Exempting entry for rubber beltings: adopted administrative clarification bound tax authorities and protected fabric-content beltings from tax.

Rubber beltings with cotton fabric content of not less than 40 per cent were treated as falling within the exempting textile entry, because the State Government had adopted a clarification that transmission and conveyor beltings meeting that fabric-content test would be regarded as fabrics for sales tax purposes. The Court also held that the Board of Revenue circular conveying that adopted clarification was binding on assessing authorities and remained effective for the relevant assessment periods, so tax could not be levied contrary to it. The decision emphasised that, in construing a tax entry, ordinary commercial understanding and authoritative administrative construction are relevant aids, and the assessments were set aside to the extent they taxed the beltings.

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Issues: (i) Whether rubber beltings with cotton fabric content of not less than 40 per cent fell within entry 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act, 1957 and were exempt from sales tax. (ii) Whether the Board of Revenue circular dated 8 December 1969, issued pursuant to the State Government's acceptance of the Government of India's clarification, was binding on the sales tax authorities and applicable to the assessment years in question.

Issue (i): Whether rubber beltings with cotton fabric content of not less than 40 per cent fell within entry 5 of the Fourth Schedule to the Andhra Pradesh General Sales Tax Act, 1957 and were exempt from sales tax.

Analysis: The expression in entry 5 covered all varieties of textiles, and the Court accepted that rubber beltings, viewed in ordinary commercial understanding, would not ordinarily be textiles. However, the Court placed substantial weight on the clarification adopted by the State Government and conveyed through the Board of Revenue, under which transmission beltings and conveyor beltings with fabric content of not less than 40 per cent were treated as fabrics for sales tax purposes. The assessee's goods were certified as containing not less than 40 per cent cotton fabric.

Conclusion: The issue was answered in favour of the assessee. The rubber beltings were exempt under entry 5 for the relevant assessments.

Issue (ii): Whether the Board of Revenue circular dated 8 December 1969, issued pursuant to the State Government's acceptance of the Government of India's clarification, was binding on the sales tax authorities and applicable to the assessment years in question.

Analysis: The Court held that the State Government's letter adopting the clarification was an order made to remove difficulty within the scope of section 42(2), and the Board's circular merely conveyed that decision to the assessing authorities. As the clarification remained in force and was not withdrawn, the sales tax authorities in Andhra Pradesh were bound to follow it. The circular was treated as an interpretation of the relevant entry and not as a mere non-binding departmental view, and its effect was not confined only to the date of the circular.

Conclusion: The issue was answered against the revenue. The circular was binding and applicable even for the earlier part of the assessment periods concerned.

Final Conclusion: The assessments could not stand insofar as they brought the rubber beltings to tax, and the revision petitions succeeded with costs.

Ratio Decidendi: Where the State Government has adopted an administrative clarification interpreting an exempting entry and communicated it through binding instructions to assessing authorities, those authorities cannot levy tax contrary to that adopted interpretation so long as it remains operative; in construing a tax entry, the ordinary commercial understanding and authoritative administrative construction are material aids.

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