Per Shri V.P. Gulati:

The issue in the appeal relates to the benefit of Notification 17/94 in respect of sewing thread falling under Tariff Heading 55.04. In terms of Notification 17/94, the benefit of Proforma Credit is available in respect of yarn which is used for the manufacture of yarn falling under Tariff Heading 55.04 in terms of Sl.No. 13 of the table to the notification. The appellants were allowed the benefit of this notification in respect of the sewing thread which was manufactured by them out of the yarn falling under 55.04. However, subsequently on the issue of Notification 17/94 under which a new item at Sl.No. 17 with the description yarn, including sewing thread was introduced and various Tariff Headings for the purpose including 52.04 were also shown both for the input items as well as the finished product. After the issue of this notification, a demand was raised as it was felt by the authorities that the subsequent Notification 17/94, clearly showed that the sewing thread was not covered in the description of yarn at Sl.No. 13 of Notification 17/94 as the words including sewing thread were missing from the description of the goods entered in the notification.

2. The learned Advocate for the appellants has pleaded that sewing thread is also a variety of yarn and, therefore, a subsequent entry at Sl.No. 17 which covered yarn including sewing thread would make no difference so far as the claim of the appellants to the benefit of Notification 7/94 is concerned. The learned Advocate has pleaded that the Tariff entry 54.04 at the relevant time covered yarn (including sewing thread). He has pleaded that since the term yarn also included sewing thread within its ambit for the purpose of the Tariff, the description yarn in the notification should be taken to be covering the sewing thread also for the purpose of the benefit of the notification. In this connection, he has cited the judgement of the Madras High Court in the case of State of Tamil Nadu Vs. R.V. Krishniah Chetty and Sons reported in 78 Sales Tax Cases 422, wherein, it was held that sewing thread is no different from cotton yarn and both are one and the same. He has pleaded in the face of this ruling, the learned lower authority's holding that sewing thread was not covered by the description of the term yarn for the purpose of the notification, was not correct. In this connection, he referred to the relevant portion of the judgement in para 4 which is as under :

4. So far as the decisions of the Kerala High Court are concerned, they expressly struck a note of dissent from the decision of this Court reported in Madura Mills Company Ltd. Vs. Government of Madras [1970] 25 STC 407. Even that apart, we are inclined to agree with the ratio of reasoning adopted by this Court in the decisions referred to above in interpreting the entry "cotton yarn". So far as the other judgement pressed into service on behalf of the State is concerned, we are of the view that a too narrow construction of the entry has been adopted. The Allahabad High Court, which dealt with the case reported in Mohta Trading Co. Vs. Commissioner of Sales Tax [1976] 38 STC 11, further appears to have been concerned more with the particular notification of exemption in that State which exempted "cotton yarn on cops and cones". While so constructing, the court proceeded that in as much as there is no separate entry in respect of the item "cotton sewing thread on cops and cones", the benefit of exemption as per the notification in issue in that case would not be granted to the assessee therein. Coming to the decisions relied upon by the counsel for the assessee, we find that the decisions of the Orissa High Court reported in Srinivasa Distributing Agencies Vs. State of Orissa [1981] 48 STC 453, State of Orissa Vs. Voona Suru Patra & Sons [1982] 51 STC 410 and State of Orissa Vs. Cuttack Monihary Store [1982] 51 STC 411, took the view that sewing thread is no different from cotton yarn and it does