1998 INSC 0717
                                                       Fenoplast

                                                           Vs

                                              State of A.P. and Others

                                     Civil Appeals Nos. 9064-9066 of 1996

                                         (S. P. Bharucha, V. N. Khare JJ)

                                                      15.09.1998

                                                        ORDER

1. The appellants are manufacturers of rexine cloth. Rexine cloth, being coated fabric, cotton or
otherwise, is covered by Entry 59.03 of the First Schedule to the Additional Duties of Excise
(Goods of Special Importance) Act, 1957. This Act was enacted to impose additional duties of
excise in replacement of the sales levied by the Union and the States, inter alia, on mill-made
textiles, and to distribute the net proceeds to the Union Territories and the States. Section 3 of this
Act is the charging section and provides for the levy and collection of additional duties on goods
described in the First Schedule thereof at the rates therein specified. The headings, sub-headings and
chapters within the Schedule mean the headings, sub-headings and chapters in the Schedule to the
Central Excise Tariff Act, 1985.

2. By reason of Section 5 of the Andhra Pradesh General Sales Tax Act, 1957, every dealer is
required to pay a tax on the quantum of his turnover at the rates specified in the Schedules thereto.
Section 6 deals with sales tax on 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 the case of inter-State sales
where tax under the Central Sales Tax Act, 1956 has been paid. Section 8 of the Act reads thus :

                  "Exemption from tax in respect of certain goods. - Subject to such restrictions and
                  conditions as may be prescribed, a dealer who deals in the goods specified in the
                  Fourth Schedule shall be exempt from tax under this Act in respect of such goods."

The Fourth Schedule of the Act contains Entry 5 which refers to "cotton fabrics, man-made fabrics
and woollen fabrics". The Explanation to the Fourth Schedule states that the expressions in Items 5,
6 and 7 bear the meaning that is assigned to them in the Additional Duties of Excise (Goods of
Special Importance) Act, 1957.

3. This being the position, the appellants were paying additional excise duty under the Additional
Duties of Excise (Goods of Special Importance) Act, 1957, and were exempted from payment of tax
under the State Sales Tax Act. Then Item 174 was added in the First Schedule of the State Sales Tax
Act. It related to "PVC cloth, waterproof cloth, tarpaulin and rexine". The appellants were sought to
be made liable to sales tax under Item 174. The appellants preferred a writ petition in the High
Court contending that they were not liable to pay any sales tax under Item 174 by reason of the fact
that they fell within Item 5 of the Fourth Schedule of the State Sales Tax Act and were exempted by
Section 8 thereof. The High Court, by the judgment which is under challenge, upheld the appellants'
contention, except to this extent :
                  "In our considered view the effect of inclusion of rexine in Entry 174 of the First
                  Schedule to the A.P. GST Act cannot have the effect of taxing the turnover of the
                  sales or purchases of rexine at the rate mentioned in Schedule I in view of the
                  provisions of Section 6 of the A. P. GST Act read with Section 15 of the CST Act, as
                  pointed out above, and thus that entry has to be read down to authorise exigibility of
                  sales tax on the turnover of declared goods including rexine subject to the provisions
                  of Section 6 of the A. P. GST Act read with Section 15 of the CST Act, namely, that
                  sales tax cannot exceed 4% of the turnover and that it shall not be levied at more than
                  one stage."

The appellants are in appeal by special leave.

4. The Explanation to the Fourth Schedule of the State Sales Tax Act makes it clear that the
expressions used in Item 5 thereof have the meaning that is assigned to them in the Additional
Duties of Excise (Goods of Special Importance) Act, 1957. The words "cotton fabrics, man-made
fabrics and woollen fabrics" in Item 5 must, therefore, be read in the light of Item 59.03 of the First
Schedule to the said Additional Duties of Excise (Goods of Special Importance) Act, 1957 which
refers to textile fabrics, impregnated cloth - covered or laminated. The appellants' product, rexine
cloth, is covered by Item 59.03 and the appellants were, at the relevant times, liable to pay and paid
additional duties of excise under the Additional Duties of Excise (Goods of Special Importance)
Act, 1957. By reason of Section 8 of the State Sales Tax Act, therefore, they were exempt from tax
thereunder in respect of their rexine cloth. The inclusion of Item 174 in the First Schedule to the
State Sales Tax Act could make no difference to this position. The High Court was in error in its
attempt to read down Item 174 it failed to give due weight to the categoric terms of Section 8.

5. The appeal is, therefore, allowed. The judgment of the High Court is set aside to the extent
aforestated. There shall be no order as to costs.