. Since the exemption for "cotton fabrics" in the Third Schedule remained unamended, the goods continue to be exempt regardless of their inclusion in the First Schedule, provided they are subject to the relevant central additional duty.
Result: Appeals allowed.
Legal Category Hierarchy
-
tax law
-
sales tax
-
exemption
- cotton fabrics
- tarpaulin
-
classification of goods
- specific vs general entry
-
exemption
-
interpretation of statutes
- legislative intent
- plain meaning rule
-
central excise and additional duties
- additional duties of excise act
-
sales tax
ORDER
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 tax. Under section 5(1)(i) in the case of goods specified in the First or Second Schedule to the KGST Act, tax is leviable at the rates and only at the points specified against such goods in the said Schedules. In the case of goods not specified in the First or Second or Fourth or Fifth Schedule, tax at a specified rate is leviable at all points of sales. Section 9 of the KGST Act provides that a dealer who deals in the goods specified in the Third Schedule shall not be liable to pay any tax under 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 till June 30, 1987 when the relevant entry, reading identically, was renumbered as 152, reading as :
"P.V.C. cloth, water-proof cloth, rexine and their products and tarpaulin."
The rate of tax at the material time was eight per cent at the point of first sale. This situation continued till July 31, 1991. By the Kerala Finance Act, 1991, the commodity "P.V.C. cloth" was deleted from the First Schedule with effect from August 1, 1991 from the relevant entry. This situation continued till March 31, 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 the point of first sale in the State.
The Third Schedule to the KGST Act contained entry 7, which read :
"Cotton fabrics, woollen fabrics (sic) and rayon or artificial silk fabrics as defined in item Nos. 19, 21 and 22, respectively of the First Schedule to the Central Excises and Salt Act, 1944". At this juncture it may be pointed out that although the First Schedule to the Central Excises and Salt Act, 1944 was repealed in 1986, when the Central Excise Tariff Act, 1985 was brought into force, and 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 PVC cloth, rexine and waterproof cloth on which duty is not levied under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (Central Act 58 of 1957)."
In 1957, the Parliament brought into force the Additional Duties of Excise (Goods of Special Importance) Act, 1957 ("the ADEA"). Under this Act, certain additional duties were levied on goods which were considered of special importance all over the country. The background against which this enactment was brought on to the
