TaxTMI 
TaxTMI 
1991 (1) TMI 404
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....Second Schedule to the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as "the State Act ") as they stood prior to 1st March, 1982, read as follows: "Cotton yarn, but not including cotton yarn waste." 3.. Broadly put, the rival submissions are the following: The learned Additional Government Pleader (Taxes) contends that to come under the above classification, the cotton yarn must be 100 per cent cotton yarn. Any blending of staple fibre or similar material, irrespective of the percentage will cease to be cotton yarn. On the other hand, the contention of Mr. C. Natarajan, learned counsel appearing for all the assessees in these cases, is that in the absence of any definition of "cotton yam" in the Sales Tax Acts, and having regard to the definitions of "yarn" and "cotton yarn" in the Cotton Textiles (Control) Orders, 1948 and 1986, "blended" yarn will still be cotton yarn provided cotton forms a major portion in the blending. 4.. In W.P. Nos. 6860 to 6863 of 1980 and 360, 361, 363, 364, 969 and 970 of 1981, writs of prohibition are prayed for by different assessees restraining the respective assessing officers from proceeding with reopening of assessment....
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....n yam. In the light of the above direction of the Central Government there was no alternative left to the manufacturers except to blend staple fibre at least 10 per cent while manufacturing cotton yarn. As a matter of fact, the definition of "yarn" under the Cotton Textiles (Control) Order, 1948, was to the effect that "yarn" means any type of yarn manufactured either wholly from cotton or partly from any other material. There cannot be two meanings for cotton yarn, one for the purpose of the Cotton Textiles (Control) Order and other for the purpose of the Central Sales Tax Act, especially in the absence of a separate definition for "cotton yarn" in the latter enactment. It is the international practice to manufacture cotton yarn wholly out of cotton as well as predominantly out of cotton blended with staple fibre. The definition of "cotton yarn" during the relevant period under the First Schedule to the Central Excises and Salt Act, 1944, also contemplated only predominance of cotton in weight in the manufacture of cotton yarn. It is the definite case of all the petitioners that they never used staple fibre beyond 10 per cent of the total fibre content of the yarn. The rest was....
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.... out the fact that the assessing officers dropped further proceedings-vide W.P. Nos. 3805 of 1981, 5425 and 5426 of 1981, 1578 and 1579 of 1981, 4075 of 1981 and 2082 of 1981. The inclusion of blended yarn under entry 18A of the First Schedule to the State Act treating it as nondeclared goods is contrary to the judgment of this Court in T.C. No. 47 of 1974 [Deputy Commissioner (CT) v. Kandasami Spinning Mills], and in any event, the restrictions contemplated under section 15 of the Central Act will apply to entry 18A of the First Schedule to the State Act. The assumption on the part of the Revenue that by classifying blended yarn as non-declared goods and thereby bringing the same under the First Schedule to the State Act, they can get over the judgment of this Court in T.C. No. 47 of 1974 [Deputy Commissioner (CT) v. Kandasami Spinning Mills] is wrong and contrary to the spirit of article 286(3) of the Constitution of India read with sections 14 and 15 of the Central Act. Therefore, notwithstanding the classification of blended yarn as non-declared goods and bringing the same under entry 18A of the First Schedule, in the light of the judgment of this Court in T.C. No. 47 of 1974 [....
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....pective of the quantum of blending, it will lose the character of cotton yarn. He also submitted that though the reasonings given by the Tribunal are not quite correct, the conclusion reached by the Tribunal is right and, therefore, no interference is called for in T.C. No. 1213 of 1980. He also submitted that a reading of the full judgment of the Andhra Pradesh High Court in T.R.C. Nos. 18, 21, 23, etc., of 1986 dated 23rd February, 1989 in State of Andhra Pradesh v. Sri Akkamamba Textiles Ltd. [1990] 79 STC 357, will support his submissions. He also placed reliance on the following judgments: India Jute Co. Ltd. v. Assistant Collector of Central Excise reported in (1988) 34 ELT 452 of the Calcutta High Court, National Fire Works Factory v. Deputy Commercial Tax Officer reported in [1973] 31 STC 132 (Mad.) and Arasappa v. Commissioner of Commercial Taxes reported in [1969] 23 STC 68 (Mys). 11.. We have considered the rival submissions. It is seen that "cotton yam" is not defined either in the Central Act or in the State Act. As pointed out by the learned counsel for the petitioner, "yarn" is defined under the Cotton Textiles (Control) Order, 1948, to mean any type of yar....
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....d the view of the Tribunal, it is necessary to point out the view taken by the Tribunal in that case. The Tribunal, in C.T.A. No. 150 of 1972, held as follows: "..........It must also be remembered that 'blended yarn' manufactured and sold by the appellants is known in the commercial circles as cotton yarn and that the prices charged are the same for yarn manufactured wholly out of the cotton and yarn manufactured out of an admixture of cotton and staple fibre. This circumstance would also point out that the goods in question have to be treated as 'cotton yarn'. There is also a certificate issued by the Superintendent of Central Excise dated 30-11-1971 to the effect in the assessment year in question the appellants had been licensed only to manufacture 'cotton yarn' and the 'cotton yarn' manufactured by the 'blended yarn' (cotton mixed with staple fibre up to 40 per cent) as well as other varieties of 'cotton yarn' manufactured by them have been cleared as 'cotton only' as per the Central Excise Rules. Under these circumstances, we hold that the 'cotton yarn' sold by the appellants must be held to be declared goods coming under item (ii-b) of section 14 and liable to be a....
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....f blended yarn and also as non-declared goods by bringing that category under the First Schedule. Because, such a change can be made only by the Parliament by introducing appropriate amendment to section 14 of the Central Sales Tax Act. 13.. We shall consider the effect of bringing "blended yarn" under the First Schedule by introducing entry 18A in the State Act at the appropriate stage. 14.. We shall now continue to consider the issue whether the "cotton yarn" manufactured by the assessees blended in small percentage with staple fibre will still be cotton yarn or not. A Division Bench of the Andhra Pradesh High Court in T.R.C. Nos. 18, 21, etc., of 1986 batch (State of Andhra Pradesh v. Sri Akkamamba Textiles Ltd. [1990] 79 STC 357), by judgment dated 23rd February, 1989, has considered an identical issue. In that decision, Jeevan Reddy, J., speaking for the Bench, held as follows: "...............The question is whether cotton yarn ceases to be cotton yarn on account of mixing of 10 per cent of non-cotton material. In this connection, it is necessary to notice that the Central Government had issued a statutory order called 'the Cotton Textiles (Control) Order, 1948'. As ....
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....uld provide cloth to the poor and provide employment to the people. In producing such cloth attention has to be given to popular tests and cloth of different varieties and standards has to be produced. This will involve use of fibres such as jari or silk. If even where a small amount of these fibres is used the cloth is to be subjected to a tax, the purpose of exemption will substantially be adversely affected. Where the quantity of fibres other than cotton is substantial and the use of it has substantially increased the value of the cloth it is difficult to call it a cotton cloth. As I held above it will in each case be a question of fact as to particular variety is a cotton cloth or not as explained above. (Para 48) ............... As I held above if the admixture of other material is small or negligible the essential description or quality of cloth is not altered. But if the material other than cotton is used to a substantial extent or in a manner so as to increase its value materially principle of apportionment will have to be followed as in my opinion Sales Tax Act is a fiscal statute and taxing provisions and exemptions have got to be strictly construed. The extent a....
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....l as that of 'muramaralu' in the English language. And, in any case, if two interpretations of a provision are possible, we think that we ought to, in such a case, apply the principle that the interpretation which favours the assessee should be preferred." A Division Bench of the Gujarat High Court, while considering a similar issue, under the Central Excise Act, has held as follows in 1980 ELT 752 (Bhor Industries Limited v. Union of India): "...............There, can we say that tiles in the manufacture of which 10 per cent of plastic material is used are 'articles made of plastics'? The court has got to bear in mind the part which plastic material in such a case plays. There is no doubt about the fact that the plastic material operates only as a binding agent and not the principal ingredient of the said tiles manufactured by the petitioners. What operated only as a binding agent cannot determine the basic character of the product. The real character of the product is determined, in a case of this type, by materials which are predominantly used therein. The only predominant material which is used by the petitioners in the said tiles is lime-stone. It forms 45 per cent of th....
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....me Court observed as follows: "The meaning or the intention of clause (3) of article 286 of the Constitution of India is not to destroy all charging sections in the Sales Tax Acts of the States which are discrepant with section 15(a) of the Central Sales Tax Act, but to modify them in accordance therewith. The law of the State is declared to be subject to the restrictions and conditions contained in the law made by Parliament and the rate in the State Act would pro tanto stand modified. " In [1991] 81 STC 113; AIR 1989 SC 2227 (Aphali Pharmaceuticals Ltd. v. State of Maharashtra), the Supreme Court held as follows: "A Schedule in an Act of Parliament is a mere question of drafting. It is the legislative intent that is material. An explanation to the Schedule amounts to an explanation in the Act itself. As we read in Halsbury's Laws of England, Third Edition, Vol. 36, para 551: 'To simplify the presentation of statutes, it is the practice for their subject-matter to be divided, where appropriate, between sections and Schedules, the former setting out matters of principle, and introducing the latter, and-the latter containing all matters of detail. This is purely a ma....
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....twithstanding the blending of staple fibre up to 16 2/3 per cent (with which quantity alone we are concerned in this case) will still be "cotton yarn" within the meaning of section 14(ii-b) of the Central Sales Tax Act and, therefore, will be one of the items of goods declared by the Parliament as goods of special importance for the purpose of article 286(3) of the Constitution of India and, therefore, all restrictions and conditions in regard to levy of tax on sale or purchase of such declared goods, namely, cotton yarn, will be governed by section 15 of the Central Sales Tax Act. 16.. Regarding entry 18A treating cotton yarn blended with staple fibre up to 16 2/3 per cent as a separate category of blended yarn and also of nondeclared goods, we are of the view that that will not take away the character of cotton yarn as declared goods and the consequences thereof. As pointed out earlier, merely declaring that cotton yarn blended with non-cellulosic fibre not exceeding 16 2/3 per cent by weight to that of cotton yarn will be treated as non-declared goods under entry 18A will be of no consequence unless such an amendment is made by the Parliament by appropriately amending section....
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....ds, the State cannot by itself unilaterally treat such declared goods as non-declared goods. We accordingly answer the further question. 17.. Now, about the decisions cited by the learned Additional Government Pleader, we hold that they are not at all helpful. In (1988) 34 ELT 452 (India Jute Co. Ltd. v. Assistant Collector of Central Excise), a learned single Judge of the Calcutta High Court, while considering item 18E of the Central Excise Tariff Act, has taken the view that the "blended cotton yarn" cannot be considered as "cotton yarn". With respect, we are not able to agree with this view. In [19731 31 STC 132 (National Fire Works Factory v. Deputy Commercial Tax Officer), a Division Bench of this Court held that matches will not include coloured matches or star matches for the reason that matches, popularly known, will mean only "safety matches". In [1969] 23 STC 68 (Arasappa v. Commissioner of Commercial Taxes), a Division Bench of the Mysore High Court considered entry 8A of the Fifth Schedule to the Mysore Sales Tax Act, 1957. The learned Judges were considering the import of the word "pure silk" in that entry. The learned Judges held that "pure silk" will not include a....