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TMI Blog2010 (4) TMI 854X X X X Extracts X X X X X X X X Extracts X X X X ..... orily grant exemption provided under Section 8 of the TNGST Act. If the State wants to levy even that particular commodity, it is well open to them to declare it as liable for tax, but cannot include it under some other wrong entry and then to levy tax only for the purpose of maximising the State’s Revenue. The clarification issued by the COCT does violence to the language found in the relevant entry. - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... t to have been dismissed. Therefore, the order of the learned single judge was set aside and the matter was remanded for a fresh disposal along with W.P. No. 11761 of 2006. 6. Subsequently, W.P. No. 13808 and 13809 of 2008 came to be filed by M/s. Jain & Co. Both the writ petitions were admitted on 13-6-2008. Pending the writ petitions, an interim stay was granted. Both the writ petitions were also directed to be posted along with W.P. No. 11761 of 2006. In that case, the petitioner had challenged the orders, dated 10-4-2008. These were the orders passed by the Appellate Assistant Commissioner, Commercial Tax-II, Chennai in APCST No. 6 of 2007 and AP No. 99 of 2007. By the said order, the appeal made against the order of DCTO-II, Pethanayakenpet North in respect of assessment year 2004-05, dated 29-12-2006 was confirmed. It was held that they are not eligible for exemption under Sales Tax Act as per Entry 8(vi) Part A of Third Schedule to the TNGST Act. Therefore, the assessment was made on the turnover at the rate of 12% under the TNGST Act and 12.6% under the CST Act as unclassified item and both appeals were dismissed. 7. The very same petitioner filed W.P. Nos. 1913 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... virtue of their finding place under 58.07, are specifically excluded from 58.06. There cannot be any doubt that "Velcro" (this expression is a trademark name) "fastener" is an article made of narrow woven-fabrics. In other words, "Velcro Fastener" is not narrow woven-fabric simpliciter; it is an article made of narrow-woven fabric. In as much as the commodity in question i.e. 'Hook and Loop Tape Fastener" otherwise called "Velcro Fastener" is an article of narrow woven fabrics falling under excise chapter heading No. 58.07, it is clarified that it is taxable at 12% under residuary entry No. 40, Part-D, First Schedule to the TNGST Act, 1959 by reiterating the clarification, dated 31-10-2005. If imported it is taxable at 20% under Entry No. 9 of Eleventh Schedule to the TNGST Act, 1959." 11. According to the petitioners, Section 8 of the Tamil Nadu General Sales Tax Act (for short TNGST), provides for exemption in respect of goods specified in Third Schedule and Serial No. 8(vi). The Third Schedule specifies narrow woven fasteners described against the heading 58.06 in column 3 to the First Schedule of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieu of Sales Tax. In view of this, it is now clarified that "Hook and Loop Tape Fasteners" are not liable to tax under Tamil Nadu General Sales Tax Act, 1959. 3. The earlier clarification issued in this office Ref. Acts Cell II/50273/88 dated 12-12-1988 and 4490/89 dated 2-2-1989 is hereby cancelled." (Emphasis added) 15. Notwithstanding this clarification, since the department insisted upon imposition of 12% tax, a clarification was sought for by the petitioner in W.P. No. 11761 of 2006. In support of their stand, the petitioner enclosed the following documents : "(a) A technical report dated 22-7-1998 given by The Silk and Art Silk Mills' Research Association, Bombay, certifying that hook and loop fastener was a narrow woven fabric. (b) A copy of the approved classification list filed by the petitioners under Rule 173B of the Central Excise Rules, 1944, where the classification of the petitioner's product as one falling under chapter 58.06 which had been approved by the central excise authorities. (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion adopted by the petitioner was accepted by the Central Excise Authority that the product in question is no way different from the Narrow woven Fastener. That product was also known as Velcro. It is claimed that Velcro was a brand of M/s. Velcro, USA, a company which pioneered the concept of Hook and Loop Tape Fastener. The petitioners are marketing their product under the brand Sky Magic. In the clarification for exemption under Third Schedule, prima facie opinion of Excise authority alone will count. One has to find out whether for the purpose of exemption under Third Schedule, the product is falling under Chapter 58.06. When the petitioners claim that it falls under 58.06, it would not be open to the COCT to bring it under Chapter 58.07, which is not only done without notice, but it is a classification based on ipse dixit. Chapter 58.07 deals with the excise of Garments. But Hook and Loop Tape Fasteners manufactured and marketed by the petitioner in W.P. No. 11761 of 2006, used in the industry to perform the function of fastening. The product is used in the leather, garments, Orthopedic, luggage industry and Telecommunication industry. Therefore, it was claimed that the concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ....The next question would be as to whether the exemption to which the appellants were manifestly entitled under the 1st paragraph of the notification they have been deprived of by the operation of the proviso. If the proviso on its proper construction, as we have endeavoured to point out earlier, cannot apply to cases where an additional duty of excise is not leviable under clause 3 of the Bill it would follow that the operation of the exemption is unaffected by the proviso. The appellants were therefore entitled to the relief from sales tax granted by the notification dated December 13, 1957." 22. The judgment of the Supreme Court in Filterco v. Commissioner of Sales Tax, Madhya Pradesh and Another reported in (1986) 2 SCC 103 = 1986 (61) STC 318 = 1986 (24) E.L.T. 180 (S.C.) was pressed into service. The following passage found in paragraph 11 was relied upon : "11. We are of opinion that the High Court should have examined the merits of the case instead of dismissing the writ petition in limine in the manner it has done. The order passed by the Commissioner of Sales Tax was clearly binding on the assessing authority under Section 42-B(2) and although technically it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation and understanding test in that it is understood as ordinary mill textiles and which is a man-made fabric, may the base be either viscose or mineral oil. Such overwhelming authority is available that it would not be safe to take out artificial silk appearing as item 4 in the Third Schedule to the Madras General Sales Tax Act, 1959, totally out of the popular context and meaning attributed to it and accept the contention of the revenue that the articles under review are not artificial silk. The Central Government which has been made a party to these writ petitions categorically avers that Nylon, Terylene, Terene, Dacron, Nylex etc., are considered as artificial silk being man-made fibres and that this view has been prevalent throughout India about the classification of these fibres and adds that even factually and technically, the products are textiles coming under the category of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and there has not been any controversy about the character of the goods at any time. They are of the view that by virtue of the agreement between the State and the Central Government, the Centre is collecting the additional exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the additional duties of excise, the States of Bihar has deprived itself of its power to levy entry tax under and by virtue of Entry 52 in List II in the Seventh Schedule to the Constitution. Indeed, it has not even forsaken its power to levy taxes on sale or purchase of tobacco or any other scheduled commodity; if it does so, all that would happen is that the consequence provided in the proviso to Rule (2) in the Schedule to the ADE Act will follow and nothing more. The ADE Act does not affect the legislative competence of the State Legislature to make a law with reference to any of the entries in List II. The contention of Shri Ganesh on this score is accordingly rejected." 25. Finally, the learned counsel submitted that if a specific entry which is leviable for additional duty under the Act, 1957 is made, it is automatically exempted under Section 8 of the TNGST Act for the purpose of levying tax by the Commercial Tax authorities. By exotic interpretation, they seek for levy tax would amount to double taxation, which is not contemplated. That will also violative of distribution of power of various taxation statutes. 26. The Supreme Court in Godfrey Phillips India L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e judgment of the Supreme Court in Delhi Cloth & General Mills Co. Ltd. v. State of Rajasthan, reported in (1980) 4 SCC 71 = 1980 (46) STC 256 = 1980 (6) E.L.T. 383 (S.C.) to show the coexistence between the local Sales Tax Act and the ADE Act, 1957. He referred to the following passage found in paragraph 20, which is as follows : "20. The unconditional exemption from sales tax granted on the sale of rayon fabrics, that is to say, without the condition that additional excise duty was paid by the manufacturer, was withdrawn by a notification dated March 5, 1973 made by the Rajasthan State Government under Section 4(2) of the Rajasthan Sales Tax Act. The notification provided that in the case of unprocessed rayon and artificial silk fabrics the exemption from sales tax would apply only if the additional duty is leviable on them under the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and such goods had not specifically been exempted from the said duty and the dealers thereof furnished proof to the satisfaction of the assessing authority that such duty had been paid. Therefore, as from March 5, 1973, the exemption from tax under the Rajasthan Sales Tax Act w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9) 1 SCC 82 = 1983 (13) E.L.T. 1607 (S.C.). The following passage found in paragraph 5 may be usefully extracted below : "5. There can, therefore, be no doubt that the word 'textiles' in Item 30 of Schedule 'B' must be interpreted according to its popular sense, meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'. There we are in complete agreement with the Judges who held in favour of the Revenue and against the assessee. But the question is: What result does the application of this test yield? Are 'dryer felts' not 'textiles' within the ordinary accepted meaning of that word? The word textiles is derived from the Latin 'texere' which means 'to weave' and it means any woven fabric. When yarn, whether cotton, silk, woollen, rayon, nylon or of any other description or made out of any other material is woven into a fabric, what comes into being is a 'textile' and it is known as such. It may be cotton textile, silk textile, woollen textile, rayon textile, nylon textile or any other kind of textile. The method of weaving adopted may be the warp and woof pattern as is generally the case in most of the textile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the hooked surface of the one tape is easily fastened with the looped surface of the another tape when pressed together. It is therefore submitted that they both together acts as a wide range of products such as clothing, carpentry, stationery products, footwear, bags etc., as a fastening material. Since the nature of the goods is such as above, it is respectfully submitted that the above items cannot be classified as a woven fabric either as understood in common parlance or as described under heading 58.06 of the Central Excise Tariff Act. 6....it is submitted that the entry 8(vi) of Part A speaks only about narrow woven fabrics as described under the heading 58.06 and not above Jooks and Loop Tape Fasteners which is commercially called as "Velcro" fasteners. In as much as the product as marketed by the petitioners does not fall within the abovesaid entry, the question whether the said entry attracts additional excise duty or not or whether the additional excise duty is actually paid or exempted by notification as averred by them in para 7 of the affidavit and pales into insignificance." 33. Mr. Haja Nazuruddin, the learned Special Government Pleader (Taxes), in suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession is capable of a wider meaning as well as narrower meaning the question whether the wider or the narrower meaning should be given depends on the context and the background of the case. In that case, the division bench held that the term "sugar" will not include sugar candy or the diamond sugar. 38. The learned counsel also placed reliance upon the judgment of the Supreme Court in State of Goa v. Leukoplast (India) Ltd., reported in (1997) 4 SCC 82 = 1997 (92) E.L.T. 19 (S.C.), wherein the Supreme Court held that the assessee should not be allowed to by-pass the statutory remedy and can approach the High Court with a writ petition. The counsel also placed reliance upon the judgment of the Supreme Court in Sony India Pvt. Ltd. v. Commercial Tax Officer and Another reported in 2009 (23) VST 1 (SC) for the very same purpose. 39. He further placed reliance upon the judgment of the Supreme Court in Godfrey Phillips India Ltd. v. State of U.P., reported in (2005) 2 SCC 515 = 2005 (139) STC 537 for the purpose of contending that the power of the State to levy Sales Tax is not taken away by the ADE Act, 1957. 40. On the basis of the rival contentions, it has to be se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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