1990 (11) TMI 376 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Entitlement to exemption under sub-rule (2) of rule 5 of the Tripura Sales Tax Rules prior to the Seventh Amendment.
2. Classification of "masticated rubber" or "mixed compound" as a "rubber product" under item 41 of the Schedule to the Tripura Sales Tax Act.

Detailed Analysis:

1. Entitlement to Exemption under Sub-rule (2) of Rule 5:
The petitioner claimed that they were entitled to an exemption under sub-rule (2) of rule 5 of the Tripura Sales Tax Rules, as it stood before the Seventh Amendment. This rule allowed a deduction of turnover of goods manufactured by a newly set up small-scale industry for a period of three years from the date of the first sale. However, the court observed that the petitioner did not claim this deduction in their returns or during the assessment hearings. The petitioner also failed to raise this issue during the revision before the Commissioner. The court concluded that since the petitioner did not bring the requisite facts on record to enable the authorities to examine this claim, it could not entertain this objection in the writ petition.

2. Classification of "Masticated Rubber" or "Mixed Compound" as a "Rubber Product":
The primary contention was whether "masticated rubber" or "mixed compound" falls under item 41 of the Schedule of taxable goods, which lists "rubber products except condom." The court referred to various definitions and principles for interpreting items in taxing statutes. The crucial question was whether masticated rubber is merely a processed form of rubber or a distinct rubber product.

The court analyzed the definitions of "rubber," "masticated rubber," and "rubber products" from dictionaries and prior judicial decisions. It noted that a commodity only becomes a different product if the processing changes its essential identity. The court referred to Supreme Court decisions, such as Tungabhadra Industries Ltd. v. Commercial Tax Officer and Deputy Commissioner of Sales Tax v. Pio Food Packers, which established that mere processing does not change the essential identity of a commodity.

Applying these principles, the court concluded that masticated rubber retains its identity as rubber despite the process of mastication. It does not become a different commodity that can be classified as a "rubber product." Therefore, masticated rubber is not covered by item 41 of the Schedule, which taxes "rubber products" and not "rubber."

Conclusion:
The court allowed the writ petition, setting aside the impugned order of assessment and the notices of demand. It directed the Superintendent of Taxes to make a fresh assessment excluding the turnover of masticated rubber from the taxable turnover of the petitioner. No order as to costs was made.

Judgment:
Writ petition allowed.