TMI Blog1999 (12) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority proposed to levy 3 per cent single point tax on a turnover of Rs. 21,14,641.98 by disallowing the claim of exemption. In reply to the pre-assessment notice, the dealer contended that locally purchased tax suffered corded yarn from textile mills have been only dipped and dyed before reselling, that no twisting or doubling of the cotton yarn was done, that mere colouring and dyeing will not change the character of the cotton yarn and therefore the proposal to levy tax may be dropped. While overruling the objections of the dealer, the assessing authority observed that the dealer sold sewing thread meant for sewing purposes, that the goods were not sold as cotton yarn meant for weaving purposes, that the sewing thread sold is commercially a different product from cotton yarn as held in [1981] 48 STC 460 (Ker) (K.C. Pappu Sons v. State of Kerala) that no person intending to purchase cotton yarn would be satisfied with sewing thread instead, that cotton yarn cannot be used in the place of sewing thread or sewing thread in the place of cotton yarn, that the dealer sold the cotton thread under the brand name Balamurugan, i.e., B.K. and therefore the objections are untenable. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls Company Limited v. Government of Madras [1970] 25 STC 407 and held that the commodity sold by the respondent has not lost its original identity and that it falls under entry 3 of the Second Schedule to the Act as cotton yarn only and therefore the sales of the respondent are eligible for exemption as second sales of cotton yarn. Hence, the present revisions preferred by the Revenue. 2.. Mr. R. Mahadevan, the learned Government Advocate, contended that State Legislature has specifically brought cotton sewing thread under the First Schedule to the Act with effect from July 25, 1977 and that the Appellate Tribunal has not followed [1981] 48 STC 453 (Orissa) (Srinivasa Distributing Agencies v. State of Orissa) wherein it has been held that the identity of the material, that is, cotton yarn is lost when the cotton yarn is converted into thread. He urged that the decision in Pyare Lal Malhotra s case [1976] 37 STC 319 (SC) relied on by the Appellate Assistant Commissioner is also relevant. He also referred to the decision of the Bombay High Court in Commissioner of Sales Tax, Maharashtra State, Bombay v. Arvind Trading Company [1995] 98 STC 288 which supports the case of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puty Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. O. Sadasivan, exemption in respect of dyed yarn in the context of the entry cotton yarn other than hand spun yarn, but not including cotton yarn waste was considered. It was held that despite the process of dyeing and colouring, cotton yarn still remained cotton yarn, that is the commodity mentioned in the entry, and does not undergo any process of transformation so as to make sales tax exigible separately on the said commodity after the process of dyeing and colouring. In State of Orissa v. Voona Suru Patra Sons [1982] 51 STC 410 the Orissa High Court held that sewing thread is taxable at the same rate as prescribed for the cotton yarn . The decisions in [1990] 78 STC 422 (Mad.) and [1994] 92 STC 262 (Mad.) refer to an identical case, namely State of Tamil Nadu v. R.V. Krishniah Chetty and Sons . Apart from Madura Mills Company Limited v. Government of Madras [1970] 25 STC 407 (Mad.), the decision in M. Muthusavari Pillai Sons v. State of Tamil Nadu [1977] 39 STC 359 (Mad.) wherein it was held that a bunch of spun thread could also come within the definition of cotton yarn if it can be used fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f such declared goods, namely, cotton yarn, will be governed by section 15 of the Central Sales Tax Act, 1956. 6.. In this connection, it is pertinent to note that in none of the decisions considered above, entry 141 of the First Schedule to the Act namely, cotton sewing thread introduced from July 25, 1977 vis-a-vis the entry 3 cotton yarn in the Second Schedule to the Act was discussed. In Sree Arunachalaeswara Mills v. State of Tamil Nadu [1991] 81 STC 137 (Mad.) it is stated that cotton yarn is not defined either in the Central Act or in the State Act and yarn is defined under the Cotton Textiles (Control) Order, 1948 to mean any type of yarn manufactured either wholly from cotton or partly from any other material. Further the manufacturer was under obligation to blend staple fibre while manufacturing cotton yarn and in no case such staple fibre shall be less than 10 per cent of the total fibre consumption in a quarter. In that context the High Court in T.C. No. 47 of 1974 [Deputy Commissioner (CT) v. Kandasami Spinning Mills] affirmed the following views of the Tribunal: ........It must also be remembered that blended yarn manufactured and sold by the appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing thread only. In [1995] 99 STC 87, the Supreme Court in Vasantham Foundry v. Union of India considered the issue pertaining to cast iron casting. It was held that cast iron casting in its basic or rough form is cast iron as contemplated in item (iv)(i) of section 14 of the Central Sales Tax Act, 1956 and the corresponding item (i) of entry 4 of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959. But, if thereafter any machining or polishing or any other process is done to the rough castings to produce things like pipes, man-hole covers or bends, they cannot be registered as cast iron castings in its primary or rough form; they are products made out of cast iron casting. Such product cannot be treated as declared goods under section 14(iv) of the Central Sales Tax Act, 1956. The following observations of the West Bengal Taxation Tribunal in regard to dyeing works contract in [1994] 92 STC 503 in the case of Bijoy Processing Industries v. Commercial Tax Officer, Central Section are relevant: ...... It does not necessarily follow that accretion has to be in the form of material; it may be in the form of colour, reaction or strength..... In the case of dyei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yarn for the purpose of weaving or knitting. Sewing thread is used particularly for the purposes of sewing or stitching or securing together two objects. It is thus clear that sewing thread and yarn are distinct and different items having separate uses. Anybody who wants sewing thread would never purchase yarn. In fact, cotton yarn and sewing thread are regarded as two different and distinct commercial commodities both by the person who deal therein and those who use the same. It is, therefore, difficult to hold cotton sewing thread to be cotton yarn . In fact, as stated above, sewing thread is one of the products of yarn and not yarn . To consider the question whether cotton sewing thread retained its characteristic of its being cotton yarn it is relevant to refer to the following observations of the Allahabad High Court in Mohta Trading Co. v. Commissioner of Sales Tax, U.P., Lucknow [1976] 38 STC 11 approved and quoted in Commissioner of Sales Tax, Maharashtra State, Bombay v. Arvind Trading Company [1995] 98 STC 288 (Bom): The cotton sewing thread, although it comes out of the basic raw material, viz., cotton yarn, but is a distinct product and of a particular th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
