Full Judgment Text
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PETITIONER:
DELHI CLOTH AND GENERAL MILLS CO. LTD.
Vs.
RESPONDENT:
STATE OF RAJASTHAN AND ORS.
DATE OF JUDGMENT08/05/1980
BENCH:
PATHAK, R.S.
BENCH:
PATHAK, R.S.
UNTWALIA, N.L.
CITATION:
1980 AIR 1552 1980 SCR (3)1109
1980 SCC (4) 71
CITATOR INFO :
D 1985 SC1201 (12)
RF 1986 SC1730 (8)
ACT:
Exemption from Sales Tax under the Central Sales Tax
Act,-"Rayon Tyre Cord Fabric", whether covered by item 18 of
the Schedule to the Rajasthan Sales Tax Act, 1954, so as to
qualify for exemption under the Central Sales Tax Act,-Item
18 of the Schedule to the Rajasthan Sales Tax Act, 1954,-
Whether assessment and payment of excise duties under the
Additional Duties of Excise (Goods of Special Importance)
Act, 1957, a precondition for claiming exemption under the
Rajasthan Sales Tax Act and therefore under the Central
Sales Tax Act.
Interference by Supreme Court under Art, 136 of the
Constitution, whether barred by Section 15 of the Rajasthan
Sales Tax Act.
HEADNOTE:
Section 4(2) of the Rajasthan General Sales Tax Act,
1954 empowers the State Government, by notification in the
Official Gazette, to exempt from tax the sale of any goods
or class of goods on such conditions as may be specified in
the notification. By a notification dated 1st July, 1958,
the Rajasthan Government unconditionally exempted all
varieties of textiles made wholly or partly of rayon from
1st July, 1958. S. 4(1) of the Rajasthan Sales Tax Act, 1954
provides for exemption from Sales Tax of the goods specified
in the Schedule to that Act provided the conditions
mentioned in the Schedule are satisfied. Item 18, inserted
in the Schedule by the Rajasthan Taxation Laws (Amendment)
Act, 1964, included "rayon fabrics" as defined in the
Additional Duties of Excise (Goods of Special Importance)
Act, 1957. On this, the notification dated 1st July 1958 was
withdrawn as redundant. When Item 18 was inserted in the
Schedule, no conditions were specified therein as a
qualification for the exemption. The unconditional exemption
from sales tax granted on the sale of rayon fabrics, that is
to say, without the condition that additional excise duty
was paid by the manufacturer, was withdrawn by a
notification dated 5th March, 1973 made by the Rajasthan
State Government under s. 4(2) of the Rajasthan Sales Tax
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Act. The notification provided that in the case of
unprocessed rayon and artificial silk fabrics the exemption
from sales tax would apply only if the additional duty is
leviable on them under the Additional Duties of Excise
(Goods of Special Importance) Act, 1957 and such goods had
not specifically been exempted from the said duty and the
dealers thereof furnished proof to the satisfaction of the
assessing authority that such duty had been paid.
Item 18 of the Schedule to the Rajasthan Sales Tax
exempts from Sales Tax and purchase tax "all cotton fabrics
rayon or artificial silk fabrics, woollen fabrics as defined
in the Additional Duties of 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, 1956 declares that the
expression "rayon or artificial silk
1110
fabrics" shall have the meaning assigned to it in Item 22 of
the First Schedule to the Central Excise and Salt Act, 1944,
which reads :
"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 metifs and
Fabrics impregnated or coated with preparations of
cellulose derivatives or of other artificial plastic
material...."
The appellant owns an industrial unit, Shriram Rayons,
situated at Kota in the State of Rajasthan. It manufactures
a product described as "Rayon Tyre Cord Fabric". Rayon fibre
is spun into rayon and twisted into cord. The cords are
arranged lengthwise, and are commonly described as the
"warp". They are packed 25 to the inch. By a process of
weaving, cotton thread are wefted through a loom across the
cords. The wefts are thinner and fewer than the cords, being
not more than two to five per inch. The cord component
comprises the major content of the product. The unprocessed
rayon tyre cord fabric so produced is sold in the form of
rolls in the market. After initial chemical treatment it is
put through a process of rubberizing in the tyre
manufacturing plant. The rayon tyre cord fabric is used as a
reinforcing base in the manufacture of tyres. It is a
product generally intended for industrial use. The rayon
tyre cord employed as a component in the manufacture of
rayon tyre cord fabric is also sold directly as such. It is
sold packed or cones, somewhat like yarn is sold. Tyre cord
is purchased directly by some tyre manufacturers, who by
applying the same process of putting in the wefts, convert
it into a tyre cord fabric for use in the tyre.
The appellant was assessed to sales tax by the
Commercial Tax Officer for the years 1969-70 and 1970-71 on
the turnover of rayon tyre cord fabric. The plea that the
product fell within the item 8 of the Schedule to the
Rajasthan Sales Tax Act and therefore was exempt from sales
tax was not accepted. The matter came up for adjudication
upto the Supreme Court. By its judgment dated 3rd May 1976
reported in 38 S.T.C. 113 (Delhi Cloth and General Mills Co.
Ltd. and Ors. v. B. R. Gupta and Ors.), the Court observed
that the controversy "requires careful consideration of the
technical processes of manufacturing, of the composition of
the ‘tyre cord fabric’, and an evaluation of opinions of
experts on the subject, to be able to decide the question
satisfactorily", as well as "some examination of commercial
usage and terminology or the language of the market in goods
of this type", and that the matter was one for determination
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by the taxing authorities.
The Deputy Commissioner (Appeals) was meanwhile seized
of not only the two appeals pertaining to the assessment
years 1969-70 and 1970-71 but also appeals against the
assessment order for 1971-72 and a provisional assessment
for the first six months of the assessment year 1972-73.
When the appeals were taken up by the Deputy Commissioner
(Appeals) voluminous evidence, both oral and documentary,
was led before him. The appeals were, nevertheless,
dismissed. Thereafter, the appellant applied in revision to
the Board of Revenue for Rajasthan, but again met with no
success. The Board expressed the view that the product was
not a fabric and dismissed the revision petitions by their
order dated 6th October, 1977. The present appeals are
directed against that order.
1111
Allowing the appeals, the Court.
^
HELD : 1. In determining the meaning or connotation of
words and expressions describing an article or commodity the
turnover of which is taxed in a sales tax enactment, if
there is one principle fairly well-settled it is that the
words or expressions must be construed in the sense in which
they are understood in the trade, by the dealer and the
consumer. It is they who are concerned with it, and it is
the sense in which they understand it that constitutes the
definitive index of the Legislative intention when the
statute was enacted. As sales tax the liability falls on the
seller, who in his turn passes it on to the consumer; as
purchase tax, the liability falls directly on the purchaser.
[1115 A-C]
Porritts and Spencer (Asia) Ltd. v. State of Haryana
[1978] 42 S.T.C. 433; followed.
2. On a comprehensive consideration of the materials,
it is clear that by and large a tyre cord fabric is regarded
as a textile fabric. The peculiar feature that the tyre cord
constitutes the dominating element indicating the use to
which the fabric is put and the close concentration in which
it is packed in contrast to the light density with which the
weft thread is woven does not detract from the conclusion
that what we have is a textile fabric. It is wholly
immaterial that once tyre cord fabric has, in the hands of
the tyre manufacturer, undergone the process of rubberizing
and is embedded in the tyre body the significance of the
weft thread is greatly reduced. It may also be that in the
more modern process of manufacturing tyres what is used is
cabled rayon with hawser twists with the cords assembled in
parallel order and rubberized without the intermediate
process of weaving on a loom. The material on the record,
however, indicates that the product manufactured by the
appellant does not fall in that category. It is a woven
fabric in which the intermediate process of weaving the weft
thread across the warp cord is an integral stage of
manufacture. When the purchaser buys the product, it is the
entire integrated woven fabric which he buys, it is not
merely the tyre cord by itself. If tyre cord was all that he
desired, he would purchase that commodity, which is readily
available, and not tyre cord fabric. Item 22 of the First
Schedule to the Central Excises and Salt Act speaks of "all
varieties of fabrics", language wide enough to include the
rayon tyre cord fabric manufactured by the appellant. [1117
E-H, 1118 A]
3. Item 22 of the First schedule to the Central Excise
and Salt Act does comprehend "industrial fabrics" as well as
the item refers to "all varieties of fabrics". Further Item
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22(3) speaks of fabrics impregnated or coated with
preparations of cellulose derivatives or of other artificial
plastic materials which would include rubberized cloth,
tarpaulin cloth, P.V.C. cloth, water proof cloth and tent
cloth. A whole range of fabric is included. [1118 B-C]
4. It is futile to suggest that the tyre plays a less
substantial role than other popular commodities in modern
life. The tyre manufacturing industry is of growing
importance and has an increasingly important role to play in
everyday life. That is evident from the overwhelming
expansion of automobile traffic prompted by the complex
needs of a constantly enlarging economy. The daily life of
the average citizen is profoundly effected by the
automobile, be it passenger bus or a goods truck or the
ubiquitous scooter. Tyres are needed for all. In rural areas
tyres are now coming into use for bullock carts.
1112
And, therefore, it is but a short step to recognising the
status of what goes into the manufacture of a tyre-the rayon
tyre cord fabric as "goods of special importance". It may be
that unlike the cotton, silk, woollen and rayon fabrics used
as wearing apparel or furnishing material the rayon tyre
cord fabric is not directly employed for the satisfaction of
a domestic need. Nonetheless, as an integral and vital
constituent of an automobile tyre it is intimately involved
in the diurnal activity of human life. [1118 E-G]
5. Whether Parliament understood the word "fabric" to
include tyre cord fabric must be gathered from all the
relevant material and with reference to tests and criteria
accepted in law rather on the basis of a single
notification, like the circular dated 11th February 1957
issued by the Revenue Board laying down that tyre and fabric
could not be described as "fabric". [1119 A-B]
6. In respect of the assessment years 1969-70, 1970-71,
1971-72 and the first six months of 1972-73, the turnover of
rayon tyre and fabric was clearly exempt from sales tax
under the Rajasthan Sales Tax Act and there was no condition
in that Act until 4th March 1973 that the exemption was
dependent on payment of additional excise duty under the
provisions of Additional Duties of Excise (Goods of Special
Importance) Act, 1957. Since from 5th March, 1973 only the
exemption from tax under the Rajasthan Sales Tax Act was
available only if additional excise duty was leviable, a
dealer was entitled to exemption from sales tax upto 4th
March. 1973 without the requirement of payment of the
additional excise duty. [1120 B-C, E-F]
7. The question in the instant case is not one of fact.
It is a question which concerns the construction of Item 22
of the Schedule to the Additional Duties of Excise (Goods of
Special Importance) Act, 1957. If the rayon tyre cord fabric
manufactured by the appellant is covered by that item it is
exempt from sales tax and there is no jurisdiction in the
sales tax authorities to assess the appellant on its
turnover. The question is one of substantial importance, and
having regard to the circumstances there is good reason for
entertaining the appeals and deciding them on the merits.
The Supreme Court is entitled to entertain appeals directly,
not withstanding that a reference is open against the
impugned orders before the High Court under Section 15 of
the Rajasthan Sales Tax Act. [1120 G-H, 1021 A-C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2453-
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2456 of 1977.
Appeals by Special Leave from the Judgment and Order
dated the 6th October, 1977 passed by the Board of Revenue
for Rajasthan at Ajmer, in revisions for the years 1969-70
1970-71, 1971-72 and 1972-73.
F. S. Nariman and H. K. Puri for the Appellant.
Lal Narain Sinha and S. C. Bhandari, Sohbag Mal Jain
and P. P. Singh for the Respondents.
The Judgment of the Court was delivered by
PATHAK, J. The question raised in these appeals is
whether the "Rayon Tyre Cord Fabric" manufactured by the
appellant is a rayon
1113
fabric covered by item 18 of the Schedule to the Rajasthan
Sales Tax Act, 1954, and therefore exempt from sales tax
under the Central Sales Tax Act.
The appellant owns an industrial unit, Shriram Rayons,
situated at Kota in the State of Rajasthan. It manufactures
a product described as "Rayon Tyre Cord Fabric." The
appellant claims that the product falls within item 18 of
the Schedule to the Rajasthan Sales Tax Act which exempts
from sales tax and purchase tax:-
"All cotton fabrics, rayon or artificial silk
fabrics, woollen fabrics as defined in the Additional
Duties of 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 declares that the expression
"rayon or artificial silk fabrics" shall have the meaning
assigned to it in Item 22 of the First Schedule to the
Central Excise and Salt Act, 1944. Item 22 reads:-
"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 motifs and
fabrics impregnated or coated with preparations of
cellulose derivatives or of other artificial plastic
materials, .... ..... ..... .... .... .... ......"
The appellant was assessed to sales tax by the
Commercial Tax Officer for the years 1969-70 and 1970-71 on
the turnover of rayon tyre cord fabric. The plea that the
product was exempt from sales tax was not accepted. Two writ
petitions were filed by the appellant in the Rajasthan High
Court against the assessments while appeals were also filed
before the Deputy Commissioner (Appeals). The Rajasthan High
Court dismissed the writ petitions on the ground that
disputed questions of fact were involved in the controversy
and recourse should be had to the remedy by way of appeal.
Against the order of the High Court the appellant obtained
from the Supreme Court special leave to appeal under Article
136 of the Constitution. Meanwhile, the Commercial Tax
Officer made a provisional assessment on the turnover of
rayon tyre cord fabric for the period 1971-72. Against the
assessment the appellant filed a writ petition directly in
this Court under Article 32 of the Constitution. The two
appeals and the writ petition were dismissed by this Court
on 3rd May, 1976.
1114
The Court observed that the controversy "requires careful
consideration of the technical processes of manufacturing,
of the composition of the ’tyre cord fabric,’ and an
evaluation of opinions of experts on the subject, to be able
to decide the question satisfactorily," as well as "some
examination of commercial usage and terminology or the
language of the market in goods of this type." It upheld the
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view taken by the High Court that the matter was one for
determination by the taxing authorities.
The Deputy Commissioner (Appeals) was meanwhile seized
of not only the two appeals pertaining to the assessment
years 1969-70 and 1970-71 but also appeals against the
assessment order for 1971-72 and a provisional assessment
for the first six months of the assessment year 1972-73.
When the appeals were taken up by the Deputy Commissioner
(Appeals) voluminous evidence, both oral and documentary,
was led before him. The appeals were, nevertheless,
dismissed. Thereafter, the appellant applied in revision to
the Board of Revenue for Rajasthan, but again met with no
success. The Board expressed the view that the product was
not a fabric and dismissed the revision petitions by their
order dated 6th October, 1977. The present appeals are
directed against that order.
Some undisputed facts concerning the product
manufactured by the appellant may be set out. Rayon fibre is
spun into rayon and twisted into cord. The cords are
arranged lengthwise, and are commonly described as the
"warp". They are packed 25 to the inch. By a process of
weaving, cotton threads are wefted through a loom across the
cords. The wefts are thinner and fewer than the cords, being
not more than two to five per inch. The cord component
comprises the major content of the product. The unprocessed
rayon tyre cord fabric so produced is sold in the form of
rolls in the market. After initial chemical treatment it is
put through a process of rubberizing in the tyre
manufacturing plant. The rayon tyre cord fabric is used as a
reinforcing base in the manufacture of tyres. It is a
product generally intended for industrial use. The rayon
tyre cord employed as a component in the manufacture of
rayon tyre cord fabric is also sold directly as such. It is
sold packed on cones, somewhat like yarn is sold. Tyre cord
is purchased directly by some tyre manufacturers, who by
applying the same process of putting in the wefts, convert
it into a tyre cord fabric for use in the tyre.
In holding that the rayon tyre cord fabric is not a
fabric, the Board has noted that the tyre body or carcass
consists of a series of layers of cord fabric in the form of
plies buried in rubber, and that the significant factor in
the tyre cord fabric is represented by the tyre cord. The
properties and characteristics of the fibre constituting the
1115
tyre cord, it is said, determines the tyre performance. The
weft in the fabric, it is pointed out, merely plays the
subsidiary role of holding the cord in place before the
process of tyre manufacturing is commenced.
Now, in determining the meaning or connotation of words
and expressions describing an article or commodity the
turnover of which is taxed in a sales tax enactment, if
there is one principle fairly well settled it is that the
words or expressions must be construed in the sense in which
they are understood in the trade, by the dealer and the
consumer. It is they who are concerned with it, and it is
the sense in which they understand it that constitutes the
definitive index of the legislative intention when the
statute was enacted. As sales tax the liability falls on the
seller, who in his turn passes it on to the consumer. As
purchase tax, the liability falls directly on the purchaser.
A long train of authorities supports that view, and we need
refer only to the recent Judgment of this Court in Porritts
and Spencer (Asia) Ltd. v. State of Haryana, in which
reference has been made to some of them.
In the record before us, a wide range of material has
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been incorporated for determining how those who manufacture
and deal in fabrics and, in particular, tyre cord fabric,
understand them. And so, a brief reference to that material
is appropriate at this point.
What is a fabric? The "Mercury" Dictionary of Textile
Terms defines "fabric" as a term which covers "all textiles
no matter how constructed, how manufactured, or the nature
of the material from which made," and the expression
"textile" is described as "any product manufactured from
fibres through twisting, interlacing, bonding, looping, or
any other means, in such a manner that the flexibility,
strength, and other characteristic properties of the
individual fibres are not suppressed." The Man-Made Textile
Encyclopaedia (1959) defines fabric as "a collective term
applied to cloth no matter how constructed or manufactured
and regardless of the kind of fibre from which made. In
structure it is planar produced by interlacing yarns, fibres
or filaments. Textile fabrics include the following
varieties, bonding, felted, knitted, braided and woven." The
Fairchild’s Dictionary of Textiles (1959) says that fabric
is "a cloth that is woven or knit, braided, netted, with any
textile fibre.....", and "textile" is said to refer to "a
broad classification of any material that can be worked into
fabric, such as fibres and yarns including woven and knitted
fabric, felt, netted fabric, lace and croched goods." In
"Textile Terms and Definitions" (1960) the word cloth is
defined as "a
1116
generic term embracing all textile fabrics and laminar
felts" and "textile" is applied in its modern sense" to "any
manufacture from fibres, filaments, or yarns, natural or
artificial, obtained by interlacing." The 1967 Annual Book
of ASTM Standards defines cloth as "any textile fabric but
specially one designed for apparel domestic or industrial
use," and textile fabric as "a planar structure consisting
of interlaced yarns or fibres." The 1973 Annual Book of ASTM
Standards reproduces those definitions.
We may now examine whether a tyre cord fabric has been
understood as a fabric. A publication IS: 4910 (Part VI)-
1970, put out by the Indian Standards Institution, defines a
"tyre cord fabric" as "a fabric consisting of tyre cord warp
with widely spaced weft threads". Another publication IS:
1324-1966 of the same institution gives the definition of
tyre cord fabrics as "fabrics which comprise the main
carcass of pneumatic tyres constructed predominantly of warp
cords (cabled yarns) with light wefts. The latter merely
serve to hold the cords together for processing". The
"Mercury" Dictionary of Textile Terms defines cord tyre
fabric as a "cloth made with strong corded sheets for the
warp with as little weft as possible....the warp takes all
the strain.....". The Fairchild’s Dictionary of Textiles
declares that a tyre cord fabric is not a true fabric today,
but originally a square woven fabric was employed in making
the pneumatic automobile tyre. "The modern tyre fabric is
not woven or knitted, but consists of cabled yarns with
hawser twists formerly mostly cotton, now usually of high
tenacity viscose rayon or nylon. These cords are arranged in
parallel order and rubberized." The tyre cord fabric
manufactured by the appellant admittedly consists of warp
and weft and therefore this definition, which does not refer
to an interlaced structure, would not apply. On the
contrary, the further definition in the same publication
appears to be more pertinent. It says: "When these tyre
cords were first made they were assembled as a warp on a
loom and held in place until rubberized by an occasional
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fine single filling yarn, and it is probably due to this
that the term "fabric" has remained in use". Some doubt is
created by the definitions included in Linton’s Modern
Textile Dictionary and River’s Dictionary of Textile Terms.
But tyre cord fabric is clearly described as a fabric by the
1973 Annual Book of ASTM Standards the Textile Terms and
Definitions (1960), and in India by the Indian Standard
Glossary of Textile Terms Relating to Man-Made Fibre &
Fabric Industry. The Man-Made Textile Encyclopaedia in its
chapter on Industrial Fabrics gives a structural description
of tyre fabrics and refers to the series of layers of cord
fabric buried in rubber in the tyre body or carcass. The
Wellingtion Sears Hand Book of Industrial Textiles describes
in some detail the process of manufactur-
1117
ing tyre cord fabrics. It states that "the tyre cords are
woven into a ’fabric’ with a very fine cotton or rayon
filling yarn, just strong enough to hold the cords together
during subsequent handling."
Now let us see how the Government of India itself, in
its various departments, looks at tyre cord fabrics. The
Revised Indian Trade Classification (1965) published by the
Central Government in the Department of Commercial
Intelligence and Statistics lists Viscose tyre fabric (Code
653.6125) under the classification Group 653-"Textile
Fabrics, Woven (not including narrow or special fabrics),
other than cotton and jute fabrics." The Ministry of Foreign
Trade Resolution dated 27th February, 1971 refers separately
to rayon tyre yarn, cord and fabric, and speaks of tyre cord
units producing both twisted cords and woven fabric. And the
Indian Customs Tariff Guide (11th Edition) shows as item 53
in the Tariff Schedule: "Rayon tyre fabrics, a loosely woven
material with extremely thin cotton threads running
breadthwise and introduced merely for keeping the artificial
silk threads running lengthwise in position." The item is
repeated in the same terms in the Tariff Schedule to the
Indian Customs Tariff Guide (13th Edition). The Table
appended to the Customs and Central Excise Duties Drawback
Rules lists "Viscose tyre cord fabric" (2621) under Serial
No. 26 "Textile Fabrics and Hosiery".
On a comprehensive consideration of the material before
us, there is no escape from the conclusion that by and large
a tyre cord fabric is regarded as a textile fabric. The
peculiar feature that the tyre cord constitutes the
dominating element indicating the use to which the fabric is
put and the close concentration in which it is packed in
contrast to the light density with which the weft thread is
woven does not detract from the conclusion that what we have
is a textile fabric. We are concerned with the product
manufactured and sold by the appellant. It is wholly
immaterial that once tyre cord fabric has, in the hands of
the tyre manufacturer, undergone the process of rubberizing
and is embedded in the tyre body the significance of the
weft thread is greatly reduced. It may also be that in the
more modern process of manufacturing tyres what is used is
cabled rayon with hawser twists with the cords assembled in
parallel order and rubberized without the intermediate
process of weaving on a loom. The material on the record,
however, indicates that the product manufactured by the
appellant does not fall in that category. It is a woven
fabric in which the intermediate process of weaving the weft
thread across the warp cord is an integral stage of
manufacture. When the purchaser buys the product, it is the
entire integrated woven fabric which he buys, it is not
merely the tyre cord by itself. If tyre cord was all that he
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desired, he would purchase that commodity, which is readily
available, and not tyre cord fabric. We
1118
may also point out that Item 22 of the First Schedule to the
Central Excises and Salt Act speaks of "all varieties of
fabrics", language wide enough to include the rayon tyre
cord fabric manufactured by the appellant.
It was contended by Shri L. N. Sinha, for the
respondents, that industrial fabrics are not envisaged
within the expression "rayon fabric" in Item 22 of the First
Schedule to the Central Excise and Salt Act. As we have
already pointed out, the item refers to "all varieties of
fabrics" and it will be noticed that Item 22(3) speaks of
fabrics impregnated or coated with preparations of cellulose
derivatives or of other artificial plastic materials which,
we are told, would include rubberized cloth, tarpaulin
cloth, P.V.C. cloth, water proof cloth and tent cloth. A
whole range of fabric is included.
It is then urged by Shri Sinha that when the Additional
Duties of Excise (Goods of Special Importance) Act, 1957 was
enacted Parliament could not have intended the expression
"rayon fabric" to include rayon tyre cord fabric. It is
pointed out that the Statement of Objects and Reasons
pertinent to the Act refers to mill-made textiles, and the
submission is that the item in the First Schedule to that
Act refers to fabric which affects the common man, which
finds place in a popular market and is intended for popular
use, and does not refer to a commodity which caters to the
needs of a special category of consumers and is devoted to a
particular use only. Now, the tyre manufacturing industry is
of growing importance and has an increasingly important role
to play in everyday life. That is evident from the
overwhelming expansion of automobile traffic prompted by the
complex needs of a constantly enlarging economy. The daily
life of the average citizen is profoundly effected by the
automobile, be it passenger bus or a goods truck or the
ubiquitous scooter. Tyres are needed for all. In rural areas
tyres are now coming into use for bullock carts. It is
futile to suggest that the tyre plays a less substantial
role than other popular commodities in modern life. And,
therefore, it is but a short step to recognising the status
of what goes into the manufacture of a tyre-the rayon tyre
cord fabric as "goods of special importance". It may be that
unlike the cotton, silk, woollen and rayon fabrics used as
wearing apparel or furnishing material the rayon tyre cord
fabric is not directly employed for the satisfaction of a
domestic need. Nonetheless, as an integral and vital
constituent of an automobile tyre it is intimately involved
in the diurnal activity of human life.
We are then told that when the Additional Duties of
Excise (Goods of Special Importance) Act, 1957 was enacted
there was in existence a Circular dated 11th February, 1957
issued by the Revenue Board
1119
laying down that tyre cord fabric could not be described as
a "fabric" within the meaning of the Central Excise Tariff.
It is said that when that was the popular conception of tyre
cord fabrics it could not have been envisaged as a fabric
when the statute was enacted. To our mind, the view taken by
the Revenue Board cannot be regarded as resolving the
question before us. Whether Parliament understood the word
"fabric" to include tyre cord fabric must be gathered from
all the relevant material and with reference to tests and
criteria accepted in law rather on the basis of a single
notification.
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We may now turn to the contention of Shri Sinha that
the benefit of exemption from sales tax is available to the
appellant only if he has paid the additional duty of excise
on the product. It is pointed out that the appellant has not
been assessed to additional excise duty under the Additional
Duties of Excise (Goods of Special Importance) Act, 1957 and
is, therefore, not entitled to exemption from sales tax
under the Central Sales Tax Act.
The Additional Duties of Excise (Goods of Special
Importance) Act, 1957 came into force on 24th December,
1957. Sub-section (1) read with sub-section (2) of s.3 of
the Act provide for the levy and collection of an additional
excise duty, over and above the excise duty chargeable under
the Central Excises and Salt Act, 1944 on certain goods at
the rate specified in the Schedule to that Act. Rayon
fabrics are mentioned in the Schedule to the Additional
Duties of Excise (Goods of Special Importance) Act, and are
classified by reference to Item 22 in the First Schedule to
the Central Excises and Salt Act.
In the present appeals, we are concerned with a claim
to exemption from sales tax, and in order to consider the
contention of the Revenue that no such exemption was
available to the appellant because he had not paid any
additional excise duty on rayon tyre cord fabric it is
necessary to determine whether indeed the exemption from
sales tax was subject to the condition of payment of
additional excise duty.
S.4(2) of the Rajasthan Sales Tax Act, 1954 empowers
the State Government, by notification in the Official
Gazette, to exempt from tax the sale of any goods or class
of goods on such conditions as may be specified in the
notification. By a notification dated 1st July, 1958, the
Rajasthan Government unconditionally exempted all varieties
of textiles made wholly or partly of rayon from 1st July,
1958. S.4(1) of the Rajasthan Sales Tax Act, 1954 provides
for exemption from sales tax of the goods specified in the
Schedule to that Act provided the conditions mentioned in
the Schedule are satisfied. Item 18, in-
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serted in the Schedule by the Rajasthan Taxation Laws
(Amendment) Act, 1964, included "rayon fabrics" as defined
in the Additional Duties of Excise (Goods of Special
Importance) Act, 1957. On this, the notification dated 1st
July, 1958 was withdrawn as redundant. Now when Item 18 was
inserted in the Schedule, no conditions were specified
therein as a qualification for the exemption. Therefore, in
respect of the assessment years with which these appeals are
concerned, the turnover of rayon tyre cord fabric was
clearly exempt from sales tax under the Rajasthan Sales Tax
Act, and there was no condition in that Act that the
exemption was dependent on payment of additional excise
duty. That being so, there was an unconditional exemption
from central sales tax also.
The unconditional exemption from sales tax granted on
the sale of rayon fabrics, that is to say, without the
condition that additional excise duty was paid by the
manufacturer, was withdrawn by a notification dated 5th
March, 1973 made by the Rajasthan State Government under
S.4(2) of the Rajasthan Sales Tax Act. The notification
provided that in the case of unprocessed rayon and
artificial silk fabrics the exemption from sales tax would
apply only if the additional duty is leviable on them under
the Additional Duties of Excise (Goods of Special
Importance) Act, 1957 and such goods had not specifically
been exempted from the said duty and the dealers thereof
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furnished proof to the satisfaction of the assessing
authority that such duty had been paid. Therefore, as from
5th March, 1973 the exemption from tax under the Rajasthan
Sales Tax Act was available only if additional excise duty
was leviable and the dealer had established that he had paid
such duty. About the same time, the Rajasthan Taxation Laws
(Amendment) Act, 1973 deleted Item 18 in the Schedule to the
Rajasthan Sales Tax Act with effect from 5th March, 1973. It
is evident, therefore, that a dealer was entitled to
exemption from sales tax up to 4th March, 1973 without the
requirement of payment of the additional excise duty. The
conclusion is inescapable that even if the appellant did not
pay additional excise duty, he was exempt from sales tax on
the turnover of rayon tyre cord fabric for the assessment
years under consideration.
Finally, it is urged by Shri Sinha that the question
whether the rayon tyre cord fabric falls within the
expression "rayon fabrics" is a question of fact and the
assessing authority, the appellate authority and the revenue
Board are all agreed that it cannot be classified as a rayon
fabric and, therefore, this Court should not interfere in
these appeals. It is also pointed out that under s. 15 of
the Rajasthan Sales Tax Act a proceeding by way of reference
is available to
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the appellant and this Court, even if it were to consider
these appeals on the merits, should exercise no wider
jurisdiction than that available to it if it had entertained
a reference. We are unable to agree that the question is one
of fact. It is a question which concerns the consideration
of Item 22 of the Schedule to the Additional Duties of
Excise (Goods of Special Importance) Act, 1957. If the rayon
tyre cord fabric manufactured by the appellant is recovered
by that item it is exempt from sales tax and there is no
jurisdiction in the sales tax authorities to assess the
appellant on its turnover. The question is one of
substantial importance, and having regard to the
circumstances there is good reason for entertaining the
appeals and deciding them on the merits.
In the result the appeals are allowed, the assessments
in respect of the turnover of rayon tyre cord fabric
manufactured by the appellant relating to the assessment
years 1969-70, 1970-71, 1971-72 and the first six months of
1972-73 are quashed. In the circumstances there is no order
as to cost.
S.R. Appeal allowed.
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