Commissioner of Sales Tax vs B and V Agro Irrigation Company

This reference at the instance of Revenue was entertained earlier and numbered. However, when it was placed for hearing and final disposal, we have been taken through the questions of law at page 18 of the paperbook. These questions read as under :

"(i) Whether, on the facts and in the circumstances of the case and on true and correct interpretation of the Schedule entry A-12 appended to the Bombay Sales Tax Act, 1959, the Tribunal was justified in holding that ''Agro Shed Knitted fabric'' (i.e., H.D. P.E. Knitted fabric) is covered under the said Schedule entry A-12, without examining the legal position with reference to the descriptions in the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and by simply relying on the view held by the Commissioner of Sales Tax in respect of the impugned product for the past periods prior to April 1, 1947?

(ii) Whether, on the facts and in the circumstances of the case and on a true and correct interpretation of the Schedule entry A-12, the Tribunal was justified in treating the HDPE fabric as covered by the said entry by holding that the said entry from September 1, 1990 has made a clear go-bye to the excise-headings, when in fact the relevant descriptions of goods to which it refers have a necessary nexus with the relevant excise-headings?

(iii) Whether, on the facts and in the circumstances of the case and on true and correct interpretation of the Schedule entries A-12 and C-II-58 appended to the Bombay Sales Tax Act, 1959, the Tribunal was justified in holding that the HDPE knitted fabric is covered by Schedule entry A-12 and that it is not a plastic product covered by Schedule entry C-II-58, by ignoring the classification made by the Central Excise Department during the particular period?"

Mr. Sonpal appearing for Revenue in support of the reference submits that the questions have been forwarded for this court''s opinion at the instance of Revenue. The respondent-assesses, who is the original appellant in Appeal No. 65 of 1996 is engaged in selling what is known as "Agro shed net fabric" which is purchased by him from a manufacturer of the said goods in Gujarat State and is sold in Maharashtra.

The respondent is duly registered under then Bombay Sales Tax Act, 1959 (for short, "the Bombay Act"). In the wake of certain circulars issued by the Central Excise Department and Sales Tax Department in the year 1994, the appellant made an application for correct classification of said product "agro shed net fabric" to the Commissioner of Sales Tax under section 52 of the Bombay Act.

The appellant sought determination of correct rate of sales tax payable in respect of the aforesaid product sold by him under sale invoice No. 540/94 dated January 6, 1995. The assessee claimed that the product is described in column 3 of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (for short, "ADE Act") and therefore is a tax-free fabric under Schedule entry A-12(i). Alternatively, it was claimed that it is a textile fabric under Schedule entry "C-I-15-A". The assessee prayed for prospective effect in case the Commissioner was inclined to reject the primary claim. The determination application was decided by the Commissioner on March 22, 1996. The primary claim of the assessee was rejected as well as the alternative claim. It was held that the product is covered by the Schedule entry "C-II-58" as a plastic product. The prayer for prospective effect was rejected. The Commissioner held this view because change of classification of the goods made by the Central Excise Department from Chapter 54 to 39. The change was referable to judgment of the M.P. High Court in case of Raj Pack Well Ltd. Vs. Union of India (UOI), .

It is against this determination that the assessee preferred an appeal to the Tribunal and the Tribunal decided the appeal on 16th December, 2000. The appeal was allowed. The preliminary claim of the appellant was upheld and the goods were held as a tax-free fabric covered by Schedule entry A-12. The Tribunal held that the Commissioner himself was aware that the goods were covered by Schedule entry A-12 for the period prior to April 1, 1994. There was no change in description of the goods under ADE Act on April 1, 1994. If the goods were described under ADE Act prior to April 1, 1994 as above, they continued to be described even thereafter. The goods therefore continued to be a tax-free fabric in First Schedule after April 1, 1994. A Reference application was filed by the Revenue challenging this judgment. It was allowed and the matter was referred to this court for its opinion and answer on the above reproduced questions.

Mr. Sonpal and Mr. Thakkar both have fairly brought to our notice the provisions of then Bombay Sales Tax Act, 1959. They have also brought to our notice the old Schedule dated July 1, 1981 to September 30, 1995 styled as Schedule A. They have also brought our notice section 5 of the Bombay Act. The Schedule is titled as "goods, the sale or purchase of which is free from all taxes". The Schedule entry 12 deals with fabric such as cotton fabrics, man-made fabrics, woven fabrics of wool, woven fabrics of silk. It also has items as fabrics, sugar and tobacco. The schedule carries this entry regarding the items as defined in the First Schedule to the Central Excise Act, 1944. In the present case, the Schedule entry from September 1, 1990 to September 30, 1995 is relevant and during the course of arguments the assessee''s counsel urged that the entry itself finds place in the list of goods which are free from all the taxes. The description of goods and with which the goods or product of the assessee tally or matches are tax-free for the relevant period or exempt from payment of taxes.

Mr. Sonpal on the other hand disputed that the goods do not carry any tax but are subjected to nil rate of duty and submits that this position does not emerge from a reading of the Schedule entry but by virtue of the notification and which has been issued by the Government in exercise of its powers under section 41 of the Bombay Act. In that regard our attention is invited to trade circular and the annexures thereto including serial No. 6 which deals with HDPE/PP woven fabrics of a type used in the manufacture of woven sacks and it is stated that the schedule clarifies that there will be zero rate of sales tax on the said description of commodity/supplies.

Mr. Sonpal submits that there is dispute with regard to classification as Revenue terms the subject goods of the type used in manufacturing of woven sacks whereas Mr. Thakkar would submit that these are fabrics covered by entry 12 in Schedule A.

The position and on facts which emerge from reading of the trade circular/notification and the Schedule A is that there is presently nil or zero rate of duty on the goods in question. The dispute raised is with regard to classification of goods and that dispute is pending. Once there is no revenue impact or effect and which could have been possibly allowed this court to pass any order on the questions which have been referred for its opinion and finding that there is no such impact as the goods do not presently attract any sales tax that we are of the opinion that the reference and controversy therein is purely academic. We are not called upon in this case to decide the case or dispute of classification. The questions as posed also do not raise such issue and even if they do raise, finding that there is no revenue impact as rate of duty is zero or nil, then the reference can be disposed of as infructuous. Any opinion on the questions posed would be purely academic and by keeping all contentions raised in the controversy to classification and for any period open for being decided in a appropriate case, the present reference is disposed of. We clarify that if for any period there is a dispute with regard to classification of the goods or applicability of the Schedule entry A-12 or serial No. 6 of the trade circular that controversy will be decided without being influenced by the order passed in the present reference. We clarify that when we dispose of this reference we assume that the admitted position is that even the trade circular which has been brought to our notice by Mr. Sonpal and notification relied upon was in force till July 31, 1995 which is subject-matter of this reference.