1980 (5) TMI 31 - SC - VAT and Sales Tax

Fibre - Tyre Cord Fabric - Fabrics - Classification of goods - Interpretation of Statute - Words and expressions - Connotation of words and phrases

Issues Involved:
1. Classification of "Rayon Tyre Cord Fabric" under Item 18 of the Schedule to the Rajasthan Sales Tax Act, 1954.
2. Whether the product is exempt from sales tax under the Central Sales Tax Act.
3. Consideration of technical and commercial definitions of "fabric."
4. Interpretation of statutory provisions and legislative intent.
5. Requirement of payment of additional excise duty for exemption from sales tax.
6. Jurisdiction and authority of sales tax assessments.

Issue-Wise Detailed Analysis:

1. Classification of "Rayon Tyre Cord Fabric" under Item 18 of the Schedule to the Rajasthan Sales Tax Act, 1954:
The primary question raised in the appeals was whether "Rayon Tyre Cord Fabric" manufactured by the appellant falls within Item 18 of the Schedule to the Rajasthan Sales Tax Act, 1954, which exempts certain fabrics from sales tax. The appellant claimed that the product is a rayon fabric and thus should be exempt.

2. Whether the product is exempt from sales tax under the Central Sales Tax Act:
The appellant was assessed to sales tax by the Commercial Tax Officer for the years 1969-70 and 1970-71, and the plea for exemption was not accepted. The Rajasthan High Court dismissed the writ petitions filed by the appellant, leading to appeals and a writ petition in the Supreme Court. The Supreme Court observed the need for careful consideration of the manufacturing processes, composition, and expert opinions, ultimately upholding the view that the matter was for determination by the taxing authorities.

3. Consideration of technical and commercial definitions of "fabric":
The judgment delves into various definitions of "fabric" and "textile" from authoritative sources like the "Mercury" Dictionary of Textile Terms, Man-Made Textile Encyclopaedia, and Fairchild's Dictionary of Textiles. The definitions generally describe fabric as any product manufactured from fibers through twisting, interlacing, bonding, or other means. The court also reviewed definitions specific to tyre cord fabric, noting that it is commonly understood as a fabric in the trade.

4. Interpretation of statutory provisions and legislative intent:
The court emphasized that words and expressions in sales tax enactments should be construed in the sense understood in the trade by the dealer and consumer. The court referenced the Porritts and Spencer (Asia) Ltd v. State of Haryana case to support this view. The court concluded that tyre cord fabric is regarded as a textile fabric, considering its manufacturing process and market understanding.

5. Requirement of payment of additional excise duty for exemption from sales tax:
The court examined whether the exemption from sales tax was conditional upon the payment of additional excise duty. It noted that the Rajasthan Sales Tax Act, 1954, empowered the State Government to exempt goods from tax, and a notification dated 1st July 1958 unconditionally exempted all varieties of textiles made wholly or partly of rayon. This exemption was valid for the assessment years in question, and there was no requirement for payment of additional excise duty. The exemption was only conditional upon payment of additional excise duty from 5th March 1973 onwards.

6. Jurisdiction and authority of sales tax assessments:
The court addressed the contention that the classification of rayon tyre cord fabric is a question of fact and should not be interfered with. The court disagreed, stating that the question concerns the construction of statutory provisions. It held that the rayon tyre cord fabric manufactured by the appellant falls under the relevant item in the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and is thus exempt from sales tax.

Conclusion:
The appeals were allowed, and the assessments in respect of the turnover of rayon tyre cord fabric for the years 1969-70, 1970-71, 1971-72, and the first six months of 1972-73 were quashed. The court concluded that the product is a fabric and is exempt from sales tax under the applicable statutory provisions. There was no order as to costs.

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