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TMI Blog1984 (8) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... r item 110 of the First Schedule to the Act and taxed the relevant turnover accordingly. The assessees filed an appeal before the Appellate Assistant Commissioner contending that armature coil winding oil cannot be classified as varnish and brought under item 110 of the First Schedule and it is liable to be taxed only at multi-point rate and as the turnover fell below the taxable limit of Rs. 50,000, they are not liable to be taxed at all. The Appellate Assistant Commissioner accepted the contention of the assessees and held that the substance called armature coil winding oil sold by the assessees is a spirit-based adhesive oil used for winding armature coil, and, in the business circle, it is treated as an adhesive and not as varnish. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en as varnish so as to bring it under item 110 of the First Schedule. The Board appears to proceed on the basis, since the product in question contains ethyl alcohol, it should be taken to fall within the term "varnish" which also contains ethyl alcohol. The other basis adopted by the Board of Revenue is that since the armature coil winding oil has been referred to as insulating spirit varnish in Indian Standards Specification, it should be treated as one kind of varnish, and therefore, it should be taken to fall under item 110 of the First Schedule. It is seen that the assessees are producing the armature coil winding oil on the basis of D.L. 2 licence issued under the Tamil Nadu Denatured Spirit Methyl Alcohol and Varnish (French Polish) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot straightaway be taken as a conclusive factor. The nature of the article and the use to which it is put cannot be completely lost sight of. In this case, the article manufactured by the assessees is used only as an adhesive in the process of armature coil winding and it is not used for polishing any surface. The varnish is normally understood as a substance which is used for polishing wooden or metallic surface. The varnish which is to be applied to a surface is a substance which will quickly evaporate making the surface glassy. Therefore, varnish is a substance used for a purpose different from the one for which the oil produced by the assessees is used. Having regard to the nature of the substance and also the use to which it is put ..... X X X X Extracts X X X X X X X X Extracts X X X X
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