Kerala High Court
Deputy Commissioner Of Sales Tax vs Indian Duplicator Co. Ltd. on 9 July, 1987
Equivalent citations: [1988]69STC238(KER)
Author: K.S. Paripoornan
Bench: K.S. Paripoornan
JUDGMENT K.S. Paripoornan, J.
1. The 'Revenue is the petitioner herein. The respondent is an assessee under the Kerala General Sales Tax Act. We are concerned with the assessment year 1980-81. The controversy is regarding the rate at which the duplicating paper and stencil paper are taxable. The Revenue brought these two items to tax as coming within item No. 21 of the First Schedule, before its amendment by Act 19 of 1980. The goods were taxed at 15 per cent at the point of first sale in the State by the respondent-dealer. In appeal, the Appellate Tribunal held that the goods are not taxable under the First Schedule, item No. 21. It was held that both stencil paper and duplicating paper cannot be taxed as accessories to duplicating machines. However, duplicating paper is paper and after amendment it will come under item No. 97 of the First Schedule and taxable at 8 per cent. Till 15th September, 1980 (date of amendment) duplicating paper was "paper" and was liable to tax at the general rate at 4 per cent. Even after the amendment, stencil paper cannot be considered as paper nor can it be considered as paper product. So it could be taxed only at 4 per cent, at the general rate. These findings and conclusion reached by the Appellate Tribunal are challenged by the Revenue in this revision.
2. We heard counsel for the Revenue, Mr. Nambiar as also counsel for the respondent, Mr. Zachariah. The relevant entries, with which we are concerned, are Schedule I, item 21, as it stood before the amendment by Act 19 of 1980 and Schedule I, item 97 after the amendment. The Appellate Tribunal referred to the decision of the Supreme Court in Annapurna Carbon Industries Co. v. State of Andhra Pradesh [1976] 37 STC 378 for the purpose of informing itself as to the meaning of the word "accessory" used in item 21 of the First Schedule, before the amendment. After adverting to the said decision, it was held that accessory to a thing is an article which is neither an integral part of it nor an item indispensable for its functioning, but yet is attached to it or is used in connection with it adding to its convenience or its effectiveness. In this view of the matter, it was held that though duplicating paper and stencil paper are essential for making a duplicating machine work, they cannot be described as accessories to duplicating machines. In the light of the decision of the Supreme Court in Annapurna Carton Industries Co.'s case [1976] 37 STC 378, we are satisfied that the Appellate Tribunal was justified in holding that duplicating paper and stencil paper cannot be called as accessories to duplicating machines.
3. The next question is whether stencil paper can be called paper. After the amendment by Act 19 of 1980, paper is covered by item No. 97 of the First Schedule. A Bench of the Orissa High Court, in the decision reported in State of Orissa v. Gestetner Duplicators (P.) Ltd. [1974] 33 STC 333 held that stencil paper is not paper. The court referred to the decision of the Supreme Court, that of the Allahabad High Court and of this Court, to hold that stencil paper is not "paper". We concur with the said decision. We hold that stencil paper will not come under the First Schedule, entry 97, even after the amendment by Act 19 of 1980.
4. The further question is whether duplicating paper will come within the First Schedule, item No. 97. It was not disputed that after the amendment by Act 19 of 1980, with effect from 16th September, 1980, duplicating paper will come within the First Schedule, item No. 97. We hold that this view of the law is right.
5. Finally we shall advert to the plea of the Revenue that the. duplicating paper and stencil paper will be paper products within the meaning of Schedule I, item No. 97 and so they could be taxed at 8 per cent. In P.K. Dewer v. State of Kerala 1970 KLT 454 a Bench of this Court had occasion to consider as to what is meant by "paper products". It was held that "paper product" means, an article different from paper and something produced with or out of paper. It was further observed that one of the test to consider whether duplicating paper or stencil paper has to be considered as paper product, is to see whether the main characteristic or main utility of the paper must be lost and a new characteristic or utility should be acquired. But the decisive test, in order to consider whether a particular commodity can be considered to be a paper product, is whether people, who are conversant in the subject, will consider it as a paper product. Judged by this test, it is difficult to hold, that duplicating paper and stencil paper can be considered to be a paper product within the meaning of the First Schedule, item No. 97. In this connection, it should be noted, that in the Finance Act of 1984, with effect from 1st April, 1984, stencil paper has been made a specific item under the First Schedule, entry No. 160A, taxable at 8 per cent.
6. In the result we hold that the Appellate Tribunal was justified in holding that stencil paper will be assessed only at the rate of 4 per cent for the relevant assessment year, whereas, duplicating paper will be taxed at the general rate of 4 per cent up to 15th September, 1980 and thereafter at the rate of 8 per cent as per entry 97 of the First Schedule to the Kerala General Sales Tax Act. The decision of the Appellate Tribunal is justified in law. We see no reason to interfere. This tax revision case is without merit. It is dismissed. No costs.