Taj Plastic House vs Commissioner of Sales Tax

Prakash Krishna, J.—These two revisions are at the instance of dealer and relate to the assessment year 1984-85. The Sales Tax Revision No. 872 of 1994 arises out of assessment proceeding and is directed against the order of the Trade Tax Tribunal dated April 8, 1994. Sales Tax Revision No. 873 of 1994 is against the proceeding u/s 15A(1)(o) of the U.P. Trade Tax Act, 1948.

The applicant is a registered firm and is engaged in the business of sale and purchase of cotton coated fabrics along with plastic sheeting. Its books of account have been accepted by the authorities below. The assessing authority has found that in the relevant assessment year the Sales Tax Officer, Mobile Squad, intercepted the consignment of the dealer. The said consignment is duly recorded in the books of account. The Sales Tax Officer, Mobile Squad, treating the said consignment as that of "rexine" got recovered security before releasing the goods. A dispute about the rate of tax on such goods was raised by the dealer before the Sales Tax Officer, Mobile Squad. The said goods were purchased from Delhi Leather Cloth Store. In reply to the show cause notice issued by Sales Tax Officer, Mobile Squad, it was submitted by the applicant that the Sales Tax Officer, Mobile Squad, on earlier occasions never intercepted the goods thus purchased from the Delhi Leather Cloth Store. However, the Sales Tax Officer, Mobile Squad, treating the said goods having "rexine" of more than 60 per cent treated it as taxable item and realised security from the dealer. The assessing authority in its assessment order has failed to record any finding about the nature of the said goods. It has also not recorded any finding whether the said goods is taxable or not. He treated the said goods as "rexine" and determined its turnover at Rs. 25,000 and levied tax at the rate of 8 per cent. From the assessment order it is clear that the turnover of cotton coated fabrics has been assessed at Rs. 5,48,900 and no tax has been levied on the said turnover by the assessing authority. In Trade Tax Revision No. 20 of 1995 the Commissioner of Trade Tax Vs. Gita Traders, I have held that cotton coated fabrics, is not taxable item under the U. P. Trade Tax Act. Reliance has been placed by me upon the judgment of the Supreme Court given in the case of Collector of Central Excise, Hyderabad Vs. Fenoplast (P) Ltd. (II), . The Supreme Court held that rexine manufactured by the dealer, containing only 8 per cent cotton fabrics remaining 92 per cent being quoting material, PVC resin, plasticizers and other fillers is cotton fabrics. It has been observed that may be rexine cloth is not called or dealt with as cotton fabrics in commercial world or in common parlance, but that does not prevent from treating it as cotton fabrics. It has taken into consideration tariff item No. 19 before its amendment in 1969 to arrive at the above conclusion.

Therefore the authorities below committed illegality in levying tax on rexine, which is an exempted item.

In Sales Tax Revision No. 872 of 1994 penalty u/s 15A(1)(o) of the Act was levied. I have held that rexine is not taxable under the U.P. Trade Tax Act. There cannot be any intention to evade payment of any tax. Therefore, levy of penalty u/s 15A(1)(o) of the Act cannot be sustained.

In the result both the revisions are allowed.