Tax classification of metallic yarn favours man-made yarn entry, with no estoppel from registration descriptions.

Metallic yarn made by slitting metallised polyester film into continuous ribbon-like filaments was treated as answering the commercial understanding of yarn, not the narrower category of badla. The rate entry for badla was not applied, and the product was treated as man-made yarn taxable at 1.5 per cent rather than 3 per cent. The Court also stated that no estoppel operates against an assessee on tax classification merely because of a description in the registration application, and that where two classifications are possible, the interpretation favourable to the assessee prevails when rate liability is in issue.

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Issues: Whether metallic yarn manufactured and sold by the assessee was classifiable as "man-made yarn" taxable at 1.5 per cent or as "badla" taxable at 3 per cent, and whether the assessee was precluded from disputing the classification because of the description used in the registration application.

Analysis: Metallic yarn was examined as a product made by slitting metallised polyester film into continuous ribbon-like filaments, and the Court held that such material answered the commercial understanding of yarn rather than the limited article described as badla in the rate notification. The reliance placed on the decision concerning woollen carpet kati was distinguished because that commodity consisted of short unspun fibre pieces and lacked the characteristics of the metallic yarn in issue. The Court also held that no estoppel operated against the assessee in matters of tax classification, and that the Revenue, seeking reassessment and a higher rate, bore the burden of proving that the goods fell exclusively within the entry for badla. Even if two classifications were arguable, the interpretation favourable to the assessee had to be adopted where rate liability was in issue.

Conclusion: Metallic yarn was held to fall within "man-made yarn" and to be taxable only at 1.5 per cent, not at 3 per cent as badla. The assessee's objection to the reassessment was accepted and the Revenue's classification was rejected.

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