1976 (5) TMI 88 - SC - VAT and Sales Tax

Whether the goods called rayon tyre cord fabric sold by the Delhi Cloth and General Mills Co. Ltd. to manufacturers of tyres who use it for the purpose of impregnating it with rubber fall under entry 18 of the Schedule of the Rajasthan Sales Tax Act 1954? Held that - Appeal dismissed. There is no sufficient reason for overriding and discarding the High Court s view that on what appeared to the High Court to be a question of fact it should not decide whether the product under consideration constitutes a fabric entitled to exemption. There was no appeal by the State of Rajasthan. It does not therefore seem proper for us to finally decide on merits the question argued before us in the appeals by the Delhi Cloth Mills which are before us unless we could have decided the matter in favour of the appellant. We could have only done that if we were of opinion that the taxing authorities had committed an error apparent on the face of the record. But as already indicated above we are not of this opinion.

Summary

Issues:
1. Interpretation of entry 18 of the Schedule of the Rajasthan Sales Tax Act, 1954 regarding the classification of "rayon tyre cord fabric" for taxation.
2. Determination of whether the "rayon tyre cord fabric" qualifies as a textile fabric entitled to exemption under relevant tax laws.
3. Assessment of whether the decision of the taxing authorities regarding the classification of the fabric was justifiable and whether there was an error apparent on the face of the record.

Analysis:
1. The case involved a petition and appeals before the Supreme Court regarding the classification of "rayon tyre cord fabric" for taxation under the Rajasthan Sales Tax Act, 1954. The central issue was whether this fabric falls under entry 18 of the Schedule of the Act, which historically exempted certain fabrics from taxation. The fabric in question was manufactured by Delhi Cloth Mills and used by tyre manufacturers after impregnation with rubber.

2. The petitioners argued that the fabric should be considered a textile fabric entitled to exemption based on its composition and usage in tyre manufacturing. They contended that the fabric was predominantly made of rayon, woven like other textiles, and served as raw material for the final fabric used in tyre production. The petitioners highlighted the technical aspects of textile weaving and production to support their claim.

3. The Commercial Tax Officer initially exempted the fabric from taxation, but later, under pressure from the State, initiated tax assessments. The High Court dismissed the petitioners' claims, stating that the issue required technical expertise to determine whether the fabric qualified as a textile fabric for exemption. The Court emphasized that until statutory remedies were exhausted, interference under article 226 of the Constitution was not warranted.

4. The Supreme Court upheld the High Court's decision, noting that the classification of the fabric involved technical considerations and commercial usage. The Court emphasized that the essential question was whether the fabric constituted a textile fabric entitled to exemption under the relevant tax laws. The Court concluded that the decision of the taxing authorities was within their jurisdiction and did not show an error apparent on the face of the record.

5. Ultimately, the Supreme Court dismissed the writ petition and appeals, affirming the decision of the High Court. The Court emphasized the need for a detailed examination of the fabric's manufacturing process, composition, and commercial terminology to determine its classification for taxation purposes. The Court highlighted that the question of whether the fabric qualified as a textile fabric required a thorough assessment by the taxing authorities based on technical expertise and factual considerations.