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SUPREME COURT OF INDIA
O. CHINNAPPA REDDY, E.S. VENKATARAMIAH, V. BALAKRISHNA ERADI, R.B. MISRA AND V. KHALID, JJ.
M/s. Filterco and another, Appellants
Versus
Commissioner of Sales Tax, M.P. and another, Respondents.
Civil Appeal No.8548 of 1983
Decided on 11-2-1986.
Advocates appeared
Mr. P. Govindan Nair, Sr. Advocate with Mr. S. K. Gambhir, Advocate for Appellants; Mr. A. K. Sanghi, Advocate for Respondents.
The High Court should have examined the merits of the Case instead of dismissing the writ petition in limine in the manner it has done. The order passed by the Commissioner of Sales Tax was clearly binding on the assessing authority under section 42 B (2) and although technically it would have been open to the appellants to urge their contentions before the appellate authority namely, the Appellate Assistant Commissioner, that would be a mere exercise in futility when a superior officer namely, the Commissioner, has already passed a well considered order in the exercise of his statutory jurisdiction under sub-section (1) of section 42-B of the Act holding that 21 varieties of the compressed woollen felt manufactured by the appellants arc not eligible for exemption under Entry 6 of Scheduled I of the Act. Further section 38 (3) of the Act requires that a substantial portion of the tax has to be deposited before an appeal or revision can be filed. In such circumstances the High Court ought to have considered and pronounced upon the merits of the contentions raised by the parties and the summary dismissal of the writ petition was not justified.
Since the parties argued the case elaborately and learned arguments were put forth, the Supreme Court decided the case on merits. [Para 11]
(2) Sales Tax-General Sales Tax, 1958-S. 10, Scheduled I, Entry 6-exemptiun of cloth-'pliability' is necessary for exemption.
"Cloth" is woven, knitted or felted material which is pliable and is capable of being wrapped, folded or wound around. It need not necessarily be material suitable for making garments because there can be "cloth" suitable only for industrial purpose; but nevertheless it must possess the basic feature of pliability. Hard and thick material which cannot be wrapped or wound around cannot be regarded as "cloth". (1977) 2 SCC 870, AIR 1477 SC 1548, (1979) 1 SCC 82 & (1978) 42 STC 433 distinguished. [Para 15]
(3) Words & Phrases--word 'cloth'-connotation of. [Para 15]
(4) Interpretation of Statutes-words of everyday use how to be interpreted.
The legal position is now well settled that words 'of everyday use' occurring in a taxing statute must be construed not in their scientific or technical sense but as understood in common parlance, that is, in their "popular sense". (1876) 1 Ex. D. 242, (1824) 9 Wheaton (US) 430, (1962) 13 STC 1, (1977) 39 STC 378 & (1978) 42 STC 433 relied on. [Para 12]
(5) Evidence Act, 1872-S. 115-equitable estoppel-when applies-M. P. General Sales Tax Act, 1958-S. 10, Sch. I, Entry 6.
The petitioner sent only one specimen of 'felt' to be examined whether it was 'cloth', The Commissioner of sales tax in relation to this single specimen of 'felt' had expressed the view that it was exempt under entry 6 of Schedule 1. Later on it was found that the appellants were manufacturing as many as 26 different varieties of compressed wollen 'felt' of varying hardness, density and thickness. There is absolutely no material to show that which out these 26 varieties was sent to the Commissioner, In these circumstances, the principle of equitable estoppel is not attracted, [ Para 18]
JUDGMENT
BALAKRISHNA ERADI, J.:— The short but interesting question that arises for our consideration in this appeal by special leave is whether the Compressed Woollen Felts manufactured in the small-scale industry unit of the appellants can be said to constitute "cloth" so as to fall within the scope of Entry 6 of Schedule I of the Madhya Pradesh General Sales Tax Act, 1958 (for short the Act), which is in the following terms :-
"All varieties of cloth manufactured in mills or on powerlooms or handlooms including processed cloth. but excluding hessian cloth" - so as to be eligible for exemption of sales-tax under Section 10 of the said Act.
2. The process of manufacture of felt adopted in the appellants factory has been described in the order of the Commissioner of Sales-tax dated January 25, 1983. The raw material consisting of woollen fibres is first mixed thoroughly and thereafter carded on a carding machine, which process results in the laying of the fibres in a combed condition in a uniform direction. The combed fibres in the shape of a web layer are then subjected to the process of hardening in a machine having an eccentric motion; the carded webs are put through two layers of cloth and passed through a steam chest. This results in the web/wool layer being converted in the form of a sheet, which is then subjected to the process of milling to impart to it necessary tensile strength and shrinkage. For this purpose, the sheet is put in a machine, which has two rows of contrarotating rollers to provide the necessary felting action to the sheet. The sheets run in the machine till the desired shrinkage and density are achieved. After this the sheet is dried and trimmed at the ends and thereafter subjected to the process of calendering and for this purpose it is passed through steam heated contrarotating rollers. The resultant product is felt.
3. From the above description it is clear .that the woollen felt manufactured by the appellants is a material obtained by compressing woollen fibres and subjecting the same to heat and moisture. It is a non-woven material.
4. On March 25, 1971, the appellants addressed a communication to the Commissioner of Sales-tax forwarding a specimen of the felt manufactured in their factory and requesting that the same may be treated as exempt from tax under Entry 6 of Schedule I.
5. In reply thereto the Commissioner of Sales-tax sent the following communication (Annexure I) to the appellants :-
OFFICE OF THE SALES TAX
COMMISSIONER
MADHYA PRADESH
No. Wick/F/32/71/12317
Indore, dated 7-8-1971
To
Filterco,
Garden. 51,
Neemuch (Madhya Pradesh).
Sir,
With reference to your letter dated 25-3-1971, it is stated that specimen of felt submitted by you, being woollen fabric, is exempt under M.P. General Sales-tax Act, 1958, under Entry 6 of its Schedule I.
Yours faithfully,
Sd/-
(N. K. PILLAI)
Additional Commissioner
for Commissioner of Sales-tax
Madhya Pradesh "
6. It is common ground that apparently on the basis of the said letter of the Commissioner of Sales-tax, the turnover of the appellants pertaining to the sales of compressed woollen felt was not subjected to tax during the period from 1971 to 1982.
7. While matters stood thus, the Commissioner of Sales-tax, Madhya Pradesh issued the following letter (Annexure II) to the appellants on March 4, 1982 :-
"OFFICE OF THE COMMISSIONER
SALES TAX
MADHYA PRADESH
No. ST /I-310/24(b)79/2872
Indore, dt. 4-3-1982
To
M/s Filterco,
Garden 51,
Neemuch (MP)
Sub:- Levy of sales-tax on compressed woollen Felt.
.................
In view of the judgment given by the SC in the case of M/s Gujarat Woollen Felt Mills, AIR 1977 SC 1548 that the compressed woollen felts are not "woollen fabrics", Compressed Woollen Felt manufactured by you will not be exempt under entry 6 of Schedule I of the M. P. General Sales-tax Act, 1958 but will be covered under entry I of Part VI of Schedule II appended to the said Act, and will attract tax @ 10%.
Clarification given to you in this office letter No. 1/26/32/71-12371, dat
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