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1991 Supreme(Mad) 799
High Court of Judicature at Madras
THE HONOURABLE CHIEF JUSTICE DR. ANAND & THE HONOURABLE MR. JUSTICE KANAKARAJ
Beardsell Limited - Appellant
Versus
State of Tamil Nadu - Respondents
Tax Case Nos. 2104 of 1984, 718 to 720 of 1986, 1140 of 1987, 80, 87 and 446 of 1989, 20 to 24, 26 to 29, 31 and 391 of 1991...2252 of 1987
Decided On : 28 October 1991
Nylon twine is not taxable as a single-point item under entry 18 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959.
Headnote:
SALES TAX - Nylon twine - Whether nylon twine is taxable as a multi-point item under section 3(1) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called "the Act") or should properly be taxed as a single-point item under entry 18 of the First Schedule to the Act - HELD, nylon twine manufactured for the purpose of making fishnets will not come within the entry 18 of the First Schedule to the Act.
Fact of the Case:
The only question involved in this batch of cases is whether nylon twine variously called nylon fishnet twines, knitting yarn, etc., dealt with by the assessees come under entry 18 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called "the Act") or should properly be taxes as a multi-point item under section3(1) of the Act.
Finding of the Court:
Nylon twine manufactured for the purpose of making fishnets will not come within the entry 18 of the First Schedule to the Act.
Issues: Whether nylon twine is taxable as a multi-point item under section 3(1) of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called "the Act") or should properly be taxed as a single-point item under entry 18 of the First Schedule to the Act.
Ratio Decidendi: 1. Nylon twine and nylon yarn are separate and distinct commercial commodities, each one being separately and popularly understood commercially by those who deal in these commodities. 2. The character of "nylon twine" and "nylon yarn" is distinct and separate, even if the source material is the same. 3. "Nylon twine" cannot be considered to be "nylon yarn" in common parlance either.
Final Decision: Assessees' appeals and petitions dismissed and State's petitions allowed.
KANAKARAJ, J.
The only question involved in this batch of cases is whether nylon twine variously called nylon fishnet twines, knitting yarn, etc., dealt with by the assessees come under entry 18 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called "the Act") or should properly be taxes as a multi-point item under section3(1) of the Act. According to the assessees the goods fall under entry 18 of the First Schedule of the Act, but according to the Revenue it is a multi-point item under section3(1) of the Act. In many cases the Revenue succeeded before the Tribunal while in some cases the assessees succeeded. In some of the cases the Joint Commissioner, exercising suo motu powers under section34 of the Act set aside the orders in favour of the assessees. There are also a few writ petitions challenging the action of the third respondent either in revising or proposing to revise the assessment orders, and holding that nylon twine is taxable as a multi-point item. Depending upon our ultimate decision, the fate of each case shall be determined at the end of our judgment.
2. However, we will refer to the facts of T.C. No. 391 of 1991 for a proper understanding of the arguments and authorities cited before us in relation to the issues involved in the cases. For the assessment year 1983-84 the appellant in T.C. No. 391 of 1991 had returned a total and taxable turnover of Rs. 10, 49, 194 and Rs. 10, 598.60, respectively. On scrutiny of the accounts it was found that the assessees had claimed exemption on the sale of nylon fishnet twines, the turnover in respect of which was Rs. 8, 69, 704.03. For this and certain other defects the assessing authority determined the total and taxable turnover to his best of judgment. Nylon fishnet twines were assessed at five per cent. On appeal, the assessees contended that the turnover relating of nylon fishnet twine would fall under entry 18 of the First Schedule of the Act and inasmuch as the assessees had purchased the same from registered dealers the second sales at their hands were not taxable. This contention was accepted by the appellate authority. On suo motu revision, it was held, following Commissioner of Sales Tax v. Sarin Textile Mills 1975 AIR(SC) 1262, 1975 SCR 743, 1975 (4) SCC 308, 1975 (35) STC 634, 1975 (S) SCR 228, 1975 UJ 401, 1975 (4) CTR 132, 1975 TaxLR 1617, 1975 SCC(Tax) 300 (SC) 1975 AIR(SC) 1262, 1975 SCR 743, 1975 (4) SCC 308, 1975 (35) STC 634, 1975 (S) SCR 228, 1975 UJ 401, 1975 (4) CTR 132, 1975 TaxLR 1617, 1975 SCC(Tax) 300, that yarn is distinct from twine. Therefore the goods dealt with the assessees could not be equated to staple "artificial silk yarn or staple fibre yarn". The Joint Commissioner after following the procedure prescribed by law resorted the order of the assessing authority and set aside the order of the appellate authority.
3. Before proceeding further it will be convenient to notice the wording of entry 18 of the First Schedule to the Act.
"18. Artificial silk yarn and staple fibre yarn. At the point of first sale in the State." *
First and foremost let us now consider how the entries in the First Schedule are to be understood. In Chennakesavalu v. Commissioner, Board of Revenue (C.T.) 1981 (47) STC 403(Mad.) it is observed as follows :
"There is First Schedule to this Act which gives a list of goods in respect of single point tax leviable under sub-section (2) of section 3. A perusal of that list will clearly show that the articles are not listed according to the source material out of which they are made, but according to their independent existence, commonly recognised as separate and distinct goods or commodities." *
In State of Tamil Nadu v. Gopal Nair and Sons 1982 (51) STC 257 (Mad.) it is observed as follows :
"The question as to whether a particular article or commodity falls within the scope of a particular expression used in the Sales Tax Act has to be determined with its nomenclature in commercial pa
