1975 (12) TMI 104 - AT - Income Tax

Summary

Issues Involved:
1. Withdrawal of concessional tax rate.
2. Classification of stiff collars as "readymade goods made of cloth".
3. Applicability of revised tax rates.

Detailed Analysis:

1. Withdrawal of Concessional Tax Rate:

The appellant contested the revision orders that sought to withdraw the concessional tax rate initially granted under a Government Order (G.O.). The original assessments for the years 1970-71 to 1972-73 applied a 2% tax rate on stiff collars based on G.O. Press 4435, Revenue dated 30th Nov., 1962. This G.O. reduced the tax rate on "ready-made goods made of cloth" to 1%, subsequently increased to 2% by later amendments. The assessing authority later issued pre-revision notices asserting that stiff collars were neither textiles nor ready-made garments, proposing a revised tax rate of 3-1/2%.

2. Classification of Stiff Collars as "Readymade Goods Made of Cloth":

The core issue was whether stiff collars qualify as "ready-made goods made of cloth" under the terms of the G.O. The appellant argued that stiff collars, although containing a plastic band, are primarily made of cloth. The AAC, however, concluded that stiff collars include plastic components and thus do not qualify for the concessional rate. The appellant provided a specimen of a stiff collar, demonstrating that the outer and inner layers are made of starched long cloth and buckram cloth, respectively, with a polythene band for stiffness. The appellant contended that the presence of plastic does not alter the fundamental nature of the collars as cloth products.

3. Applicability of Revised Tax Rates:

The appellant argued that the stiff collars should continue to be taxed at the concessional rate, as they are predominantly cloth products. The State Representative countered that the presence of polythene bands disqualifies the collars from the concessional rate. The Tribunal examined the specimen and concluded that, despite the polythene bands, the collars are substantially made of cloth. The Tribunal noted that the processing involved does not alter the fundamental nature of the material, similar to how starched cloth remains classified as cloth.

Conclusion:

The Tribunal found that the stiff collars are indeed "ready-made goods made of cloth" and thus eligible for the concessional tax rate. The Tribunal emphasized that the presence of minor plastic components does not change the primary nature of the product. The revision of the assessments was deemed unjustified, and the original assessments were restored.

Final Judgment:

The appeals were allowed, and the orders of revision were canceled. Consequently, the original assessments applying the concessional tax rate were reinstated.