1976 (1) TMI 155 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Whether "cotton sewing thread on cops and cones" is taxable or exempt under Notification No. ST-911/X dated 31st March, 1956.

Summary:

Issue 1: Taxability of "cotton sewing thread on cops and cones"

The assessee claimed that sales of "cotton sewing thread on cops and cones" were exempt from sales tax under the notification exempting "cotton yarn on cops and cones." The Sales Tax Officer rejected this claim, but the appellate authority accepted it. The revising authority overturned the appellate decision, leading to the present reference.

The court examined whether "cotton sewing thread on cops and cones" falls within the meaning of "cotton yarn on cops and cones." The court noted that although cotton sewing thread is made from cotton yarn, they are distinct commodities with different uses in the commercial world. Cotton yarn is used for weaving or knitting, while cotton sewing thread is used for sewing or stitching.

The court referred to several precedents, including:
- State of Madhya Bharat v. Hiralal: Iron and steel did not lose their character when converted into different shapes.
- State of Gujarat v. Sakarwala Brothers: Different forms of sugar were still considered sugar.
- Commissioner, Sales Tax v. Ballabh Das: Twisted yarn remained hand-spun yarn.
- Madura Mills Company Ltd. v. Government of Madras: Cotton tyre cord warp sheet was considered cotton yarn.
- Commissioner of Sales Tax, U.P. v. Tata Iron & Steel Co. Ltd.: Galvanised and corrugated iron sheets remained iron and steel.

The court distinguished these cases, emphasizing that cotton sewing thread cannot be reconverted into cotton yarn and has a distinct identity and use.

The court also considered the principle that exemptions must be strictly construed, citing Union of India v. Commercial Tax Officer and Bharat Bhandar, Kanpur v. Commissioner, Sales Tax, U.P.. The court concluded that "cotton sewing thread on cops and cones" is a distinct commodity from "cotton yarn on cops and cones" and does not qualify for the exemption.

Conclusion:
The court answered the reference in the negative, holding that "cotton sewing thread on cops and cones" is taxable and not exempt under the notification. The respondent was awarded costs of Rs. 100.