Karnataka High Court
The State Of Karnataka vs B.V. Aswathanarayana Setty And ... on 19 July, 1980
Equivalent citations: 1980(2)KARLJ361, [1980]46STC466(KAR)
JUDGMENT Rama Jois, J.
1. In these eleven revision petitions presented by the State under section 23(1) of the Karnataka Sales Tax Act, 1957 (hereinafter referred to as "the Act"), against the order of the Karnataka Appellate Tribunal, Bangalore, the following question of law arises for consideration :
"Whether the pierced cocoons fall within entry 38-A of the Fifth Schedule to the Act and consequently exempt from tax under the provisions of the Act ?"
2. The respondent, who is common in all these cases (hereinafter referred to as the assessee) is a dealer in waste silk and pierced cocoons. During the relevant years, the assessee had sold pierced cocoons. The assessing officer was of the opinion that the pierced cocoons fell within the expression of "raw silk" included under entry 38-A of the Fifth Schedule to the Act and therefore the turnover pertaining to pierced cocoons was exempt from payment of tax under the Act. The Deputy Commissioner of Commercial Taxes having entertained the view that the order of the assessing authority was erroneous and prejudicial to the revenue, revised the orders in exercise of his suo motu revisional powers under section 21 of the Act. Aggrieved by the orders of the Deputy Commissioner, the assessee preferred appeals before the Karnataka Appellate Tribunal. The Tribunal by a common judgment accepted the contention of the assessee and revised the order of the Deputy Commissioner and restored the order of the assessing authority. Aggrieved by the orders of the Tribunal, the State has preferred these revision petitions.
3. Before considering the question arising for consideration, it is necessary to refer to the relevant provisions of the Act. According to Section 5(1) of the Act, every dealer has to pay tax on his taxable turnover at the rate prescribed in the said sub-section, except in cases where different rates are specified in the different schedules to the Act. The Fifth Schedule contains description of goods which are exempted from tax under the Act. The relevant entries are entries 16 and 38-A, which read :
"Entry No. 16. Silkworm cocoons sold by cocoon rearers.
Entry No. 38-A. Raw silk, thrown silk or twisted silk."
4. It is common ground that pierced cocoons sold by the assessee do not fall under entry 16. According to the assessee, the pierced cocoons fall within the expression "raw silk" included under entry 38-A whereas according to the State it does not fall within the said entry. The Tribunal was of the view that the pierced cocoon was raw silk used in the manufacture of spun silk and, therefore, falls within the expression "raw silk" used in entry 38-A. In coming to said conclusion, the Tribunal relied on the correspondence that had ensued between the Commissioner and one of the dealers and between the Commissioner and the Director of Sericulture, in connection with the necessity of taking licence by persons dealing in pierced cocoons under section 6 of the Act, as it stood prior to 1966. In the letter dated 1st October, 1965, the Commissioner of Commercial Taxes was of the opinion that pierced cocoons should be treated as "raw silk" and, therefore, subject to the licence fee under Section 6 of the Act. In a letter dated 14th November, 1966, addressed to the Director of Sericulture, the Commissioner of Commercial Taxes expressed the opinion that pierced cocoons are considered as raw silk and, therefore, subject to the licence fee under section 6 of the Act. The Commissioner of Commercial Taxes in his letter dated 12th August, 1971, addressed to one M/s. Nissar Pasha and Company, made it clear that the raw silk waste was exempted from sales tax. In a letter dated 24th August, 1976, addressed by the Director of Sericulture to the Commissioner of Commercial Taxes, he was of the opinion that pierced cocoons are classified along with the silk waste. The combined effect of the last two letters was that the silk waste fell within the expression of "raw silk" and the pierced cocoons were considered as silk waste and consequently it was also "raw silk". In addition to the information available from the correspondence referred to above the Tribunal relied on the publication "Wealth of India" in which the opinion expressed was that the pierced cocoons were also considered as silk waste. After considering these materials the Tribunal expressed the view that pierced cocoons are exempted from payment of tax under the Act in view of entry 38-A.
5. At this stage, it is relevant to explain what is meant by pierced cocoons. In the book of Economic Development of Karnataka by K. Puttaswamaiah, Volume I, it is clearly explained as to how the fine silk filament is produced by the silkworm and how it spins a protective shell around itself which is called cocoon. The relevant portion reads :
"The raw silk is the thin and fine filament of the silkworm. Whatever has been eaten by the silkworm, it brings out as liquid which gets solidified on coming into contact with oxygen. This solidified material is the silk filament. The silkworm 'larva' spins the silk filament around itself as a protective shell and this is called cocoon. Each such cocoon is nothing but a continuous length of silk filament. The length of the silk filament from a single cocoon is about 500 metres. Within two days, the silkworm spins the cocoon and rests inside as 'pupa'. Essentially the cocoon is purely a natural protection to the worm against enemies and climatic conditions, so that it may undergo the next two phases of life, namely, pupa and the month. If allowed to continue at this stage, within 10 days the pupa undergoes a metamorphosis and becomes moth, developing wings. It then pierces its protective shell and comes out."
The cocoon, after the silkworm develops into a moth by the process of metamorphosis and pierces out of it is called a pierced cocoon.
6. Now coming to the process of production of silk thread used in the manufacture of silk cloth, it should be mentioned that they are of the following two varieties :
(i) The silk filament in a continuous form is capable of being reeled out only before the moth comes out. The process of reeling is explained in the same book as follows :
"Man, however, found it advantageous to convert the cocoon into a fibre for his luxurious appeal. So in order to get unbroken silk filament the pupae are not allowed to undergo metamorphosis. The pupa is destroyed when the cocoon is thrown into hot water, which also dissolves the gum which attaches the filament to the cocoon. Up to 30 per cent of the cocoon is gum or Saricin and this has to be dissolved to reel out of the silk filament. The thread reeled out of the cocoon on hanks either in country charkhas or filature basin, is silk yarn and this is called raw silk. This raw silk is sold to weavers and weaving factories."
Thus it maybe seen the silk yarn so produced after killing the silkworm within the cocoon is the raw silk used in the manufacture of silk cloth. In the process of reeling, considerable wastage takes place and such wastage is called waste silk.
(ii) From the pierced cocoons, it is not possible to take out the silk filament in continuous length on account of the hole made in the cocoon. But from such cocoons, silk thread is produced by the process of spinning. In this process waste silk inferior cocoons are used along with pierced cocoons. The yarn so produced is used for manufacture of silk cloth called "spun silk". This information is also available from the book mentioned earlier under the heading "Spun Silk Industry", relevant portion of which reads :
"In the process of reeling, about 30 per cent of the silk cannot be reeled and it is obtained as by-product. This waste forms the bulk of the raw material for the spun silk industry, which is playing a major role to earn foreign exchange and provide employment to the poorer class, thereby contributing much to the economy of the State and the individual. This is almost a parallel industry to the silk industry. Besides the silk waste, the other products utilised for spun silk spinning yarn are :
(1) Pierced cocoons; (2) Double cocoons; (3) Inferior cocoons; (4) Re-reeling waste; and (5) Throw-sters or winders waste, i.e., waste obtained during the course of rewinding the silk from hanks on to bobbins in the course of weaving; and (6) Ericocoon, muga waste and tussar waste."
The information furnished in the above book is in conformity with the information available from the letters of the Commissioner of Commercial Taxes and the Director of Sericulture as also the book "Wealth of India" on which reliance was placed in the order of the Tribunal.
7. The relevant meaning of the word "raw" given in the Concise Oxford Dictionary reads :
"..... in unwrought state, not or not completely manufactured, r. silk, as reeled from cocoons ....."
The meaning indicates that any material or commodity in its natural or semi-manufactured state, which is capable of being used for manufacture of any other kind of finished products which could be prepared out of such material is a raw material. Silk in its raw or natural state is found only in the form of "cocoons" whether pierced or not. Therefore, there can be no doubt that pierced cocoon is raw silk (raw material) used for the manufacture of one variety of manufactured silk, that is, spun silk, and falls within entry 38-A of the Fifth Schedule to the Act.
8. For the aforesaid reasons, we are of the opinion that the view taken by the Tribunal is correct and has to be accepted. Accordingly, we make the following order :
(i) These revision petitions are dismissed.
(ii) The respondent is entitled to costs. Advocate's fee in one set Rs. 250.
9. Petitions dismissed.