Facts of the Case

The petitioner, M/s. New Khadi Niketan, challenged the order of the Odisha Sales Tax Tribunal before the High Court of Orissa under Section 19 of the Odisha Entry Tax Act, 1999. The dispute arose from an audit assessment relating to the tax periods 01.04.2006 to 30.09.2011, wherein the Assessing Authority imposed Odisha Entry Tax along with penalty on the petitioner's intra-State purchases of saree, patta, dhoti and gamuchha from unregistered dealers.

The petitioner contended that these goods were not covered under Entry No. 3 of Part-II of the Schedule to the Odisha Entry Tax Act and, therefore, were not liable to Entry Tax. While the First Appellate Authority accepted the petitioner's contention, the Odisha Sales Tax Tribunal reversed the appellate order and held that the goods were textile products liable to Entry Tax. Aggrieved by the Tribunal's decision, the petitioner filed the present revision before the High Court.

 

Issues Involved

  1. Whether saree, patta, dhoti and gamuchha fall within the expression "Textile Products including cotton fabrics and ready-made garments" under Entry No. 3 of Part-II of the Schedule appended to the Odisha Entry Tax Act, 1999.
  2. Whether these goods are liable to Odisha Entry Tax under the provisions of the Act.
  3. Whether the word "including" used in Entry No. 3 should be interpreted restrictively or expansively.

 

Petitioner's Arguments

The petitioner submitted that:

  • The expression "including" used in Entry No. 3 should receive a restrictive interpretation, limiting the scope of "textile products" only to the specifically mentioned items such as cotton fabrics and ready-made garments.
  • Had the Legislature intended to tax all textile products, it would not have specifically mentioned cotton fabrics and ready-made garments.
  • The Schedule separately classifies pure silk fabric, silk, artificial silk yarn and raw silk under Part-I, indicating that only specifically mentioned goods were intended to be taxed under the relevant entries.
  • Saree, patta, dhoti and gamuchha, being handloom products, should not automatically be treated as taxable textile products for Entry Tax purposes.

 

Respondent's Arguments

The State contended that:

  • The Tribunal had correctly interpreted the Schedule and rightly held that saree, patta, dhoti and gamuchha are textile products.
  • The word "including" in Entry No. 3 enlarges the scope of the entry and is not restrictive.
  • Textile products comprise all woven fabrics irrespective of whether they are manufactured through handloom or power loom.
  • The Legislature intentionally classified specific silk products separately while keeping the broader category of textile products under Entry No. 3 of Part-II.
  • The First Appellate Authority wrongly treated the goods merely as handloom products and ignored the wider legal meaning of textile products.

 

Court Findings / Order

The High Court dismissed the revision petition and upheld the order of the Odisha Sales Tax Tribunal.

The Court held that:

  • The expression "including" generally enlarges the scope of the principal expression unless the statutory context requires otherwise.
  • The words "textile products including cotton fabrics and ready-made garments" are broad enough to cover all woven textile articles.
  • Saree, patta, dhoti and gamuchha continue to retain their essential character as textile products even after being converted into finished articles.
  • The common parlance test, dictionary meanings, and various judicial precedents establish that woven fabrics and articles manufactured from such fabrics remain textile products.
  • The Tribunal correctly held that the disputed goods fall under Entry No. 3 of Part-II of the Schedule to the Odisha Entry Tax Act.
  • Accordingly, the substantial question of law was answered in favour of the Revenue and against the petitioner, and the revision petition was dismissed with no order as to costs.

 

Important Clarification

This judgment clarifies that:

  • Saree, Patta, Dhoti and Gamuchha are "Textile Products" within the meaning of Entry No. 3 of Part-II of the Schedule appended to the Odisha Entry Tax Act, 1999.
  • The word "including" ordinarily enlarges the meaning of the entry and should not be construed narrowly unless the statute expressly indicates otherwise.
  • Finished textile articles do not lose their essential character merely because they are stitched, processed or marketed in different forms.
  • The judgment reinforces the principle that taxing entries are generally interpreted according to common parlance, unless the statute provides a specific definition.

 

Sections Involved

  • Section 19 – Odisha Entry Tax Act, 1999 (Revision before High Court)
  • Section 17 – Second Appeal
  • Section 16 – First Appeal
  • Section 9B – Tax Audit
  • Section 9C – Audit Assessment
  • Entry No. 3, Part-II of the Schedule – Textile Products including Cotton Fabrics and Ready-made Garments
  • Entry No. 5, Part-I of the Schedule – Pure Silk Fabric, Silk, Artificial Silk Yarn and Raw Silk
  • Rule 3 of the Odisha Entry Tax Rules, 1999

Link to download the order -

https://mytaxexpert.co.in/uploads/1782969869_175compressed.pdf

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