JUDGMENT :

Dhananjaya Y Chandrachud, J.

Civil Appeal No 793 of 2021 [Arising out of SLP(C) No 3885 of 2021]

1. Delay condoned.

2. Leave granted.

3. By a judgment and order dated 11 September 2019, a Single Judge of the High Court of Judicature at Allahabad dismissed a Sales/Trade Tax Revision¹[Sales/Trade Tax Revision Defective No 95/2019] instituted by the Commissioner of Commercial Taxes.

4. The respondent is a dealer registered under the provisions of the Uttar Pradesh Value Added Tax Act 2008 (“UP VAT Act 2008”). The respondent carries on the business of purchasing textiles and selling dress material for women. A survey was conducted at the establishment of the respondent on 9 March 2010 by the Special Investigation Branch. During the course of the survey, the statement of a partner of the respondent was recorded in which the nature of the business was described in the following terms:

“The business of manufacture and unstitched suit, salwar, kameeze, dupatta etc. is carried out. The work of design/embroidery is carried out on kameeze, Kurta and Dupatta. The sewing process is carried out in the neck portion of the kameeze/kurta. No stitching is done on Salwar. “PECO” is done on the borders of Dupatta. The entire activity is got completed with the help of machine/manual labour. The process of “Tanka” as carried out on Kurta/Kameeze is commonly known as “Rough Stitching” i.e., “Kachchi Silai”.”

5. During the course of the assessment, a similar statement on oath was made by the representatives of the dealer before the Assessing Authority, which was recorded by the Tax Assessment Officer in the following terms:

“...Shri Bhushan Kumar Malhotra, authorised the representative, appeared on behalf of the trader and stated on oath that the business is of unstitched dress material. The cloth is purchased in bulk. Thereafter, by cutting it as per the length of the suit of the ladies and cutting as per the size of the neck of the shirt, the cutting of different sizes of neck is done and thereafter, the embroidery of the same is done. The head scarves/chunni, which is made of the thin cloth, the edges of the same are picoed. All the head scarves are not picoed. No work is done on the lower garment (salwar). The pieces of the same are cut and by matching with the shirt and headscarf, the set of the same is made out. We do only the cutting and embroidery work in the factory. This is the 1st year of the business and even now the business is continuing. From the business year 2008 – 09 till now, the nature has remained the same.

The cloth, threads, stars, beads are used as the material...”

6. The dealer was assessed to a tax of Rs 99,42,870 for assessment year 2009-2010, by treating the product as an unclassified item under Schedule V of the UP VAT Act 2008, under which the rate of tax is 12.5%. The respondent filed an appeal² [Appeal No 83/2013] before the Additional Commissioner, Gr.-2, (Appeal) IV, Ghaziabad. By an order dated 13 February 2013 the first appellate authority partly allowed the appeal and classified the goods as “textile made ups” which are subject to a duty of 4% under Serial Number 16 of Schedule IIA. The order passed by the appellate authority was assailed by the appellant and by the respondent before the Commercial Tax Tribunal (“Tribunal”). By an order dated 27 April 2019, the Tribunal allowed the appeal filed by the respondent and rejected the appeal of the Revenue. The product sold by the respondent was classified as a ‘textile’ within the meaning of Entry 21 of Schedule I and was, therefore, held to be exempt from tax. The appellant unsuccessfully challenged the decision in a revision before the High Court which has been dismissed in limine by the impugned judgment and order dated 11 September 2019.

7. Notice was issued in the Special Leave Petition filed by the appellant on 28 August 2020. The Office Report indicates t