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TMI Blog2004 (2) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... , 3341, 3342, 3370, 3373, 3398 and 3767 of 2003), where assessments have been completed but have been reopened. 2.. In all these petitions, a pure question of construction and interpretation of entry No. 34 of Schedule I vis-a-vis entry No. 60 of Schedule III to the Delhi Sales Tax Act, 1975 is involved. The question is whether "silk sarees" (or spelled as "saris") merit classification as "silk fabrics" or "garments made of silk". According to the petitioners, the long standing tradition/practice of classifying "silk sarees" as "silk fabrics" is the only correct method. If "silk sarees" fall within "silk fabrics" then they would be placed in entry No. 60 of Schedule III and would not attract any sales tax. On the other hand, if "silk sarees" are construed as "garments made of silk" then they would merit classification in entry No. 34 of Schedule I and would be exigible to sales tax at the rate of 12 per cent. 3.. That as per provisions contained in the Act, section 4 thereof indicates a Schedule of rates at which the tax shall be levied on the taxable turnover. Schedule I. .... 12 per cent (12 paise in a rupee) Schedule II. .... 4 per cent (not exceeding four paise in a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his reply dated March 10, 2003, vide annexure 3, that the department is interpreting wrongly by construing silk sarees to mean "garments made of silk" which attracts tax at 12 per cent as per entry No. 34 of Schedule I. "Silk sarees" are not intended in the Act to be termed as "garments made of silk". The assessee further pointed out that since a number of years "silk fabrics" and "silk sarees" are treated as one and the same thing and the assessee has never dealt in "garments made of silk". It was further pointed out to the assessing officer that with effect from April 1, 2001, the item "silk fabrics" was moved from Schedule I to Schedule III and thus exempted from the tax. It is in view of this, the assessee neither collected any sales tax on the items nor kept any segregated record of taxable and non-taxable items. It was also pointed out that for the financial year 2001-2002, quarterly returns were filed and at no point of time it was pointed out to the assessee that the returns were incorrect. For the assessment year 2001-2002, the assessing officer made assessment under section 23(3) of the Act on August 28, 2003, a copy of which is produced at annexure 4. 10.. On behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) with metal threads. The pieces were about 12 feet (3.66 m) long and from 36 to 50 inches (91.44 to 127 cm) wide. Today, fine expensive saris are hand woven or machine made in cotton or silk, in pieces from 12 to 16 feet (3.66 to 4.88 m) long while the less expensive saris are machine made, mostly in cotton and are cut from long pieces. Also spelled sarrie, saree." 12.. The learned counsel for respondent No. 1 drew our attention to Schedule III to the Act where at entry No. 13 varieties of cotton fabrics are defined as under: "All varieties of cotton fabrics, man-made fabrics and woollen fabrics excluding imported varieties of such fabrics. Explanation.-The expressions 'cotton fabrics', 'man-made fabrics' and 'woollen fabrics' shall have the same meanings as are respectively assigned to them in the Central Excises and Salt Act, 1944 (1 of 1944)." So far as silk fabric is concerned, our attention was drawn to Schedule I of the Act. Entry No. 34 thereof reads as under: "Silk and garments made of silk, (the words 'silk fabrics' have been omitted vide No. F.4(75)/99-Fin.(G)/2079(ii) dated 31.3.2000 with effect from 1.4.2000)." Our attention was also drawn to Schedule III ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees", i.e., new articles having different identity emerged. It is in view of this that the assessing officer held that sarees are not covered under "silk fabrics" as sarees have separate identity and are ready to wear. Accordingly, the assessing officer held that the assessee did not disclose the sale of silk sarees and taxed the assessee considering the purchase and then by adding gross profit at the rate of 6 per cent and taxed at the rate of 12 per cent and other sarees, etc., were taxed at 4 per cent. For the said period, notice was also issued under section 55 of the Act. We need not refer to the notice of demand or notice issued under section 23 of the Act. 14.. The learned counsel for the petitioner submitted that the assessing officer has committed a grave error in not appreciating the said Supreme Court judgment in the proper perspective. He submitted that the case before the Supreme Court was a matter pertaining to exigibility to excise duty. The Assistant Collector of Central Excise had made a demand on Kapri International Pvt. Ltd. for clandestine clearance of bed-sheets and bed spread which were confirmed by the Commissioner of Central Excise along with the demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns its character as "silk fabrics". 16.. The learned counsel for the petitioner drew our attention to the judgment delivered by CEGAT in the case of Kapri International Pvt. Ltd. v. Collector of Central Excise, Meerut (1999) 110 ELT 937, to point out that Kapri International Pvt. Ltd., was receiving dutypaid fabric in running lengths and was manufacturing items like bedsheets, bed spread, table cloth and napkins of required sizes and then was hemming and stitching them. It is also pointed out that fabrics in running length was sent to fabricator/job-workers. The articles were manufactured by the job-workers/fabricators. Thus, admittedly after receipt of cotton fabrics in running length and after cutting the same in pieces further work was executed so as to manufacture new articles. The cotton fabric manufactured by the manufacturer thus lost its original identity. In the instant case, it was submitted by the learned counsel for the petitioner that as the petitioner is selling "silk sarees" to the buyers in the same condition in which the same were received, it cannot be said that any manufacturing process was done at the hands of the assessee so as to convert the original silk fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 (SC); (1976) 1 SCC 834. What is to be seen in the present case is whether stone, gitti, chips, etc., continue to be identifiable with the stone boulders, which have been bought by the dealer." 20.. The court further pointed out in para 5: "Where the dealer had brought into existence new commercial goods by consuming the boulders to bring out small pieces of stone, it was held that such activity attracted purchase tax. In the present case, however, stone, as such, and gitti and articles of stones are all of similar nature though by size they may be different. Even if gitti, kankar, stone-ballast, etc., may all be looked upon as separate in commercial character from stone boulders offered for sale in the market, yet it cannot be presumed that entry 40 of the notification is intended to describe the same as not stone at all. In fact, the term 'stone' is wide enough to include the various forms such as gitti, kankar, stone-ballast. In that view of the matter, we think that the view taken by the majority of the Tribunal and affirmed by the High Court stands to reason." It is in view of this, even the pieces cut from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... silk" and "raw silk" for the said period were placed at entry No. 77 of Schedule II and was subject-matter of tax at the rate of 4 per cent. All kinds of sarees excluding "sarees made of silk", "blended silk" and "raw silk" were placed at entry No. 68 of Schedule III and was exempted from payment of tax. From July 3, 2003 onwards "silk" and "garments made of silk" but not including sarees made of "silk" were placed at entry No. 34 of Schedule I and tax imposed was at the rate of 12 per cent. So far as "sarees made of silk" are concerned, these were placed at entry No. 34 of Schedule II and were charged tax at the rate of 4 per cent. All kinds of sarees excluding sarees made of "silk" were placed at entry No. 68 of Schedule III and thus were exempted from payment of tax. From April 1, 2000 onwards "readymade garments" but not including those made of "leather", "fur", "khadi" and "silk" were taxed at 4 per cent and were covered by entry No. 20 of Schedule II. 23.. The learned counsel for the petitioner submitted that till the judgment in Collector of Central Excise v. Kapri International (P.) Ltd. [2002] 128 STC 650 (SC); (2002) 4 SCC 710, "silk sarees" were considered as "sil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... superimposed. The court held that cotton sarees may, in ordinary parlance be called cotton fabrics, if such sarees are embroidered or decorated, but such embroidery or decoration is superimposed upon them after the process of their manufacture is over, they would be dealt with differently. Thus the process of manufacturing of a cotton fabric and on such manufacture of cotton fabric, the same is embroidered then, both would be distinct articles. After the manufacture of cotton fabrics is complete and the process of embroidery is over, so as to make them embroidered sarees, the dealer sell such articles not as cotton fabrics but as embroidered sarees. The court pointed out that it is this additional process, which results in embroidered sarees, a process which is neither incidental nor ancillary to their manufacture as cotton fabrics. The court pointed out that: "In our view, if a saree piece which is a cotton fabric, is subjected to the process of embroidery after its manufacture as a cotton fabric has been completed, it can no longer be called a cotton fabric as defined by entry 19 of Schedule I to the Central Excises and Salt Act and it becomes an embroidered saree within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er silk or cotton fabrics manufactured by a manufacturer. Merely because, without any further process being carried out on the manufactured article, a person can put it on, it cannot be branded as a garment. When the Legislature wanted "silk saree" to be taxed specifically, the same has been taxed. Any sort of length of "silk fabrics" would remain "silk fabrics" and even if it is cut into pieces without any further process/work carried out on such pieces, the pieces would remain "silk fabrics". 27.. The simple dictionary meaning of "cloth" and "clothes" would be relevant to decide this matter. The essential difference between "cloth" and "clothes" is that "cloth" is what comes straight from the textile factory whereas, "clothes" are articles after the cloth has been converted by cutting, stitching and/or some further process having been done to cloth, either by a man or a machine to make that cloth into a garment or wearing apparel. Whether in view of the size in which a particular cloth is manufactured, or its adaptability for a particular use, or the fact that it can straightway be used as a garment, "cloth" manufactured by a manufacturer ceases to be cloth is the question? Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conversion of one kind of product into a different kind of product by any additional expenditure of human labour and skill. The court pointed out that "mere fact that dhotis and saris are of particular sizes, whereas generally speaking 'cloth' manufactured by the mills is of much greater length does not also furnish any distinguishing feature". The court further pointed out that it is well-known that rolls of cloth come in different sizes, some rolls being of 40 yards, others of 24 yards, still others of 20 yards. Some expensive suiting is manufactured only in lengths of 3 yards, (known as suit length) so that there may be no two pieces available of the same kind, and the wearer may have the unique distinction that no other person has a suit, like the one, which he has. The adaptability of a particular cloth for a particular kind of use can also furnish no guide. The court pointed out that "therefore, the mere fact that dhotis are adaptable for use by men, and saris for use by women can also not make these lose their character as mill-made cloth". 30.. After considering the dictionary meaning, in the case of Lakshmiratan Cotton Mills [1962] 13 STC 1031 (All.), the court pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subject without clear and express words prescribing the obligation. There is no scope for intendment, implication or presumption regarding assessment of tax. The court whose plain duty is only to interpret and apply the statute, and not to legislate, should not get bogged in the quicksands of the policy of Legislature or the background of legislation. The only criterion is whether or not the words of the Act have reached the alleged subject of taxation. If the answer to this question is in the affirmative, after giving the words their plain grammatical meaning, that ought not to be construed to afford the subject means of evasion or avoidance of tax. If the answer is in the negative the subject goes free and the State cannot strain the language to give effect to their supposed intentions." 34.. In that case, the question was "whether the assessee was liable to pay sales tax at the enhanced levy or at the normal rate? The Appellate Tribunal opined that "the appellants cut crepe silk cloth into pieces of 7/8 yards in length, which is said to be the average length required to stitch a choli or the upper garment of a woman. They get small pieces of embroidery made by a process cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid raised by the petitioner that choli bits and saris are "clothes" and not "cloth". The court pointed out that choli bits are pieces or lengths of cloth in a state of adaptability to be transformed into garments like bodices but by themselves they are neither wearing apparel nor garments. Saris, also, are pieces of cloth and can hardly be called garments merely because they are draped round the body of a woman. They are not articles of dress like gowns, frocks and other tailored articles used by women mostly in countries other than India. Having regard to the plain dictionary meaning of the term "cloth" the court had no hesitation in holding that the silk choli bits and saris fell within the ambit of "cloth". 36.. In Sharfaji Rao v. Commissioner of Sales Tax [1953] 4 STC 6 (Hyd), the Chief Justice delivering judgment on behalf of the Bench observed at page 36: "The goods which are sold by the assessee are ready-made garments. The assessee after he had bought the cloth from the mills had to make garments out of the same by applying some process, e.g., by cutting the said cloth and sometimes by stitching one piece to the other. It cannot be said that the goods, which came i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing officer. The court pointed out that it was a case of mere change of opinion, which did not provide jurisdiction to the assessing officer to initiate proceedings under section 147 of the Income-tax Act. The court pointed out as under: "The power to reopen an assessment was conferred by the Legislature not with the intention to enable the Income-tax Officer to reopen the final decision made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position it would result in placing an unrestricted power of review in the hands of the assessing authorities depending on their changing moods. [See CIT v. Rao Thakur Narayan Singh [1965] 56 ITR 234, 239 (SC)]. In Phool Chand Bajrang Lal [1993] 203 ITR 456, 477 (SC), their Lordships have held while interpreting section 147 as it stood in the assessment year 1963-64: 'An Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income-tax Act, 1961, only if on the basis of specific reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax will be levied. Fabrics either of silk or cotton are manufactured by a manufacturer. They may be of different sizes. The manufacturer may supply either cotton or silk fabrics in different lengths but so far as the article manufactured by the manufacturer is not converted into any other article by following any other process, it cannot be identified as a different article but would remain as fabric. Merely because it is capable of being worn as a saree, it would not fall within the ambit of the words "garments made of silk". It would remain as "silk fabrics". We have pointed out earlier that if the fabric is cut into pieces and some other process is carried out so as to have a different article having a distinct identity different from the original one, then in such case it cannot be said to be the same article manufactured by a manufacturer. Such as embroidered sarees made by persons after the manufacturing process of fabric is completed by the manufacturer [See Pravin Bros. v. State of Gujarat [1964] 15 STC 478 (Guj)]. 42.. It is this decision on which reliance is placed by the respondents. However, there is nothing on the record to show that dealers after receiving the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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