Full Judgment Text
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PETITIONER:
DELHI CLOTH & GENERAL MILLS CO. LTD. & ORS.
Vs.
RESPONDENT:
R. R. GUPTA, COMMERCIAL TAX OFFICER, JAIPUR & ANR.
DATE OF JUDGMENT03/05/1976
BENCH:
BEG, M. HAMEEDULLAH
BENCH:
BEG, M. HAMEEDULLAH
RAY, A.N. (CJ)
SINGH, JASWANT
CITATION:
1977 AIR 2086 1976 SCR 497
1976 SCC (3) 443
CITATOR INFO :
RF 1980 SC1552 (3)
ACT:
Rajasthan Sales Tax Act, 1954-Statutory remedies
provided under the Act not exhausted-No error apparent on
the face of the record-If petition under Art. 226 lay.
Constitution of India, 1950-Art. 32-Absence of
jurisdiction to assess not shown-If remedy lies under Art.
32.
HEADNOTE:
Rayon tyre cord fabric which is a textile consisting of
rayon threads in the warp and cotton threads in the weft is
manufactured on weaving looms in the same manner as any
other ordinary textile. The tyre manufacturers to whom the
product is supplied. impregnate the fabric with rubber and
weave it into fabric. Under Entry 18 of Schedule of the
Rajasthan Sales Tax Act, 1954, rayon fabrics were exempt
from sales tax. When the Commercial Tax officer rejected the
petitioners’ objections to sales tax being levied on rayon
tyre cord fabric, the e petitioners filed a petition under
Article 32 of the Constitution alleging breach of
Fundamental Rights.
In respect of certain earlier assessment years,
however, the view of the Commercial Tax officer was that the
goods were not the end product. when, the matter was taken
to the High Court, it held that, until the statutory
remedies had been exhausted, no case for interference under
Art. 226 arose. It did not find any error apparent on the
face of the record. Hence, the appeals by special leave. E
In the write petition as well as in the appeals it was
contented that the goods constituted the end-product which
the petitioners sell in the market and, therefore, were
exempt from sales tax.
Dismissing the petition and appeals.
^
HELD: (1)(a) It is difficult to find fault with the
view of the, High Court there was no error apparent on the
face of the record and that the taxing authorities should be
left tb determine whether the tyre cord fabric is more
correctly capable of being described as a fabric or as
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merely cord passing of as a textile fabric. This is really a
technical question. In any case. it is a question on which
two views may be possible. [503C]
(b) The fact that the tyre cord fabric manufactured by
the petitioners is woven by its purchases into a fabric in
the same way as is being done by the petitioners means that
the tyre cord fabric serves also as raw material for another
fabric which ultimately emerges by subjecting the goods to a
process of impregnating it with rubber. The essential
question to determine is the stage at which the goods under
consideration became textile fabrics if they do become that
at all. [502C; 503A]
(2) This Court cannot interfere under Art. 32 with the
decision of the Commercial Tax Officer, because no
Fundamental Right is shown to be affected by the mere
determination of the question. There was no absence of
jurisdiction of the taxing authorities who had the power to
decide the question either rightly or wrongly. [503E]
34 -833 SUP CI/76
498
ARGUMENTS
For the petitioners
Respondent No. 1 did not produce or get any evidence
from the commercial community dealing with rayon tyre yarn
and cord and rayon tyre fabric for the purpose of
controverting the conclusive evidence produced by the
petitioners to the effect that in the commercial community
dealing with the said goods these goods were different both
from the point of view of manufacture and also from the
point of view of ultimate end-product and are considered to
be different by the commercial community, which heats rayon
tyre cord fabric as fabric. There was no evidence on the
contrary to come to the conclusion that the rayon tyre
fabric was not fabric. The High Court wrongly relied on 25
STC 407 which had no application in the present case,
ignoring the decision in 22 STC 470 and 28 STC 431. It was
therefore not a case of disputed question of fact, but a
case of admitted fact by the commercial community against
which there was no evidence before the respondent.
The alternative remedy of appeal is not at all
efficacious in the facts and circumstances of the present
case inasmuch as the Commissioner and the State Government
having already made up their mind to levy tax, no relief
could be expected by the appellants from him and the High
Court should have interfered under arts. 226 and 227.
Further ill this case there was no question of disputed
facts. The sample was admitted. There was uncontradicted
evidence that the product of the petitioners is known as
rayon cord fabric by the commercial community and by common
parlance. The case is a misdirection of law on the part of
the assessing authority.
For the respondents
There was no error of law apparent on the face of the
record as contended by the petitioners. The High, Court
rightly rejected the writ petitions on the ground that there
were disputed facts and there are alternative remedies and
full and adequate machinery under the Act itself.
The assessee mills, when paying excise duty, paid it
only as on yarn under entry 18 of the First Schedule to the
Central Excise and Salt Act. The mills did not pay
additional duty under the Additional Duties of Excise (Goods
of Special Importance) Act 1956 on the ground that the
material was not fabric. When it suited the mills the
material wag said to be yarn and in case of sales tax it
contended that it was fabric. This fact itself was a strong
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indication that this was a disputed question of fact.
JUDGMENT:
ORlGINAL JURISDICTION/ClVlL APPELLATE JURISDICTION:
Writ Petition No. 49 of 1973.
Under Article 32 of the Constitution and
Civil Appeals Nos. 43 and 44 of 1973
Appeals by Special Leave from the Judgment and order
dated the 27th October 1972 of the Rajasthan High Court in
D. B. Civil Writ Petition Nos. 398/72 and 1 885/71
respectively.
A. K. Sen, B. Sen and H. K. Puri for the Appellants.
S. T. Desai, S. M. lain and S. K. Jain for the
Respondents.
499
The Judgment of the Court was delivered by
BEG. J.-We have before us a petition under Article 32
of the Constitution and two appeals by Special leave from
the judgment of the High Court of Rajasthan between the same
parties. The three cases before us raise the same question
of law. It is: Do the goods called "Rayon tyre Cord Fabric"
sold by the Delhi Cloth & General Mills Co. Ltd. to
manufacturers of tyres, who use it for the purpose of
impregnating it with rubber, fall under entry 18 of the
Schedule of the Rajasthan Sales Tax Act, 1954 (hereinafter
referred to as ’the Act’ ) ?
The schedule mentioned above gives a list of goods on
the sale or purchase of which no tax is payable under the
Act. "The relevant entry 18, which was omitted in 1973,
reads as follows:
"18. All cotton fabrics, rayon or artificial silk
fabrics, woollen fabrics, sugar and tobacco, as defined
in the Additional Duties cf Excise (Goods of Special
Importance) Act, 1957 (Central Act 58 of 1957)".
Section 2(C) of the Additional Duties of Excise (Goods of
Special Importance) Act, 1957, lays down:
"2 (C) the words and expressions ’sugar’,
’tobacco’, ’cotton fabrics’, ’silk fabrics’, ’woollen
fabrics’ and rayon or artificial silk fabrics shall
have the meanings respectively assigned to them in
Items Nos. 1, 4, 19, 20, 21 and 22 of the First
Schedule to the Central Excise and Salt Act, 1944".
The Writ Petition of the Delhi Cloth and General Mills
Co. Ltd. states that "rayon tyre cord fabric" is
"manufactured out of rayon yarn and cord". It goes on to
explain that this fabric is "a textile consisting of rayon
threads in the warp and cotton threads in the weft and is
manufactured on weaving looms in the same manner as in other
ordinary textile". It is also stated there:
"The fabric consists of more than 60% by weight of
rayon and is unprocessed. The weft threads are not used
merely for tying the warp threads together for the
purpose of convenient transport or storage but form an
integral part of the whole fabric".
500
The petitioners state that the manufacturers of tyres
to whom the fabric is supplied "impregnate the fabric with
rubber and weave it into a fabric in the same way as is
being done by the first petitioner". Thus, the petitioners
allege that they manufacture "a textile" and also that it
serves as part of raw material for what ultimately also goes
into the manufacture of a fabric.
After indicating the manner in which and the substance
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out of which "rayon tyre cord fabric" is made and its
composition, the petition sets out item 22 of the first
schedule of the Central Excises and Salt Act, 1941, as the
applicable entry covering the goods manufactured by the
petitioner. This item reads as follows:
"Rayon or artificial silk fabrics ’means all
varieties of fabrics manufactured either wholly or
partly from rayon or artificial silk and includes
embroidery in the piece, in strips or in the motifs and
fabrics impregnated or derivatives or of other
artificial plastic materials, but does not included any
such fabrics:-
(i) If it contains 40% or more by weight of wool.
(ii) lf it contains 40% or more by weight of silk.
(iii)If it contains cotton and less than 60% by
weight of rayon or artificial silk; or
(iv) If it contains no cotton and less than 40% by
weight of wool and less than 40% by weight of
rayon or artificial silk".
The petitioners assert that, from years 1966 to 1969,
the respondent Commercial Tax officer was not subjecting the
goods of this description to sales tax and accepted the case
of the petitioners that they were exempt from taxation. The
reasoning of the Commercial Tax Officer, in exempting these
goods, is also mentioned. It is then stated that, as some
questions were put in the Rajasthan State Legislative
Assembly, on or about 20th April, 1971, asking for the
reason why this particular type of goods of the petitioners
were exempted from Sales tax, the Commissioner of Commercial
Tax issued a letter to the Commercial Tax Officer to levy
Sales tax on the "rayon cord fabric" manufactured by the
petitioner. Thereafter, notices under the proviso to S.
12(1) of the Act were issued for the years 1965 to 1969 with
a view to reopening the assessments on the ground that the
sales of these goods had wrongly escaped assessment. but
these were dropped due to some preliminary
501
objections. Fresh notices were then issued and proceedings
for subsequent assessment years were also taken. By orders
passed on various dates, the Commercial Tax officer rejected
the petitioners’ objections to Sales tax on "rayon tyre cord
fabric". The petitioners have, however, come up to this
Court directly against the order and provisional assessment
dated 21 st November, 1 972. It also appears from the writ
petition that proceedings fol the assessment year 1972-73
arc still pending before the Commercial Tax officer. Civil
Appeals Nos. 43 of 1973 and 44 of 1973 by special leave are
directed against a common judgment of a Division Bench of
the High Court of Rajasthan, given on 27.10.1972, dismissal,
the appellants’ Writ Petitions against the assessment order
dated 26th March, 1971, for the years 1968-69 and 1969-70
made by the Commercial Tax officer..
The view of the Commercial Tax Officer, questioned by
the petitioners, was that the goods now sought to be taxed
are not the "end product". The High Court did not go into
the merits of the case. It accepted the preliminary
objection of the State of Rajasthan that the petitioner
should first resort to alternative remedies provided Under
the Act so that the appellate authority under Section 13 of
the Act may go into the whole evidence and decide disputed
questions of fact. There is also provision for revision by
the Board of Revenue under Section 14 when moved by the
assessing authority. The High Court did not find any error
"apparent upon the face of the record" The taxing
authorities have the. jurisdiction to decide the question
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before them either rightly or wrongly. In any case, its view
was that, until the statutory remedies had not been
exhausted, leaving some "error apparent on the face of the
record" still to be rectified by the High Court, a case for
interference under Article 226 of the Constitution will not
arise.
It is urged on behalf of the Delhi Cloth Mills that no
disputed question of fact arises. It is submitted that, on
admitted facts, it could be decided whether the "tyre cord
fabric" is an exempted "fabric" or not. We think that this
view over-looks several matters, indicated below, including
the admission on behalf of the Delhi Cloth Mills that, in
the case before us, the "tyre cord fabric" manufactured by
it is woven by its purchasers "into a fabric in the same way
as is being done by the first petitioner". This certainly
means that the tyre cord fabric serves as raw material for
another fabric which ultimately emerges by subjecting the
goods manufactured by Delhi Cloth Mills to a process of
impregnating with rubber.
502
A sample of the tyre cord fabric was actually produced
before us. It is said that the "fabric" is manufactured in
the same way as cloth is woven on looms. It consists of
cords which could be said to constitute warps, running
length-wise, and wefts, running breadth wise. But, the
spaces left between them are so wide, presumably for
purposes of impregnation with rubber, that it may not pass
for an ordinary "fabric’. Like one of those mentioned in
entry 19 of the first schedule to the Central Excises and
Salt Act, 1944, such as "tussors", "corduroy", "gaberdine",
"denim‘’. Indeed, if the "lyre cord fabric" is so well
established a category of rayon "fabric", it could have
found mention specifically in item 22 in the same way as the
numerous varieties of cotton fabrics are mentioned in item
19. In answer to this argument, it could be urged that, for
some reason, entry No. 22 does not enumerate rayon and silk
fabrics in the same fashion as the cotton fabrics are
specified by name in item 19.
It is certainly a question which appertains to the
knowledge of technical aspects of textile weaving and
production to determine at what stage threads or cords
forming warps and wefts really amount to a "fabric". It is
true that the term fabric has a wide meaning. Its first
meaning given in the Oxford English Dictionary is: "A
product of skilled workmanship". The first example of such a
product is: "An edifice, a building". The fourth example of
the first meaning is: I "a manufactured material; now only a
’textile fabric’, a woven stuff".
We think that we are necessarily concerned here only
with "textiles" as fabrics. This is clear from entries 19 to
22(D) of the first Schedule of the Central Excises and Salt
Act, 1944. Entry 22AA is "textile fabrics not elsewhere
specified". This residuary entry and the descriptions in
preceding entries seem to us to make it abundantly clear
that we are dealing here only with "textile fabrics". The
case of the Delhi Cloth Mills also is that the product is a.
"textile". There fore, the essential question to determine
is the stage at which the goods under consideration become a
’textile fabric". The meaning of the term "textile", given
in the Oxford Dictionary, is: "A woven fabric; any kind of
cloth". It must acquire a body and a texture. Presumably it
is not just the skeleton of a textile. Apparently, it is
more than that. But, against pushing this point of view too
far it may be urged that in the technical and commercial
parlance we are dealing with a "fabric".
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It is, therefore, difficult to find fault with the view
of the High Court that there is no error apparent on the
face of the record and
503
that the taxing authorities should be left to determine
whether the "tyre cord fabric" is more correctly capable of
being described as a fabric or as merely cord pretending to
pass off as ar textile fabric This is really a technical
question. In any case, it is a question on which two views
seem possible on apparent facts. And, neither of the two
views can be rejected outright as untenable. It requires
careful consideration of the technical processes of
manufacturing, of the composition of the "tyre cord fabric’,
and an evaluation of opinion of experts on the subject, to
be able to decide the question satisfactorily rt may also
require some examination of commercial usage and terminology
or the language of the market in goods of this type. We,
therefore, think that the High Court was right in not
interfering with the decisions of the taxing authorities at
this stage.
We also think that for the same reason we could not
interfere under Article 32 with the decision of the
Commercial Tax officer. Indeed, no fundamental right is
shown to be affected by a mere determination of the question
indicated above. There is no absence of jurisdiction of the
taxing authorities who had the power to decide the question
either rightly or wrongly.
It has been urged, on behalf of the Delhi Cloth Mills
that the High Court should have interfered as the question
whether the tyre cord fabric is the end product or not in
the final manufacture of an- other fabric was quite
irrelevant. It was submitted that, so far as the Delhi Cloth
Mills is concerned, the goods under consideration constitute
the "end product" which they sell in the market. The example
given was that of cloth which is the "end product" for the
mills which manufacture cloth, but, it becomes the raw
material for tailors and for those who make ready-made
clothes to sell them. This argument overlooks that it is not
so much the point of manufacture at which the Mills sell
their own product which determines the nature of goods which
are entitled to exemption, but it is the stage reached by
this product, in the process of manufacture of fabrication
of a "textile", which should decide the question. As we have
already indicated, the context in which the entry occurs
shows that it is meant for "textile" fabrics and not for any
kind of fabric. Therefore even if the tyre cord fabric may
be the end product for the Delhi Cloth Mills, the crucial
question is: Does this product constitute a fabric which is
a textile? A textile fabric does not cover everything which
could be made into a fabric. Mere cord does not become a
textile fabric just because it requires some skill to make
it. The rather wide dictionary meanings of the term "fabric"
do not appear to us to give the exact meaning of the term
"fabric" as
504
used in the relevant entries entitled to exemption. In the
entries, it evidently means a fabric which is also a
textile. The question, therefore, to be determined by the
Tax authorities themselves is whether the product for which
the Delhi Cloth Mill claims exemption Is a textile fabric
and not any other kind of fabric.
Having indicated the nature of the enquiry which must
by undertaken by the taxing authorities, we find that there
is no sufficient reason for overriding and discarding the
High Court’s view that, on what appeared to the High Court
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to be a question Of fact, it should not decide whether the
product under consideration constitutes a fabric entitled to
exemption.
There was no appeal by the State of Rajasthan. It does
not, therefore, seem propel. for us to finally decide, on
merits, the question argued before us in the appeals by the
Delhi Cloth Mills which are before us unless we could have
decided the matter in favour of the appellant. We could have
only done that if we were of opinion that the taxing
authorities had committed error apparent on the face of the
record. But, as already indicated above, we are not of this
opinion.
For all the reasons given above, we think that the Writ
Petition as well as the appeals by special leave are liable
to be dismissed, and, we hereby dismiss them with one set of
costs.
P. B. R. Appeal dismissed.
505