Madras High Court
State Of Tamil Nadu vs Asian Engineering Company on 31 July, 1991
Author: A.S. Anand
Bench: A.S. Anand
JUDGMENT Dr. A.S. Anand, C.J.
1. The Revenue is in revision against the order of the Tamil Nadu Sales Tax Appellate Tribunal (Main Bench), Madras, dated July 27, 1979.
2. The controversy lies in a narrow compass. The assessee disputed before the Tribunal the liability to tax on the sale of rubber beltings under the Tamil Nadu General Sales Tax Act, 1959. The plea of the assessee was that the sales of rubber beltings were covered by item 19 of the First Schedule to the Central Excises and Salt Act, 1944 and according to section 14(iia) of the Central Sales Tax Act, 1956, they could not be brought to tax under the Tamil Nadu General Sales Tax Act. The Tribunal after verification of the record held, keeping in view the process of manufacture of the rubber beltings, that they were to be treated as cotton fabrics falling under item 19 of the Central Excise Tariff and in the absence of the goods being provided for taxation under the Second Schedule to the Tamil Nadu General Sales Tax Act, they were declared to be not taxable under the Tamil Nadu General Sales Tax Act. On recording these findings, the Tribunal granted relief to the respondent-assessee on a turnover of Rs. 1,93,219.24 taxable at 3 per cent relating to the period from April 1, 1973 to March 3, 1974.
3. The commodity in respect of which controversy was raised by the assessee was cotton canvas fabric impregnated by rubber between the layers of such cotton fabrics. Rubber was utilised to bind together the cotton canvas fabric. It has been found on facts that the predominant and substantial part of the fabric or product of the assessee is only cotton and not rubber and that rubber has been used only to bind together the basic fabric. It is settled law that power of taxation of declared goods is not available to the State unless the stage of taxation and point of taxation is clearly provided for in the sales tax law of the State concerned.
4. Section 4 of the Tamil Nadu General Sales Tax Act, 1959, dealing with declared goods provides that notwithstanding anything contained in section 3, the tax under the Tamil Nadu General Sales Tax Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the Second Schedule on the turnover in such goods in each year, whatever be the quantum of turnover in that year. It is not disputed that so far as the product in question is concerned, there is nothing in the Second Schedule to the Tamil Nadu General Sales Tax Act, whereby the rate or the point of tax has been specified. The Tribunal after extracting tariff item 19 of the Central Excise Tariff found that the products of the assessee were essentially cotton fabrics covered by item 19 of the Central Excise Tariff and were consequently declared goods falling under section 14(iia) of the Central Sales Tax Act. Under section 15 of the Central Sales Tax Act, 1956, declared goods falling under section 14 of the Central Sales Tax Act cannot be taxed at more than one stage and at rate exceeding the prescribed rate. Cotton fabrics as defined by tariff 19 of the Central Excise Tariff are the declared goods both for the purpose of the Central Sales Tax Act, 1956 and for the purposes of the Tamil Nadu General Sales Tax Act. The Tribunal, After examination of the samples of the product, held that the belt was made of cotton canvas of three or four layers and each layer is appended with the next one with rubber solution. Merely because rubber had been used to bind the layers of cotton we agree with the Tribunal, the product cannot be said to be a product other than cotton fabric.
5. In State of Tamil Nadu v. Navinchandra and Company [1978] 42 STC 423 a Bench of this Court held that anything fabricated out of cotton can be called "cotton fabric" and went on to hold that cotton belts made of cotton used for transmitting the power generated by an electrically operated motor or by other means would be cotton fabric falling under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act and hence exempt from tax notwithstanding the fact they may be parts or accessories falling under item 81 of the First Schedule. Learned Additional Government Pleader (Taxes) faced with the situation submitted that since the belting was required to be used for industrial purposes, it could not be treated to be cotton fabric. We cannot agree. The use to which a commodity is put is immaterial and that cannot have bearing upon character of the goods. In Porritts & Spencer (Asia) Ltd. v. State of Haryana [1978] 42 STC 433, the Supreme Court of India specifically ruled :
"When yarn, whether cotton, silk, woollen, rayon, nylon or of any other description or made out of any other material is woven into a fabric, what comes into being is a 'textile' and it is known as is such. The method of weaving adopted may be the warp and woof pattern, as is generally the case in most of the textile, or to any other process or technique. What is necessary is no more than weaving of yarn and weaving would mean binding or putting together by some process so as to form a fabric. Moreover a textile need not be of any particular size, strength or weight. It may be bleached or dyed. The use to which it may be put is also immaterial and does not bear on its character as a textile. It can be used even for industrial purposes".
Thus it would be seen that the mere use for industrial purposes would not detract the nature of the commodity which, as found by the Tribunal on the basis of the examination of the sample and the manner of its manufacture, was cotton fabric.
6. It may be relevant at this stage to also refer to another judgment of the Supreme Court in Delhi Supreme Court in Delhi Cloth & General Mils Co. Ltd. v. State of Rajasthan [1980] 46 STC 256. The question raised before the Supreme Court was whether rayon tyre cord fabric manufactured by the item 18 of the Schedule to the Rajasthan Sales Tax Act, 1954 and, therefore, exempt from sales tax under the Central Sales Tax Act. After analysing the provisions of item 18 of the Schedule to the Rajasthan sales Tax Act which exempted from sales tax and purchase tax "all cotton fabrics, rayon or article silk fabrics, woolen fabrics as defined in the Additional Duties of Excise (Goods of Special Importance) Act, 1957" and went on to hold that the expression "rayon fabric" was wide enough to include within it rayon tyre cord fabric even though the said produce was used in the manufacture of tyres. The Supreme Court accepted the plea of the assessee and held that rayon tyre cord fabric manufactured by the the assessee was covered by the item in question and was exempt from sales tax and there is no jurisdiction in the sales tax authorities to assess the assessee on its turnover. That judgment is fully applicable to the facts of the instant case in so far as interpretation of the expression "fabric" in relation to rubber beltings in the present case is concerned.
7. In view of the aforesaid discussion, we are of the opinion that the Tribunal was perfectly justified in holding that the rubber belting handled by the assessee-respondent had to be treated as falling under tariff item 19 of the Central Excise Tariff, and in the absence of the goods being provided for taxation under the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959, they could not be taxed under the Tamil Nadu General Sales Tax Act, 1959, at the relevant time. No error is, therefore, found in the order of the Tribunal, and consequently the revision fails and is dismissed. Since there is no representation on behalf of the respondent, no order as to costs.
8. Petitioner dismissed.