Punjab-Haryana High Court
Excise And Taxation Commissioner vs Orient Electrical Insulation Private ... on 29 November, 2004
Equivalent citations: [2006]145STC471(P&H)
Author: M.M. Aggarwal
Bench: M.M. Aggarwal
JUDGMENT G.S. Singhvi, J.
1. Whether sleevings manufactured by the respondent are covered by entry 30 of Schedule B of the Punjab General Sales Tax Act, 1948 (for short, "the 1948 Act"), as applicable to the State of Haryana, is the question which has been referred by the Sales Tax Tribunal, Haryana (for short, "the Tribunal") for the opinion of this Court in compliance of the direction given under Section 42(2) of the Haryana General Sales Tax Act, 1973 (for short, "the 1973 Act").
2. The respondent is engaged in the manufacturing of different kinds of insulation material including sleevings. The process of manufacturing the sleevings involves rewinding of different kinds of yarn on reels. The reels are then put on rewinding machines for putting the yarn into small bobbins. The small bobbins of yarn are put on spindles of braiding machines which weave the braiding in circular form. The rolls of braiding are singed with gas for burning the loose fibres. Thereafter, the braidings are cut into one meter length and polished on polishing machines. The same are then dyed and impregnated in varnish. Thereafter, the braidings are dried through a heating process and cut into the sleevings of the required sizes.
3. In the return filed by it for the assessment year 1988-89, the respondent claimed exemption from payment of tax on the ground that the goods manufactured by it are covered by entries 30, 30-A, 30-B and 30-C of Schedule B of the 1948 Act. The Assessing Authority rejected the respondent's claim and assessed the goods to tax. On appeal, the Deputy Excise and Taxation Commissioner (A), Rohtak, held that empire cloth and empire cloth tapes manufactured by the respondent fall within the ambit of entry 30-B of Schedule B of the 1948 Act and as such, the same are exempt from tax. However, he rejected the respondent's claim for exemption of sleevings by making the following observations:
I have considered this plea of the dealer and I do not find myself in agreement with the view taken by the learned Counsel. The reason is that the braided cords processed into sleevings could not by any stretch of imagination be covered under entry 30 as the end-products could not be considered a textile simpliciter since the processing done on the braided cords has altogether brought in existence a new and different commodity.
4. On further appeal, the Tribunal held that the sleevings are textile within the meaning of entry 30 of Schedule B of the 1948 Act and are exempt from tax. The reference applications filed by the department under Section 41(1) of the 1973 Act were dismissed by the Tribunal, but this Court entertained the applications filed under Section 42(2) and directed reference of the above noted question.
5. Shri Jaswant Singh, learned Senior Deputy Advocate-General, argued that the sleevings manufactured by the respondent cannot be treated as textile within the meaning of entry 30 and as such, the same are liable to tax. He relied on the judgments of the Madras High Court in English Electric Company of India Ltd. v. Government of India 1977 Tax LR 2260, Standard Batteries Ltd. v. Appraiser, Appraising Deptt. and Dynamo Dilectrics v. Union of India and argued that the sleevings manufactured by the respondent do not retain the character of yarn/textile and as such, the same are not covered by entry 30 of Schedule B of the 1948 Act.
6. We have thoughtfully considered the submission of the learned Senior Deputy Advocate-General and perused the record. It is settled law that in a taxing statute, words of every day use must be construed not in their scientific or technical sense, but as understood in common parlance--Ramavatar Budhaiprasad v. Assistant Sales Tax Officer , Motipur Zamindary Co. (Private) Ltd. v. State of Bihar , State of West Bengal v. Washi Ahmed , Dunlop India Ltd. v. Union of India AIR 1977 SC 597, Porritts & Spencer (Asia) Ltd. v. State of Haryana and Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan .
7. In King v. Planters Nut and Chocolate Company Limited (1951) CLR 122, the Exchequer Court, while considering the meaning of the term "vegetables", observed as under:
Now the statute affects nearly everyone, the producer or manufacturer, the importer, wholesaler and retailer, and finally, the consumer who, in the last analysis, pays the tax. Parliament would not suppose in an Act of this character that manufacturers, producers, importers, consumers and others who would be affected by the Act, would be botanists. The object of the Excise Tax Act is to raise revenue, and for this purpose to class substances according to the general usage and known denominations of trade. In my view, therefore, it is not the botanist's conception as to what constitutes a 'fruit' or 'vegetable' which must govern the interpretation to be placed on the words, but rather what would ordinarily in matters of commerce in Canada be included therein. Botanically, oranges and lemons are berries, but otherwise no one would consider them as such.
8. The above reproduced observations were quoted with approval by the Supreme Court in Ramavtar Budhaiprasad v. Assistant Sales Tax Officer . While interpreting the word "vegetables" occurring in C.P. and Berar Sales Tax Act, 1947, their Lordships of the Supreme Court held as under:
...But this word must be construed not in any technical sense nor from the botanical point of view but as understood in common parlance. It has not been defined in the Act and being a word of every day use it must be construed in its popular sense meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'. It is to be construed as understood in common language.
9. In Commissioner of Sales Tax, Madhya Pradesh v. Jaswant Singh Charan Singh , the Supreme Court dealt with the word "charcoal" used in Madhya Pradesh General Sales Tax Act and while holding that "charcoal" would be included in the word "coal", observed as under:
Now, there can be no dispute that while coal is technically understood as a mineral product, charcoal is manufactured by human agency from products like wood and other things. But it is now well-settled that while interpreting items in statutes like the Sales Tax Acts, resort should be had not to the scientific or the technical meaning of such terms but to their popular meaning or the meaning attached to them by those dealing in them, that is to say, to their commercial sense.
10. In Porritts and Spencer (Asia) Ltd. v. State of Haryana , the Supreme Court considered the question whether cotton and wollen dryer felts manufactured by the assessee which are woven textile felts of a kind commonly used in paper making machinery are textile fabrics and answered the same in the affirmative. After making reference to some of the judicial precedents, their Lordships observed as under:
The word 'textiles' is not defined in the Act, but it is well-settled as a result of several decisions of the Supreme Court that in a taxing statute words of everyday use must be construed not in their scientific or technical sense but as understood in common parlance.
11. We may now advert to entry 30 of Schedule B of the 1948 Act, with reference to which the respondent had claimed exemption. The same reads thus:
All varieties of cotton, wollen or silken textiles including rayon, artificial silk or nylon whether manufactured by handloom or otherwise (but not including pure silken fabrics, carpets, druggets, woollen durrees and cotton floor durrees.
12. A bare reading of the above reproduced entry shows that it covers all varieties of cotton, wollen or silken textiles including rayon, artificial silk or nylon whether manufactured by handloom or otherwise, but does not include pure silken fabrics, carpets, druggets, woollen durree and cotton floor durrees. The entry, in turn, does not refer to sleevings and other articles manufactured by using a yarn, but keeping in view the principles laid down by the Supreme Court in interpreting such entries, we shall consider whether the sleevings manufactured by the respondent fall within the meaning of "textile" used in common parlance or by trading community.
13. In English Electric Company of India Ltd. v. Government of India 1977 Tax LR 2260 (Mad.), Mohan, J. (as his Lordship then was) considered a question whether imported periglass sleevings or silicon elastomer coated glass sleevings could be classified as textiles. After making reference to various dictionary meanings of the word "textile" and certain text books on manufacturing technology of continuous glass fibres, Mohan, J., observed as follows:
As laid down by the division Bench, in State of Tamil Nadu v. East India Rubber Works [1974] 33 STC 399, the word 'textile' occurring under item 53 must be interpreted according to its ordinary or popular sense, the sense in which they are commonly understood in ordinary parlance and not in its primary or technical sense.... On the contrary, neither the trade nor industry looks upon the periglass sleevings as a variety of textile manufacture as seen from the literature relating to silicon rubber coated glass sleevings and also Vida Flex Vinyl coated glass sleeving.
14. In Standard Batteries Ltd. v. Appraiser, Appraising Department , another learned single Judge of the Madras High Court held that fibre glass sleevings cannot be treated as variety of textile manufacture, because the trade and industry do not look upon the same as textile.
15. In Government of India v. English Electric Company of India Ltd. , a division Bench of the Madras High Court approved the ratio of Standard Batteries' case and held that PVC coated glass sleevings do not fall within the expression "textile".
16. In Dynamo Dilectrics v. Union of India , a division Bench of the Gujarat High Court interpreted the entry contained in entry 22F(4) of the Central Excise Tariff and held that mineral fabrics and glass fabrics and varnished/unvarnished fibre glass sleeves and scrap cannot be treated as textiles.
17. In our opinion, the ratio of the aforementioned judgments clearly supports the case of the department that sleevings manufactured by the respondent do not fall within the scope of entry 30. It is true that base material used for manufacturing the sleevings is yarn, but after the braidings manufactured out of the small bobbins of yarn are polished and then dyed and impregnated with varnish, the same loose their character of being textile, as understood in common parlance or by the trading community. The polished braidings which are dyed and impregnated in varnish cannot be, at a later stage, converted into yarn or used as yarn. In Beardsell Ltd. v. State of Tamil Nadu [1993] 89 STC 137, a division Bench of the Madras High Court of which Dr. A.S. Anand, Chief Justice (as his Lordship then was) was a member, interpreted entry 18 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959 which related to artificial silk yarn, and held as under:
'Nylon twine' and 'nylon yarn' are separate and distinct commercial commodities, each one being separately and popularly understood commercially by those who deal in these commodities. The character of 'nylon twine' and 'nylon yarn' is distinct and separate, even if the source material is the same. 'Nylon twine' cannot be considered to be 'nylon yarn' in common parlance either.
While cotton threads can be rewoven or retwisted into cotton yarn with ease, once nylon yarn is made into nylon twine, the process cannot be reversed and it would not be possible to restore twine into yarn.
18. In view of the above discussion, we hold that insulation sleevings manufactured by the respondent do not fall within entry 30 of Schedule B of the 1948 Act.
19. Before concluding, we may notice the ratio of the judgment of the Supreme Court in Porritts & Spencer (Asia) Ltd. v. State of Haryana and a judgment of Madras High Court, to which reference has been made in the order of the Tribunal. In the first case, the Supreme Court considered whether dryer felts manufactured by the assessee falls within the ambit of entry 30 of Schedule B of the 1948 Act. After noticing the process of manufacturing the dyer felts, their Lordships of the Supreme Court observed as under:
There can, therefore, be no doubt that the word 'textiles' in item 30 of Schedule B must be interpreted according to its popular sense, meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'. The word 'textiles' is derived from the latin 'texere' which means 'to weave' and it means any woven fabric. 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 such. It may be cotton textile, silk textile, wollen textile, rayon textile, nylon textile or any other kind of textile. The method of weaving adopted may be the warp and woof pattern as is generally the case in most of the textiles, or it may be any other process or technique.... Moreover a textile need not be of any particular size or strength or weight. It may be in small pieces or in big rolls : it may be weak or strong, light or heavy, bleached or dyed, according to the requirement of the purchaser. The use to which it may be put is also immaterial and does not bear on its character as a textile.
20. In State of Madras v. T.T. Gopalier [1968] 21 STC 451, a division Bench of the Madras High Court considered the question whether braided cords would fall within the ambit of the term "textiles" appearing in entry 4 of Schedule III of Madras General Sales Tax Act, 1959 and answered the same in the affirmative.
21. In our opinion, neither of these judgments has any bearing on the determination of the question referred in the present case because the Supreme Court and Madras High Court did not deal with sleevings manufactured by the assessee.
22. In the result, the question referred to this Court is answered in favour of the department and against the assessee.