TaxTMI 
TaxTMI 
1985 (11) TMI 216
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.... the general rate of 7 per cent for unclassified goods?" The facts involved in all these references are common except the assessment years. The assessee is the same person and so is the commodity involved. The assessment years are 1968-69 (12-2-1968 to 22-2-1968), 1969-70, 1970-71 and 1971-72. Briefly recalled, the relevant facts are that M/s. Sakariya Textiles (hereinafter referred to as the dealer or assessee) is a manufacturer of cloth and laces at Sumerpur (District Pali). The lace is locally known as gope or pachrangi dori. In the return and the trading account filed by the assessee for the year 1968-69, this gope or pachrangi dori was described as lace. Lace was an exempted article not exigible to tax under the Rajasthan Sales Tax Act, 1954 (hereinafter to be referred as "the Act"), by virtue of Notification No. F. 5 (48)E & T/57 dated 1st July, 1958, and the entry at serial number 18 of the Schedule appended to the Act. The Assistant Commercial Taxes Officer (Anti-evasion), Pali, surveyed the business premises of the assessee at Pali on 2nd December, 1971, and formed the opinion that the commodity manufactured and sold under the description of lace was nothing but pachrangi....
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....sment periods. They were further of the opinion that tax could not be levied at the residuary rate. In the result, the revisions were partly allowed and the matter was sent back to the assessing authority for the determination of the tax according to law as applicable to the relevant period of assessment. The department was not satisfied with the decision taken by the Board. An application was moved under section 15(1) of the Act and the Board was requested to make references as the matter involved is a question of law as to whether pachrangi dori should or should not be taken to be cotton yarn. The learned Members of the Board were not inclined to make the references in view of the pronouncements made by this Court in Union of India v. Maharaja Umed Mills Limited, Pali, 1973 Tax LR 2488. But the assessee also contended that the commodity involved was cotton fabric. The Board, after hearing the parties, thought it proper to make the references for an authoritative pronouncement on the matter by this Court. We have heard Mr. K.C. Bhandari, learned counsel for the revenue, and Mr. R. Mehta, learned counsel for the assessee. We have also gone through various orders passed by the Comm....
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....ld be levied at the rate of 7 per cent. The contention of Mr. Bhandari, the learned counsel for the revenue, is that pachrangi dori should not be treated and taken as cotton fabrics or cotton yarn but should be taken to be a commodity altogether of new commercial connotation susceptible to tax at the residuary rate of 7 per cent. It was argued that, no doubt, pachrangi dori is made from cotton yarn, but the cotton yarn is consumed by the new product (pachrangi dori). As such, the cotton yarn loses its identity and pachrangi dori becomes altogether a new commercial product. Reliance in support of the contention was placed on Mohta Trading Company v. Commissioner of Sales Tax [1976] 38 STC II, M.M. Pillai v. State of Tamil Nadu [1977] 39 STC 359 and Deputy Commissioner v. A.K.K. Sons [1976] 37 STC 227. Combating the contentions of Mr. Bhandari, it was argued by Mr. Mehta, the learned counsel for the assessee, that pachrangi dori is nothing but a bunch of some cotton threads of five colours. The word "fabrics " is of wide importance and includes a cord within its ambit. Pachrangi dori should, therefore, be taken to be the cotton fabrics. Alternatively, it was argued that pachrangi d....
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.... decisions relied upon by Mr. Bhandari gave no assistance to decide the question in controversy before us. We may examine the controversial question step by step. Cotton thread is made from cotton yarn. In order to make cotton thread, few cotton yarns are braided and intertwined but the yarn does not lose its identity. Cotton thread has been, therefore, accepted as cotton yarn. In Srinivasa Distributing Agencies v. State of Orissa [1981] 48 STC 453 the learned judges of the Orissa High Court treated cotton thread as cotton yarn under the State Sales Tax Act. The Rajasthan Board of Revenue, in Mali Ram Madho Lal v. State of Rajasthan 73 RRD 601 was also of the view that thread made out of cotton yarn by the process of twisting, irrespective of the counts to which it is twisted, still, remains cotton yarn. The dyeing or colouring of cotton yarn does not change its character. Cotton yarn remains cotton yarn despite the process of dyeing and colouring. In Deputy Commissioner of Sales Tax (Law) v. Sadasivan [1978] 42 STC 201 the Kerala High Court took the view that the process of colouring and dyeing the cotton yarn does not bring out any new commercial commodity and the cotton yarn r....
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....ould cease to be a yarn and should be considered as 'cotton twist'. " The multiple-fold yarn was held to be species of the general category of cotton yarn. It would be useful to read item 18-A of the aforesaid Schedule. The explanation occurring in this entry renders considerable help in coming to a conclusion whether cotton yarn twist or thread should be taken to be cotton yarn or not? The explanation reads as under: "(1) 'Cotton yarn' shall include cotton twist and thread. (2) Cotton yarn, twist or thread, all sorts, whether sized or unsized, in all forms including skeins, hanks, cops, cones, bobbins, pirns, spools, reels, cheeses, balls or on warp beams shall be deemed to be included under this item." The pachrangi dori in question is a very thin-even thinner than a thin string. It is a bunch of some cotton threads of five colours which are intertwined and twisted. The mere act of twisting, braiding, colouring, dyeing, or bunching of cotton yarn into a single cord does not bring into existence a new commercial product. The process of twisting, etc., is, no doubt, there, but the cord still remains a yarn and cannot be treated as an unspecified, distinct and separate product ....