Additional tax on power loom cloth.

RAMACHANDRA IYER, J.

The petitioner owns a factory at Erode wherein cloth is manufactured with the aid of nine power-looms. Originally cloth manufactured on power-looms and sold by a dealer was liable to sales tax at the general rate fixed in section 3(1)(b) of the Madras General Sales Tax Act, 1939. Act XX of 1954, which came into effect from 23rd August, 1954, imposed an additional tax of Re. 0-1-3 every rupee of the turnover on certain verities of cloth, namely

"cloth, whether of silk, artificial silk, wool, flax, or any other material not being cotton, made in mills, in which the count of warp yarn employed (excluding the border) is 17s or finer (whether single or folded)." *

It will be noticed that the additional tax levied under the provisions of the Amending Act XX of 1954 was in respect of mill products where the warp yarn employed was above 17s or finer. Cloths manufactured by power-looms are not specifically mentioned in the section. Prima facie they appear to have been excluded from the operation of the section. This Act was later amended by Act XL of 1954 which substituted the following in the place of the one above extracted :

"Mill cloth (whether of silk, artificial silk, wool, flax, or any other material), which is not made wholly of cotton and in which the count of warp yarn employed (excluding the border) is 17s or finer (whether single or folded)." *

The amended section came into effect from 23rd August, 1954, itself. By Act III of 1956, the State Legislature further amended the aforesaid provision. In the place of the provision which I have extracted above, it brought to tax the following goods :

"Cloth (other than cloth woven on handlooms, whether of silk, artificial silk, wool, flax, or any other material) which is not made wholly of cotton."A comparison of the three provisions which I have set out above shows that in the latest of the enactments, the qualification of the cloth being a mill cloth had been removed. It would follow that any cloth other than those exempted by the provision would attract the tax. Power-loom products would therefore be included by virtue of Act III of 1956 even if it were not included under the previous provisions. Section 1(2) of Act III of 1956 states that it should be deemed to have come into force on 23rd August, 1954. The result will be that additional tax would be leviable in respect of sales of cloth manufactured on power-looms as and from that date. It is obvious that if the dealers in power-loom cloth were not subject to additional tax under Act XX of 1954 or Act XL of 1954, the retrospective operation of Act III of 1956 would act harshly on such of them that did not collect tax from their customers thinking that their turnover was not liable to tax under the then existing law. In order to relieve this hardship, the Government passed G.O.Ms. No. 275, Revenue, dated 19th January, 1957, whereby they waived the collection of the additional sales tax leviable in section 3(2) of the Madras General Sales Tax Act for the period from 23rd August, 1954, to 27th March, 1956. The relevant provision of the G.O. so far as it applies to the present case is that contained in clause (b) thereof.

"(b) Cloth (other than handloom cloth woven on handlooms) whether silk, artificial silk, wool flax or any other material, which is not made wholly of cotton, if the dealer adduces proof that the additional sales tax had not actually been collected on the ground that according to the manufacturer's invoices, the sale of the cloth was not liable to the additional sales tax." *

For the year 1954-55 the Deputy Commercial Tax Officer assessed the petitioner to sales tax. The assessment was made on 31st May, 1956. By that time Act III of 1956 had come into force, the President's assent having been given on 24th March, 1956. The enactment being retrospective in its operation the power-loom goods sold in 1954-55 would also come within its ambit. That the Deputy Commercial Tax Officer made the