M/S.New Khadi Niketan vs. State Of Orissa

Held

The Court held that saree, patta, dhoti, and gamuchha fall under Entry Serial No. 3 of Part-II of the Schedule appended to the Odisha Entry Tax Act, 1999. The Court affirmed the reasoning of the Odisha Sales Tax Tribunal (OSTT) that the term "textile products" is broad enough to encompass the goods in question. The Court found that the Appellate Authority erred in giving a restricted meaning to the expression in Entry 3, Part-II. The Court relied on various judicial pronouncements, including those from the Supreme Court and other High Courts, which interpreted "textile" broadly as any woven fabric and held that items like sarees and dhotis do not lose their character as cloth or fabric merely due to their use or minor processing like stitching. The Court concluded that the goods in question are products of "textile" and do not lose their essential characteristics of fabric. Therefore, the question of law was answered in the affirmative in favour of the State of Odisha-Revenue.

Facts

The petitioner, M/s. New Khadi Niketan, challenged an order dated September 22, 2017, passed by the Odisha Sales Tax Tribunal (OSTT). This order was in appeal against an order dated September 30, 2014, by the Deputy Commissioner of Sales Tax (Appeal), Bhubaneswar Range. The original assessment was framed under Section 9C of the Odisha Entry Tax Act, 1999 (OET Act) by the Sales Tax Officer, Bhubaneswar-II Circle, for the tax periods from April 1, 2006, to September 30, 2011. The Assessing Authority had raised a demand of Rs. 7,54,898/- (tax and penalty) on goods like "saree, patta, dhoti and gamuchha" purchased from unregistered dealers within Odisha and brought into the local area. The petitioner contended these goods were not taxable under Entry Serial No. 3 of Part-II of the OET Act Schedule. The Appellate Authority held these goods were "handloom products" and not "textile," thus not exigible to entry tax. The OSTT reversed this, holding they were "textile products."

Key Issues

1. Whether saree, patta, dhoti, and gamuchha fall under Entry Serial No. 3 of Part-II of the Schedule appended to the Odisha Entry Tax Act, 1999? The petitioner argued that the word "including" in Entry Serial No. 3, Part-II of the Schedule should be interpreted restrictively, limiting the term "textile" to "cotton fabrics and ready-made garments" that follow it. They also contended that comparing Entry No. 3, Part-II with Entry No. 5, Part-I of the same Schedule indicated the intent was to tax only specific items like "pure silk fabric, silk, artificial silk yarn, raw silk." The revenue contended that the OSTT correctly interpreted the classification of the goods and their leviability to entry tax. They argued that the term "textile products" along with "cotton fabrics and ready-made garments" was intended to cover all textile products, with the latter items serving as clarification. They further argued that the Appellate Authority erred in treating the goods as exclusively "handloom products" and that "textile" in common parlance means any woven fabric, citing High Court and Supreme Court precedents.