TMI Blog1983 (9) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... e Sales Tax Officer accepted the claim that what was sold by the petitioners was nothing but cotton fabric. The turnover was held exempt from any tax liability. This was through an order of 30th June, 1976. Subsequently, a notice under section 21 of the Act was issued to the petitioners saying that some part of the turnover had escaped assessment to tax and that the petitioners should appear before the Sales Tax Officer with full records. When the petitioners wanted to know from the Sales Tax Officer the basis upon which this notice was issued, the Sales Tax Officer told them that an examination of the record had disclosed that a partner of the petitioners, Ashok Kumar in the case of M/s. Palco Lining Company and Swadesh Kumar in the case of M/s. K.P. Traders, had accepted in a statement made before the assessing authority that what was sold by the petitioners was collar which had been made out of cloth but no tax had been paid on the turnover of sale of these collars. The petitioners then came to this Court for relief in these petitions. They have founded their case upon the fact that what was actually being sold by them was not "collar" as such but two pieces of cotton clot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (printed at page 260 infra) 1980 UPTC 912, C.S.P. SINGH, J., examined the question whether fused collar was entitled to exemption under the aforesaid notification. He found that the method of manufacturing the collar was that pieces of different size were cut from buckram cloth and from ordinary cloth, and then they were fused together and thereafter eyes were cut at two ends so that buttons could be used. The collar prepared by this process was used for being stitched into shirts and bush-shirts. The learned judge answered the question "whether by fusing, cutting and finishing process a new commercial commodity distinct from cotton fabric came into existence." by saying that it did and on the further conclusion that the fused collars were not manufactured on powerlooms held that exemption under the notification was not available in respect of fused collars manufactured by the petitioner before him. The counsel for the department has, naturally, placed strong reliance on this decision. In these cases, it is not in dispute that though cut in the shape of a collar, what was being sold by the petitioners was collar lining. What the department says about its process of manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade out of paper were covered by the expression "paper" under section 2(a)(vii) of the Essential Commodities Act and item 13 of Schedule I to the Gujarat Essential Articles Dealers' (Regulation) Order, 1971, and this is what was said (in paragraph 6 of the Report): "........ It cannot be disputed that an exercise book is nothing but a collection of sheets of paper (blank or lined) stitched together by a piece of string or pinned together with pins of a stapler and is a substance used for writing and, therefore, would clearly fall within the item 'paper'. The test would be whether because of stitching or pinning them together such a collection of sheets loses its identity as paper. The answer must be in the negative. Looked at from this angle it is difficult to accept the contention that an exercise book is a distinct commodity other than paper................." Judged with reference to the test aforesaid, collar lining would not cease to be a cotton fabric so as not to be comprised within the term "cotton fabrics of all kinds" and entitled to exemption from tax. We find support for our view from the decision of a Division Bench of the Gujarat High Court in State of Gujarat v. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated to be metal for purposes of levy of tax at the lower rate of 2 per cent. The High Court had accepted the contention of the department that they were a commercial commodity distinct from aluminium ingots and billets from which they were prepared and unlike ingots and billets they were not entitled to be taxed at the lower rate on the footing that they were metal. Interpreting the relevant notification, as well as the scheme evinced by various entries in several notifications, the Supreme Court took the view that the expression "metal" had been generally implied to refer to the metal in its primary sense, that is the form in which it is marketable as a primary commodity. Having regard to the language used in the notification before us we are not satisfied that this principle will help the department in the present case. We may also notice the submission made on behalf of the department that the matter whether the article sold by the petitioners was a cotton fabric or a different commercial entity rendering it exigible to tax, should be left for determination by the departmental authorities on examination of evidence before them. Reliance in this respect is placed upon some ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings could be justified in the present case. However, we may observe that irrespective of the amplitude of the language used in section 21 of the Act, reassessment proceedings are not permissible on mere change of opinion by the taxing authority at a subsequent stage. The petitioners are right in their submission that issuance of a notice under section 21 of the Act in the present cases was without authority of law. In the result, we allow the petitions and quash the notices issued under section 21 of the Act to the petitioners and the proceedings initiated thereby. The petitioners shall be entitled to their costs. Appendix [The judgment of C.S.P. SINGH, J., of the Allahabad High Court in Omvik Electronics Private Ltd. v. Commissioner of Sales Tax, U.P., Lucknow (Sales Tax Appeal No. 322 of 1978 decided on 25th September, 1979) is printed below: OMVIK ELECTRONICS PRIVATE LTD. v. COMMISSIONER OF SALES TAX SINGH, J.-The assessee manufactures fused collars and shoulder straps. The method of manufacturing these articles was that pieces of different sizes are cut from buckram cloth and from ordinary cloth. These are fused together and thereafter eyes were cut at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommercial commodity distinct from cotton fabric comes into existence. Sri S. P. Gupta, appearing on behalf of the assessee contended that the process of manufacture, the fused collars and the shoulder straps did not alter its character of a cotton fabric. He referred me to a decision reported in 1972 Selected Decisions volume XIII page 301. This is a publication issued by the Government of Maharashtra by the sales tax department, and probably contains the decision of sales tax authorities constituted under the Bombay Sales Tax Act. The question that arose for decision in that case was as to whether Bondrex Collar Lining manufactured by the assessee fell within the description of cotton fabrics within the meaning of entry 15 of Schedule A to the Bombay Act. The authority held that as Buckram cloth and the laminated cloth individually fall within the expression of cotton fabric, the cut pieces of the cotton fabric though bonded together without use of any other material would continue to fall within the scope of cotton fabrics. This decision undoubtedly supports the contention of the appellant. Reliance was also placed on Porritts' case [1978] 42 STC 433 (SC); 1979 UPTC 866, wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the collar stiffening material manufactured by the assessee would be cotton fabric as contemplated by section 14, item No. 14(iia) of the Central Sales Tax Act. Counsel also referred to the decision of the Bombay High Court in the case of Punjab Business Supply Co. Pvt. Ltd. v. State of Maharashtra [1977] 39 STC 386 wherein it was held that rags and chindhis were cotton fabrics. This case however is of little help, for, rags and chindhis being pieces of cloth of irregular shapes and sizes would be nothing but cotton fabric. So far as the Madras case is concerned the entry was not similar to the one that we held here, for that entry included within its impress all varieties of fabric manufactured either wholly or partly from cotton. So all that was essential was that the fabrics should be manufactured wholly or partly from cotton. In the present case the relevant part of the notification reads: "Textiles of the following varieties manufactured on powerlooms, excluding durries, carpets, hosiery goods and readymade garments but including the goods specified in the annexure hereunder.' (a) Cotton fabrics of all varieties." A bare perusal of this notification clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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