STATE OF KERALA Vs. MARINE TRADE LINKS

JUDGEMENT

(1.) THE question involved in these Tax Revision Cases is whether nylon fishing net fabric is liable to be assessed under Entry 129 of the First Schedule to the KGST Act upto 1. 4. 1992 and thereafter under Entry 89 of the First Schedule or whether the item is entitled to exemption under Entry 7 of the Third Schedule to the KGST Act which entry is later renumbered as entry 11 of the very same Third Schedule. Different Benches of Sales tax appellate Tribunal decided the appeals differently, some granting exemption, while the others declining exemption holding that the item comes under the above entries of the First Schedule to the Act. THErefore Tax Revisions are filed challenging the orders of the Tribunals both by the State as well as by the assesses. We have heard various counsel appearing for the assesses and government Pleader appearing for the State.

(2.) ON going through the Tribunals orders, we find the tribunals have referred to a Government order, G. O. P. No. 162/88/td dated 25. 11. 1988, clarifying that nylon fishing net fabric sold in length will fall under Entry 7 of the Third Schedule to the Act, and therefore eligible for exemption from tax. It is seen from the copy of the notification produced in court that the Government issued the clarification on application for sales tax exemption by a section of manufacturers and dealers of nylon fish net including matsya FED, an organization under Government control. When the parties sought for exemption, Government felt that no exemption was required as the item falls under Third Schedule to the Act. Inspite of Government orders, the assessing officers levied tax because this Court held in a series of decisions that section 59a under which the Government issued the above clarification is invalid. Counsel for the assesses besides referring to Government orders relied on the decision of the Supreme Court in Reliance Trading Company v. State of kerala, 147 STC 211 wherein the Supreme Court in a similar case held that tarpaulin made up of cotton fabric is entitled to exemption even though tarpaulin was brought under First Schedule taxable at the point of first sale in the State. Situation in this case is almost the same as in the tarpaulin case because original Entry 7 later substituted by Entry 11 of the Third schedule to the Act provides for exemption from man-made fabric covered under entries 54. 08, 54. 09 of the Central Excise Tariff Act. ON going through the central Excise Tariff Act, we find nylon yarn is treated as man-made filament yarn. Therefore nylon and fabric made of nylon yarn are man-made fabrics covered by Entry 54. 08 of the Central Excise Tariff Act. There is some controversy as to whether the item is nylon net or nylon net fabric. We do not think there is any need to consider this issue because what is granted exemption under Third Schedule is man-made fabric covered under the Entries of the Central Excise Tariff Act. Moreover, fabric by itself is nylon net and that is the understanding of the Government in the clarification above referred.