Sewing thread classified as cotton yarn for tax purposes, Orissa High Court rules

The Orissa High Court held that sewing thread is classified as cotton yarn for tax purposes, affirming the assessee's position. Despite the State's appeal for a higher tax rate, the Court referenced previous decisions and maintained that sewing thread should be taxed at the same rate as cotton yarn. The judgment favored the assessee, with no costs awarded. Justice Behera concurred with the Chief Justice's decision on the matter.

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Issues involved:
The issue involved in this case is whether sewing thread should be taxed at the same rate as cotton yarn.

Summary:
The assessee, a registered dealer, sold sewing thread during the assessment year 1971-72 and paid tax at the rate of 2 per cent, considering it to be cotton yarn. The assessing officer raised the tax rate to 5 per cent, claiming that sewing thread was not cotton yarn. The first appeal by the assessee resulted in the tax rate being reduced back to 2 per cent. The State appealed the decision, arguing for a revision of the tax rate on sewing thread. The Orissa High Court, in line with previous decisions, held that sewing thread is indeed considered as cotton yarn. The Court referred to a decision by the Allahabad High Court and a communication from the Ministry of Finance, supporting the classification of sewing thread as "cotton yarn." The Court rejected the plea to refer the matter to a larger Bench based on a decision by the Kerala High Court, maintaining its stance that sewing thread should be taxed at the same rate as cotton yarn. The judgment was in favor of the assessee, with no costs awarded.

Separate Judgment:
Justice Behera concurred with the Chief Justice, and the reference was answered in the affirmative.

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