1977 (3) TMI 134 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the products manufactured by the assessee-firm (dryer felts) are covered by item 30 of Schedule B of the Punjab General Sales Tax Act, 1948, and therefore exempt from sales tax under both the Punjab General Sales Tax Act, 1948, and the Central Sales Tax Act, 1956.

Detailed Analysis:

1. Nature of the Product and Manufacturing Process:
The assessee-firm, engaged in the manufacture and sale of cotton/woollen dryer felts, claimed that their products fell under the category of tax-free goods as per item 30 of Schedule B of the Punjab General Sales Tax Act, 1948. The manufacturing process involves blending cotton and synthetic yarn or wool fibre with synthetic fibre, which is then woven into the final product known as dryer felts. These felts are used by paper mills in the manufacture of paper.

2. Contention of the Assessee:
The assessee argued that dryer felts qualify as "textiles" based on the dictionary definitions from various sources, including Webster's New International Dictionary and Encyclopaedia Britannica. They contended that since dryer felts are woven fabrics, they should be considered textiles and thus exempt from sales tax.

3. Assessing Authority's Decision:
The Assessing Authority rejected the assessee's contention, stating that dryer felts resemble druggets and carpets, which are specifically excluded from item 30 of Schedule B. The authority emphasized that the technical or dictionary meaning should not be applied in this context, and the common parlance understanding of the term "textile" should prevail.

4. Tribunal's Decision:
The Tribunal upheld the Assessing Authority's decision, agreeing that dryer felts do not fall under item 30 of Schedule B and are therefore taxable.

5. High Court's Analysis:
The High Court examined various precedents and dictionary meanings to determine whether dryer felts could be considered textiles. The court noted that while the dictionary definition might support the assessee's claim, the common parlance and commercial understanding of "textile" do not include dryer felts. The court cited several cases, including Ramavatar Budhaiprasad v. Assistant Sales Tax Officer and Ganesh Trading Co., Karnal v. State of Haryana, to emphasize that the commercial and common understanding should prevail over technical definitions.

6. Separate Judgments:
- Bains, J.: Concluded that dryer felts do not fall within the definition of "textiles" under item 30 of Schedule B. The judge emphasized that the intention of the legislature was to exempt goods used by common people and not specialized industrial products like dryer felts.
- Mittal, J.: Disagreed, arguing that the manufacturing process and the material used in dryer felts qualify them as textiles. Mittal, J., believed that the term "textile" should be interpreted broadly to include dryer felts.
- Chinnappa Reddy, J.: Resolved the difference of opinion by siding with Bains, J., emphasizing that the term "textile" should be understood in its common parlance, which does not include dryer felts. The judge highlighted that the use of the product and its commercial understanding are crucial in determining its classification.

7. Conclusion:
The High Court ultimately held that dryer felts are not covered by item 30 of Schedule B of the Punjab General Sales Tax Act, 1948, and are therefore not exempt from sales tax. The reference was answered against the assessee and in favor of the revenue. The court emphasized the importance of common parlance and commercial understanding in interpreting tax statutes.

Reference Answered:
The reference was answered against the assessee and in favor of the revenue, confirming that dryer felts do not qualify as textiles under item 30 of Schedule B and are subject to sales tax.

← Previous Next →