9911796707
TMI Blog1980 (9) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 12(8) of the Act and after hearing the assessee reassessed by demanding tax at 5 per cent by applying the residuary rate. The assessee appealed to the Assistant Commissioner. Relying on Circular No. 18641/CT dated 16th December, 1959, issued by the Commissioner of Sales Tax, the appellate authority held that cotton yarn and sewing thread are one and the same commodity. He, therefore, took the view that the sales turnover representing sewing thread was liable to be assessed at the rate prescribed under serial No. 3. Since the assessment had earlier been made by adopting that rate, he annulled the reassessment under section 12(8) of the Act. The revenue preferred a second appeal to the Tribunal challenging the first appellate order. Relying on a decision in the case of Mohta Trading Co. v. Commissioner of Sales Tax, U.P., Lucknow[1976] 38 S.T.C. 11., of the Allahabad High Court, the Tribunal held that cotton yarn and sewing thread are two different commodities and, therefore, sewing thread was not exigible to tax at the rate prescribed under serial No. 3. As there was no special rate prescribed for sewing threadlower or higher than the general rate-the sales turnover o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginal assessment has not been disputed and, therefore, even if the assessee ultimately succeeds in its stand that the rate of tax is 2 per cent, the original demand would not be reopened and it would not become entitled to refund of the excess of one per cent collected and deposited towards sales tax. 5.. The main question for consideration in the premises indicated is whether sewing thread is cotton yarn and, therefore, the rate of tax would be 2 per cent as stipulated. In support of the assessee's stand on this score, the petitioner's counsel relied upon the circular letter of the Commissioner of Sales Tax where he had expressed the view that sewing thread was cotton yarn and, therefore, exigible to tax at 2 per cent. The assessee's counsel contended that under the scheme of the Act, the Commissioner was the pivot of administering the statute and under sub-section (3) of section 3, others including the assessing officer were appointed to assist the Commissioner. Under section 3-A of the Act, the Commissioner has superintending power. The Commissioner has all the powers conferred under the Act to administer and under section 17 thereof, he is authorised to delegate his powers a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on sewing thread basically emanates from cotton yarn after going through a process. The principal question, therefore, to be decided in this reference is what are the tests to be applied to find out whether the 'cotton sewing thread on cops and cones' is a part and parcel of the commodity known as 'cotton yarn on cops and cones'." The Division Bench of the Allahabad High Court thereafter referred to certain Supreme Court decisions and precedents of their own court and ultimately observed: "A consideration of all these decisions leads us to conclude that two principles have to be borne in mind while deciding the question whether cotton sewing thread was cotton yarn. Firstly, whether the things are not two different things in ordinary parlance. Secondly, whether the identity of the goods is retained even in its changed form or shape. It has also to be borne in mind that the exemption clause has to be construed strictly. Applying these principles it would be seen that cotton yarn and cotton sewing thread are two distinct and well-known commodities. They are separate things in ordinary parlance. It cannot be said that they are the same thing. Even their user is distinct and separate. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuating them into an even roving, further thinning and twisting this roving into a single yarn, and finally twisting two or more of the single yarns into plied thread. Mercerizing, a process of soaking in caustic soda under high tension, adds luster to cotton thread, makes it stonger and more readily receptive to dyes. Synthetic yarn, a product of a highly complex chemical process, is delivered to the thread manufacturer for final processing into thread." "Yarn" according to the Shorter Oxford English Dictionary means: "Spun fibre, as of wool, flax, silk, cotton; now usu., fibre spun and prepared for use in weaving, knitting, etc. In Rope-making, one of the threads composing a strand, or these threads collectively." "Thread" according to the same dictionary means: "A fine cord composed of the fibres or filaments of flax, cotton, wool, silk, etc. spun to a considerable length; spec. such a cord composed of two or more yarns, esp. of flax, twisted together; ......" "Thread" also means: "Each of the lengths of yarn which form the warp and woof of a woven fabric..... A lineal measure of yarn: the length of a coil of the reel, varying in amount according to the material, and also w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am directed to say that the Government of India are advised that cotton sewing thread is covered by the term cotton yarn but not including cotton yarn waste, used in section 14(ii-b) of the Central Sales Tax Act, 1956. Suitable instructions in this regard have already been issued to all the State Governments." We agree that the view expressed by the Government of India is not a final one, but we have noticed it as it is in accord with our conclusion which has been independently reached. The observations of the Division Bench of the Allahabad High Court in the reported decision referred to above that"......On the question whether cotton sewing thread retained its characteristic of its being cotton yarn the question has to be answered in the negative......" and "......Although the cotton sewing thread is made out of cotton yarn, it cannot be re-converted into cotton yarn if not used as a cotton sewing thread..." do not, in our view, appear to be correct. 8.. We may conveniently refer to a very recent decision of the Supreme Court in the case of Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. Pio Food Packers[1980] 46 S.T.C. 63 (S.C.). Affirming the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
