1990 (8) TMI 367 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Proper classification of nylon fishing nets for sales tax purposes under the Kerala General Sales Tax Act, 1963.
2. Classification of nylon twine under the Kerala General Sales Tax Act, 1963.

Issue-wise Detailed Analysis:

1. Proper Classification of Nylon Fishing Nets:

The central issue in these cases is the proper classification of nylon fishing nets for sales tax purposes under the Kerala General Sales Tax Act, 1963. The competition is between entry 7 of the Third Schedule and entry 100 of the First Schedule. Entry 7 pertains to "Cotton fabrics, woollen fabrics and rayon or artificial silk fabrics," while entry 100 pertains to "Bonded fibre fabrics other than those made of coir."

The Government issued an order on October 21, 1985, invoking section 59A of the Act, classifying nylon nets under entry 100. The reasoning was that nylon nets, being woven from nylon twines, qualify as "fabrics" and the twine, being a product of twisted nylon fibres, can be classified as "bonded fibre."

Technological advancements have shifted the material of fishing nets from traditional cotton and fibre to nylon, a synthetic fibre. Nylon is recognized as fibre in various publications, including Caxton's Encyclopaedia and Webster's Dictionary, which emphasize its use in manufacturing fish nets.

The Madras High Court in Kishinchand Chellaram v. Joint Commercial Tax Officer [1968] 21 STC 367 held that nylon fabrics come within the entry of artificial silk fabrics. However, this case did not address a conflict between entries, unlike the present case. The principle that a specific entry takes precedence over a general one applies here. Even if nylon fishing nets fall under artificial silk fabrics, they would be classified under the more specific entry of "bonded fibre fabrics."

The petitioners argued that the classification required an additional ingredient: that fishing nets should be made from bonded fibre. They contended that bonding involves an adhesive substance or fusion process, which is not present in the making of fish net yarns. This argument was supported by references to the Encyclopaedia Britannica.

The court noted that the term "bonded" must be understood in the context of the statutory scheme. The exclusion of coir fabrics from entry 100 indicates that bonding does not necessarily require an adhesive or fusion process. The Legislature intended a broader interpretation of "bonded," encompassing materials like nylon fibres. Consequently, the classification of nylon fish nets under entry 100 by the Government is correct, and the petitioners' contentions were rejected.

2. Classification of Nylon Twine:

A subsidiary issue in O.P. No. 1968 of 1987 concerns the classification of nylon twine. The Government classified nylon twine as general goods, not falling under entry 42 ("Artificial silk yarn, synthetic polyester fibre, polyester fibre yarn and staple fibre yarn") or entry 156 ("Plastics and articles made of plastics including plastic pipes").

The Government reasoned that nylon, despite its petrochemical base similar to plastics, is commercially considered part of the textile group and distinct from plastic goods. Nylon twine does not fit within entry 42, which pertains to polyester fibre and yarn. The court found no legal infirmity in this view, agreeing that nylon twine is different from plastic goods and polyester fibre.

Conclusion:

The writ petitions were dismissed, affirming the Government's classification of nylon fishing nets under entry 100 and nylon twine as general goods. The court did not address the correctness of a Government notification exempting certain nylon fish nets, as it was not challenged in these cases.