05 June 2014

HDPE fabric is artificial silk

The High Court of Punjab & Haryana recently examined warp and weft to judge if HDPE woven fabric is artificial silk [A.R. Plastic P. Ltd. v. State of Haryana]. Disposing the batch of appeals by various dealers, it held that HDPE / PP woven fabric falls within entry 51 of Schedule B of Haryana VAT Act, 2003, (the Act)  and is exempt from VAT.


Goods at issue

The appellant submitted that the HDPE fabric was produced by using HDPE granules, processing them to produce sheets which are then cut and strips are woven by weft and warp to create HDPE fabric. Hence, the goods would fall under ‘All varieties of cotton, woolen or silken textiles including rayon, artificial silk or nylon… ‘(Entry 51) since the HDPE fabric could be classified as artificial silk.


Decision of Madras High Court

The appellant relied on a decision by the Madras High Court in The State of Tamil Nadu v. Polyweb Private Ltd, [(1982) 51 STC 364], wherein the court examined rayon and artificial silk as per the then Central Excise and Salt Act, 1944.  It held that artificial silk is not a mere synonym for rayon and newer varies of artificial silk had been developed and artificial silk thus meant man-made fibre. The relevant Tamil Nadu General Sales Tax Act, 1959 expressly stated that the words would have meanings as per the Central Excise Act and the court had examined the technical meaning of words.

While agreeing with the above reasoning, the High Court of Punjab & Haryana pointed out that the Act does not precisely define what is rayon and artificial silk.  Decision of the Supreme Court in relation to Haryana General Sales Act In Porritts & Spencer (Asia) Ltd. v. State of Haryana was cited wherein the court had opined that the meaning of words should be as per everyday use rather than the technical or scientific meaning. Also “textiles” is derived from Latin ‘texere’ which means ‘to weave’ and it means any woven fabric.


The judgement

Thus, the High Court of Punjab & Haryana held that HDPE fabric would fall under textiles as artificial silk.  It further observed that the clarification issued by the Haryana Government on 10-12-2009 that the products manufactured by similar manufacturers are not covered under entries 52 and 53 of Schedule B nor under Schedule C of the Act and therefore, an unclassified good is liable to be taxed at 12.5% was contrary to the opinion expressed by the Supreme Court.


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