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TMI Blog2007 (8) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... VINEET KOTHARI DR. , J. ORDER:- Dr. VINEET KOTHARI J. These revision petitions of the assessee filed against the order of Tax Board dated July 16, 2001 raise a short, but interesting question of law for consideration by this court. The question is as to whether the metallic yarn produced and sold by the assessee during the period in question, namely, 1986-87 to 1988-89, is taxable at the rate of 1.5 per cent as all kinds of man-made yarn whether synthetic or non-synthetic, cellulosic or non-cellulosic, blended or not and waste thereof , or is taxable at the rate of three per cent as badla under notification dated June 19, 1967 (S. No. 130 of J.K. Jain's Book, Vol. 2). The said commodity badla , though not a defined term, is used in the notification dated June 19, 1967 along with other items like gota, gotakinari, salma and sitara. The said notification is reproduced hereunder: S. No. 130: F.5(56)FDCT/67-2 dated June 19, 1967. In exercise of the powers conferred by section 8(5) of the Central Sales Tax Act, 1956, the State Government [.2.] hereby directs that the rate of tax payable under clause (b) of sub-section (2) of the said section by a dealer havin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of the desired width; e.g. 1/8 to 1/128 inch (3.2 to 0.20 millimetres). In some types of metallic filament, the centre of the sandwich consists of a plastic (e.g. polyster) film that has been vacuum-coated with aluminum, and this may then be protected by the application of layers of lacquer or plastic film as above. Many types of coloured metallic filament are produced, including those with the metallic glitter of the aluminum shining through the coloured adhesive and those having coloured outer plastic films. Gold-coloured filaments are made by using an orange-yellow dyestuff or pigment in the adhesive; a silver colour requires only the natural glitter of the aluminum. Metallic MC yarns are used almost entirely as decorative materials for the textile industry. The aluminum foil that provides the glitter in a modern metallic yarn is protected from any ambient corrosive materials by the plastic film in which it is enclosed. Polyester types will withstand repeated launderings without losing sparkle. Because metallic yarns are not affected by sea water or the chlorinated water of swimming pools, they are widely used in swimwear. The dyestuffs used in colouring metal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic sheets or foils which are slitted by them by electrically operated machines fall within the purview of tariff entry 15A(2) of the First Schedule to the Central Excises and Salt Act, 1944 which is a specific entry relating to articles made of plastics of all kinds as contended by the respondents and therefore are dutiable at a lower rate and that the goods in question do not come within the ambit of the general tariff entry 18 and were therefore not liable to higher rate of duty. The honourable Allahabad High Court in the case of State v. Memorex Company reported in [1980] Tax L.R. NOC. 19 held as under: The commodity manufactured by the assessee, viz., metallic yarn manufactured out of polyster films may be unspun fibre as it is used in weaving and is unspun but if it was not yarn it could not be filature or artificial silk yarn. The Division Bench of the honourable Gujarat High Court in the case of Metta Embo v. State of Gujarat reported in [1993] 90 STC 505 explained the process of producing metallic yarn as under: (at page 506) . . . The process of producing metallic yarn was witnessed by the Assistant Sales Tax Commissioner before deciding the appeal. He has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . 20.. Now, the facts found on the basis of evidence adduced by the Additional Appellate Commissioner and the Judge (Revisions), Sales Tax, are that such woollen kati are short cutpieces of unspun fibre (each of which according to the aforesaid Encyclopaedia is about 2 inches in length). It has very little tensile strength and is not used as it is not capable of being used for weaving, knitting or rope-making. The only use to which the kati or pile is put, is by attaching each piece by hand around two warp threads. The kati is not a component of the basic fabric of the carpet. It is not an integral constituent of the warp and weft of the carpet which consists of a different spun fibre of great tensile strength, i.e., of yarn. The process of looping or knotting these pile tufts is different and distinct from the process of lengthwise and crosswise combining of warp and weft components, which makes the woven basic structure of the carpet. 21.. In view of these primary facts found by the taxing authorities, the conclusion is inescapable, that woollen carpet kati is neither 'yarn' nor 'unspun fibre used in weaving' within the contemplation of the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... badla and in the category of man-made yarn , still the question of rate of tax has to be resolved in favour of the assessee because it is well-settled principle of interpretation that where two views are possible, one in favour of the subject or assessee has to be adopted. Therefore, the metallic yarn which falls within the definition of man-made yarn and is taxable at the rate of 1.5 per cent under the relevant notifications can be said to be covered by the definition of badla also. Still the rate of tax applicable to the assessee in the present case would be 1.5 per cent, because badla itself can fall within the definition of man-made yarn . The aforesaid quoted judgments and extracts from Encyclopedia Britannica and book of Essence of Textiles and case law clearly establish that the metallic yarn produced by the assessee squarely falls within the definition of man-made yarn and is therefore, taxable at the rate of 1.5 per cent only under the relevant notifications. Consequently, these revision petitions are allowed and the order of the Tax Board dated July 16, 2001 is set aside and it is held that during the relevant period the assessee was liable to pay sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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