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TMI Blog1983 (11) TMI 270X X X X Extracts X X X X X X X X Extracts X X X X ..... moved an application seeking to question the validity of the Amendment Act on grounds identical to those on which the validity of Ordinance No. 12 of 1981 had been questioned by it. The petitioner is a dealer in "acrylic yarn". It claimed that during the period 1st of April, 1979, to 31st of August, 1979, acrylic yarn was, under the provisions of the Sales Tax Act, taxable at the rate of 7 per cent, i.e., 6 per cent under section 3-A of the Act plus additional tax at the rate of 1 per cent under section 3-F of the Act. Likewise for the period 1st of September, 1979, to 31st of March, 1980, it was taxable at the rate of 3 per cent, i.e., at the rate of 2 per cent plus additional tax at the rate of 1 per cent and paid the tax accordingly. The Sales Tax Officer accepted the turnover as disclosed by the petitioner. He, however, came to the conclusion that cashmilon, i.e., acrylic yarn sold by the petitioner fell in the category of knitting wool inasmuch as in common parlance, it was so understood. It was used in knitting sweaters, socks and topas, etc., by crosia or knitting needles and that it was not used for purposes of spinning. He concluded that the goods sold by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued notifications omitting entries Nos. 105 (Notification No. 5784/X dated 30th of September, 1977), 106 (Notification No. 2175/X dated 1st of March, 1979) and 108 (Notification No. 8224/X dated 31st of August, 1979) from the schedule referred to in section 3-A(1) with effect from 1st of October, 1977, 1st of March, 1979, and 1st of September, 1979, respectively. The State Government also had in exercise of its powers under the proviso to sub-section (2-A) of section 3-A of the Act, issued Notification No. 4949/X dated 30th of May, 1975, declaring that with effect from 1st of June, 1975, the turnover in respect of the goods specified in column II of the schedule to that notification, shall be liable to tax at the point of sale and at the rate specified in columns III and IV thereof. After various entries mentioned in the schedule referred to in sub-section (1) of section 3-A had been omitted, it became open to the State Government to, in respect of the goods covered by those entries, issue notifications under the proviso to sub-section (2-A) of section 3-A of the Act and to include the same in the schedule of goods appended to Notification No. 4949/X dated 30th of May, 1975 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d itself with yarns of all kinds except those of the nature specified in entry No. 105 and which the State Government, in exercise of its powers under the proviso to sub-section (2-A) of section 3-A, issued Notification No. 8224/X dated 31st of August, 1979, providing therein that yarn of all kinds except cotton yarn but not including desi kati was to be liable to tax at the rate of 2 per cent with effect from 1st of September, 1979. Apparently, generality of the expression "yarn of all kinds" embraced within its ambit "knitting yarn, whether woollen, acrylic or of any other kind" mentioned in Notification No. 2177/X dated 1st of March, 1979, as well and thus rendering such yarn liable to tax at the rate of 2 per cent. Realising that it was not the intention of the State Government to, while issuing Notification No. 8224/X dated 31st of August, 1979, affect the rate of tax in respect of knitting yarn provided for by Notification No. 2177/X dated 1st of March, 1979, the Governor of Uttar Pradesh promulgated the U.P. Sales Tax (Amendment and Validation) Ordinance, 1981. Section 21(5) of the Ordinance provided that in Notification No. 8224/X dated 31st of August, 1979, in the list t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner. It is not disputed that the power of the Governor to promulgate an Ordinance is co-extensive with that of the legislature. In the case of Tata Iron and Steel Co. v. Bihar State [1958] 9 STC 267 at 285 (SC); AIR 1958 SC 452 at 463, the learned Judges while considering the provisions of the Bihar Sales Tax Act observed that the legislature acting within its own legislative field had the powers of a sovereign legislature and could make its law prospectively as well as retrospectively. In the case of Hira Lal Rattan Lal v. Sales Tax Officer, Section III, Kanpur [1973] 31 STC 178 (SC), the Supreme Court had the occasion to consider the question whether retrospective validation of a notification, which deprives a dealer of an opportunity to pass on the incidence of sales tax to the consumer, stands vitiated as being in violation of the provisions contained in article 19(1)(f) and (g) of the Constitution. While dealing with this question, the learned Judges of the Supreme Court observed thus: "A feeble attempt was made to show that the retrospective levy made under the Act is violative of article 19(1)(f) and (g). But we see no substance in that contention. As seen earlier, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent as were not covered under any other notification. On the petitioner's own showing acrylic yarn was on that date covered by Notification No. 2177/X dated 1st of March, 1979, rendering it liable to tax at the rate of 6 per cent. Accordingly nothing contained in Notification No. 8224/X dated 31st August, 1979, affects the taxability of acrylic yarn sold by the petitioner. This, however, is not the end of the controversy involved in this case. The petitioner claims that in respect of the yarn sold by it during the period 1st of March, 1979, to 31st of August, 1979, it was liable to pay sales tax at the rate of 6 per cent in accordance with Notification No. 2177/X dated 1st of March, 1979, and in case its contention with regard to the validity of Ordinance No. 12 of 1981 is repelled, it would continue to be liable to pay sales tax at the same rate together with an additional tax of 1 per cent under section 3-F of the Act, i.e., the total tax computed at the rate of 7 per cent. The respondents have, however, computed the total tax at the rate of 8 per cent, 7 per cent normal tax and 1 per cent additional tax under section 3-F of the Act. As already explained, the controversy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Judge of this Court has in the case of Commissioner of Sales Tax v. Rajhans Soda Water Factory (Sales Tax Revision No. 446 of 1981 decided on 26th of April, 1982) printed at page 128 infra, held that acrylic yarn is not yarn. Likewise on the ratio of the decision of the Supreme Court in the case of Commissioner of Sales Tax, U.P. v. Sarin Textile Mills [1975] 35 STC 634 (SC), knitting wool cannot be treated as yarn inasmuch as it is not used for purposes of weaving. We find no merit in the submission made by the learned counsel for the respondents. In the case of Rajhans Soda Water Factory (Sales Tax Revision No. 446 of 1981 decided on 26th of April, 1982-Allahabad High Court) printed at page 128 infra the controversy before the court was whether the expression "yarn of all kinds including unspun fibre used in weaving other than handspun yarn but excluding cotton yarn" covered within its ambit acrylic yarn which was being sold by the petitioner of that case as knitting wool. The question whether acrylic yarn of the kind sold by the petitioner in the instant case was covered within the ambit of the expression "knitting yarn, whether woollen, acrylic or of any other kind" mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority has conceded that knitting wool is also a yarn but then it reasoned that as there exists a specific entry with regard to knitting wool, this commodity would fall outside the ambit of general entry relating to yarn of all kinds and it has to be taxed in accordance with the rates provided in the specific entry. For purposes of this case, it is not necessary for us to go into the question as to whether or not the sales tax authorities were justified in treating acrylic yarn sold by the petitioner as knitting wool. Apart from the entry at item No. 106 of the schedule, referred to in section 3-A(1) of the Act which stands deleted with effect from 1st of March, 1979, no other specific entry or notification dealing with knitting wool making the same liable to tax at the rate of 7 per cent has been brought to our notice, accordingly, there is no reason to exclude acrylic yarn, which on the ratio of the Supreme Court's decision in Sarin Textile Mills' case [1975] 35 STC 634 (SC), qualifies as yarn, from the ambit of the expression "knitting yarn, acrylic", used in Notification No. 2177/X dated 1st of March, 1979. The reason given by the appellate authority in this regard is, in ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of March, 1982, passed by the appellate authority are set aside, and the assessing authority is directed to pass a fresh assessment order computing the tax payable by the petitioner on the turnover already determined in the light of the observations made in this judgment. Parties are directed to bear their own costs. Appendix [The judgment of V.K. MEHROTRA, J., of the Allahabad High Court in Commissioner of Sales Tax v. Rajhans Soda Water Factory (Sales Tax Revision No. 446 of 1981 decided on 26th April, 1982) is printed below: ] COMMISSIONER OF SALES TAX v. RAJHANS SODA WATER FACTORY MEHROTRA, J.-The three submissions made on behalf of the Commissioner of Sales Tax, U.P., applicant in this revision under section 11(1) of the U.P. Sales Tax Act, are, firstly, that the turnover of the dealer, opposite party in the revision, of sale of ice-cream was wrongly held exempt from levy of sales tax as a milk product, secondly, that part of taxable turnover of self manufactured soda lemon was erroneously held not liable to tax, and thirdly, that the turnover of sale of acrylic yarn was erroneously held liable to tax at a lower rate of 2 per cent instead of 7 per cent. So far as the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion. Instead of being taxed at the rate of 2 per cent the turnover was liable to be subjected to tax at 7 per cent as an unclassified item as urged by the learned standing counsel. A copy of this decision shall be forwarded to the Tribunal as required by section 11(8) of the Act. Costs on parties. Dt. April 13, 1982. Before this judgment, which was dictated in open court on 13th April, 1982, was transcribed and put up for signature, Sri Rajesh Kumar, appearing for the dealer-opposite party, prayed that he may be heard further in support of this plea that the order of the Tribunal did not require any interference even in regard to the rate of tax on the turnover of acrylic yarn. Consequently, he was heard and so was the learned standing counsel further. The submission of Sri Rajesh Kumar is that the notification which would govern the turnover in question was the one dated 3rd April, 1975, by which an earlier notification dated 15th November, 1971, had been substituted. At the relevant time, the entry was in the following term: "108. Yarn of all kinds including unspun fibre used in weaving, other than handspun yarn, but excluding cotton yarn, woollen carpet yarn, filature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alifies all kinds of yarn does not appear to be correct. But when one looks at the *Transliterated from Hindi. subsequent notification No. 2 of 1st April, 1960, the commas have been omitted so that, according to the text of that entry the word 'weaving' would qualify all kinds of yarn as well. Indeed there are subsequent entries also relating to yarn where commas have been omitted. It is possible, therefore, to say that the intention of the State Government was that the word 'weaving' should qualify not only the unspun fibre but also the term 'all kinds of yarn'." If one compares the text of the entry as it was worded, in the notification dated 1st April, 1960, and the one relatable to the dispute involved in the present case, it would be clear that the language, in the material part, is the same. The observations of the Division Bench cannot be ignored by taking the view that they did not incorporate a concluded opinion about it. The counsel for the dealer also urged that it was not open to the Commissioner to plead for imposition of tax at the higher rate on the footing that what was being sold by the dealer was acrylic yarn as knitting yarn, when, in fact, no such grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties was that the commodity sold by the dealer during the year 1976-77 was liable to be taxed as an unclassified item for he has sold the acrylic yarn as knitting wool. Lastly it was urged by Sri Rajesh Kumar that the mere fact that the dealer had described the commodity as knitting wool was not determinative of the fact that it was knitting yarn and further that there was nothing on the record to show that the yarn sold by him could not be used for the purpose of weaving. In this view of the matter, it was urged the Tribunal's conclusion deserved to be upheld. In the circumstances of the instant case, it is too late to contend that the taxability of acrylic yarn as an unclassified item was being based by the department on the mere fact that it had been described as "wool" by the dealer. It has been found that at the relevant time the entry relating to yarn, as interpreted by the Bench of this Court, was confined to yarn used for weaving. There was no entry which would have brought the commodity sold by the dealer within the ambit of taxability at a lower rate at a particular point. It was for the first time that in the year 1979, as noticed earlier in this judgment, that a se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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