Emery Cloth Is Cotton Coated Fabric And Liable To Be Exempted From Tax: Andhra Pradesh High Court

The Andhra Pradesh High Court has held that emery cloth is cotton coated fabric and liable to be exempted from tax.

The bench of Justice Ravi Nath Tilhari and Justice Harinath Nunepally has upheld the Tribunal's ruling in which it was held that the emery cloth is covered in Item-59.03 of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and therefore is exempted under Fourth Schedule to the APGST Act, as the same is liable for additional duties of excise under the Additional Duties Act. It held that emery cloth is cotton coated fabric and therefore liable to be exempted from tax. Regarding the levy of tax on tarpaulins, the Appellate Tribunal held that tarpaulin which is waterproof with the base as cloth falls under cotton fabrics in item-5 of the Fourth Schedule to the APGST Act.

The respondent is an assessee on the rolls of the Commercial Tax Officer, Kurupam Market, Visakhapatnam and did business in hardware, electrical goods, pipes etc. The Commercial Tax Officer, Kurupam Market, Visakhapatnam finally assessed the assessee for the years 1994-95 under Andhra Pradesh General Sales Tax Act (APGST Act) in Assessment No.881/94-95. The Assessing Authority assessed the turnover relating to the sale of emery cloth as unclassified item and levied tax accordingly under Seventh Schedule to the APGST Act. It also assessed the turnover relating to the sales of tarpaulins and levied tax at the rate of 9% treating it as covered by item-174 of First Schedule to APGST Act.

The assessee file the appeal. The appeal was partly dismissed and partly remanded and partly allowed by the Appellate Deputy Commissioner, Kakinada. With respect to emery cloth, the contention of the assessee was not accepted. It was held that the commodity should not be treated as cotton fabric. The appeal with respect to this item was dismissed. With respect to other items – tarpaulins, the claim of the assessee was partly accepted by reducing the rate of tax to 4%. With respect to other items in the appellate Order, there is no lis in the present petition.

The Appellate Tribunal formulated the point for consideration that whether the first sales of emery cloth and tarpaulins are not excisable to the tax under APGST Act. The tribunal held that like rexine cloth, tarpaulin is also included in item-174 and stands in the same position as rexine cloth which was held to be completely exempt from tax.

The department filed the revision petition against the order passed by the tribunal.

The department contended that the emery cloth is based with sand and hence cannot be treated as cloth. The emery cloth is for the purpose of shining the wood and other articles and the cloth is useless and of no importance. The Tarpaulin being covered in item No.174 of the First Schedule, it was liable to be taxed and was rightly so 4% taxed by the Deputy Commissioner. The Appellate Tribunal erred in interfering with the Order of the Deputy Commissioner.

Section 3 of the Additional Duties Act 1957 is the charging section and provides for levy and collection of additional duties on goods described in the First Schedule thereof at the rates therein specified. Headings and sub-headings and chapters within the Schedule mean headings, sub-headings and chapters in the schedule with the Central Excise Tariff Act 1985. By Section 5 of the APGST Act every dealer is required to pay tax on the quantum of his turnover at the rates specified in the schedule thereto. Section 6 deals with sales tax of declared goods and states that it shall be paid at the rates specified in the Third Schedule of the Act. It provides for reimbursement of tax in case of inter-state sales where tax under the Central Sales Act 1956 has been paid.

The court noted that as per the order of the Appellate Tribunal the emery cloth was covered under item-59.03 and was exempted as the same was liable for additional duties of excise under the Additional Duties of Excise (Goods of Special Importance) Act 1957.

The court did not find any illegality in the order of the Appellate Tribunal. No case is made out for interference, inasmuch as the Appellate Tribunal has neither failed to decide any question of law nor has decided the question of law erroneously.

The court dismissed the Tax Revision Case filed by the department.

Counsel For Petitioner: S. A. V. Sai Kumar

Counsel For Respondent: A. Sarveswara Rao

Case Title: The State of Andhra Pradesh Versus Mohsin Brothers

Case No.: Tax Revision Case No. 168 Of 2003

Click Here To Read The Order