TaxTMI 
TaxTMI 
2010 (4) TMI 854
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....by the Commissioner of Commercial Tax (for short COCT), Chennai. The COCT, by the impugned communication, dated 18-4-2006 issued a clarification No. 66/2006 in respect of the petitioner holding that the "Hook and Loop Tape Fasteners" otherwise called "Velcro Fastener" is an article of narrow woven fabrics, falling under excise chapter heading No. 58.07. It was clarified that it was taxable at 12% under residuary entry 40, Part D, First Schedule to the TNGST Act, 1959 and also the earlier clarification dated 31-10-2005 was reiterated. If it is imported it is taxable at 20% under Entry 9 of Eleventh Schedule to the TNGST Act. The said writ petition was admitted on 26-4-2006. Pending the writ petition, an interim stay was granted. 4. Thereafter, W.P. Nos. 19261 and 19262 of 2006 came to be filed by M/s. Aaron India, seeking to challenge the orders, dated 24-5-2006 and 31-3-2006. In the first writ petition, the impugned order was pursuant to the communication sent by the CTO, Ayanavaram Assessment Circle, Chennai stating that the dispute regarding is disallowance of exemption on sales of Hook and Loop Fasteners to a sum of Rs. 32,04,104/- and assessed to tax at 12% and the petiti....
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....mercial Tax Officer, Bethanayakanpet North Assessment Circle, dated 16-6-2008 in CST.95349/2003-04 and TNGST 1140932/2003-04. In both the cases, the assessment orders were under challenge in respect of the same subject matter. In those two writ petitions, notices were ordered to the respondents and an interim stay was granted. 8. On behalf of the DCTO, Pethanayakanpet North, a common counter affidavit, dated 9-11-2009 was filed. 9. Heard the arguments of Mr. N. Prasad and Mr. K. Balasubramanian, learned counsel for the petitioners and Mr. Haza Nazruddin, Special Government Pleader (Taxes) assisted by Mr. Radhakrishnan and Mr. J. Ganesan, learned Government Advocates for Tax. 10. According to the petitioners, the entire issue arose out of the order passed by the COCT under Section 28A, dated 18-4-2006. The operative portion of the order reads as follows : "From the perusal of the sample furnished by them, it is seen that it is commercially called as "Velcro tape". It is a pair of nylon tapes having adhesive character by a machanism of tiny hooked fibres on one surface that fasten easily to other surface. This paired device is used in clothing, carpentry etc. In ot....
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....N 8 Description of goods (Effective from 27-3-2002) PART-A The following goods produced or manufactured in India as described in column (3) against the relevant heading in column (1) of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (Central Act 58 of 1957) ["1 to 7 omitted"] 8.(i) Woven pile fabrics and chenille fabrics of wool, cotton or manmade fibres as described against the heading '58.01'. (ii) Terry towelling and similar woven terry fabrics and tufted textile fabrics as described against the heading '58.02'. (iii) Guaze as described against the heading '58.03'. (iv) Lace in the piece in strips on in motifs of cotton or man made fibres as described against the heading '58.04'. (v) Embroidery in the piece, in strips or in motifs as described against the heading '58.05'. (vi) Narrow woven fabrics as described against the heading '58.06'." 12. Section 8 of the TNGST Act provides for a general exemption from Tax which reads as follows : Section 8. Exemption from tax.- Subject to such restrictions and conditions as may be prescribed, a dealer who deals in the goods specified in the Third Sche....
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....uram, clarifying that hook and loop tape fastener fell under chapter 58.06 to the schedule to the Additional Duties of Excise Act. (d) A copy of the proceeding dated 15-7-2000 of the Additional Commissioner (CT) Calcutta, clarifying that hook and loop tape fastener fell under chapter 58.06 to the schedule to the Additional Duties of Excise Act. (e) A copy of the order of the Sales Tax Appellate Tribunal, U.P. Lucknow, in A.P. No. 13 of 1991 dated 21-1-1992 holding that hook and loop tape fastener fell under chapter 58.01 (presently 58.06) of the schedule to the Additional Duties of Excise Act. 16. It was also brought to the notice of the COCT that the Government of India by a Notification No. 76/05, dated 25-7-2005 imposed anti-dumping duty on Hook and Loop Tape Fasteners, treating it as a narrow woven fasteners falling under Chapter 58.06. It is also claimed that the Ministry of Industries, Government of India certified that Hook and Loop Tape Fasteners falling under Chapter 58.06. However, in the impugned clarification, the COCT clarified that Hook and Loop Tape Fasteners falling under 58.07. 5807 reads as follows : "Labels, badges and similar articles of texti....
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.... a non application of mind, arbitrary and violative of Article 14 of the Constitution. 19. In fact, the very same department has been accepting vide its earlier circular referring to that the commodity in question does not attract any tax under TNGST Act. The first respondent's finding in the impugned clarification is that the Hook and Loop Tape Fasteners, which was Velcro, was commercially different from narrow woven fasteners. This conclusion was drawn applying an incorrect test user. It has always been held that the user test is not conclusive for the purpose of classification. The directive issued by the Government of West Bengal, dated 15-7-2005 in respect of the very same hook and loop tape fastener is produced and it reads as follows : "With reference to above, this is inform you that hook tapes and loop tapes, known as hook and loop tape fasteners and also as Velcro, made from nylon, are nothing but woven fabrics of nylon. Therefore, such hook tapes and loop tapes, manufactured or made in India, are covered by the description of goods, "Textile fabrics made wholly or partly of cotton, rayon, artificial silk or wool manufactured or made in India, other than those spec....
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....s namely, the Appellate Assistant Commissioner, that would be a mere exercise in futility when a superior officer namely, the Commissioner, has already passed a well considered order in the exercise of his statutory jurisdiction under sub-section (1) of Section 42-B of the Act holding that 21 varieties of the compressed woollen felt manufactured by the appellants are not eligible for exemption under Entry 6 of Schedule I of the Act. Further Section 38(3) of the Act requires that a substantial portion of the tax has to be deposited before an appeal or revision can be filed. In such circumstances we consider that the High Court ought to have considered and pronounced upon the merits of the contentions raised by the parties and the summary dismissal of the writ petition was not justified. In such a situation, although we would have, ordinarily, set aside the judgment of the High Court and remitted the case to that court for fresh disposal, we consider that in the present case it would be in the interests of both sides to have the matter finally decided by this Court at the present stage itself especially since we have had the benefit of elaborate and learned arguments addressed by the....
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....he State, and that in respect of these fabrics the State cannot levy sales tax. It is a fundamental canon of law that whilst it is possible for both the Centre and the State to interpret upon and explain certain words or expressions used in taxing statutes amongst others, a certain uniformity should prevail in order to avert inconvenience and harassment resulting to the persons affected by such an interpretation or ruling. Article 261 of the Constitution of India is a pointer to this effect and provides that full faith and credit shall be given throughout the territory of India to public acts of the Union and of every State. It cannot be disputed seriously that the opinions and the decisions taken by the Government of India under the Indian Tariff Act and the excise Acts are such public acts. It is also significant to note that the Additional Duties of Excise (Goods of Special Importance) Act was passed after a deep consideration of the mutual interests and benefits the Centre and the States should and ought to derive by such imposition. This is seen from the Finance Commission's Report preceding the passing of the Additional Duties of Excise (Goods of Special Importance) Act and t....
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.... as follows : "49. Under the three lists of the Seventh Schedule to the Indian Constitution a taxation entry in a legislative list may be with respect to an object or an event or may be with respect to both. Article 246 makes it clear that the exclusive powers conferred on Parliament or the States to legislate on a particular matter includes the power to legislate with respect to that matter. Hence, where the entry describes an object of tax, all taxable events pertaining to the object are within that field of legislation unless the event is specifically provided for elsewhere under a different legislative head. Where there is the possibility of legislative overlap, courts have resolved the issue according to settled principles of construction of entries in the legislative lists." ....... 67. However, while widening the scope of Entry 54 of List II, the powers of the States to levy such tax are subjected to a corresponding restriction as a consequence of the constitutional curbs imposed on sales tax under Article 286 read with Sections 14 and 15 of the Central Sales Tax Act, 1956 and the ADE Act, 1957. The tax leviable by virtue of sub-clause (a) of clause (29-A) of Ar....
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....ch duty. About the same time, the Rajasthan Taxation Laws (Amendment) Act, 1973 deleted item 18 in the Schedule to the Rajasthan Sales Tax Act with effect from March 5, 1973. It is evident, therefore, that a dealer was entitled to exemption from sales tax up to March 4, 1973 without the requirement of payment of additional excise duty. The conclusion is inescapable that even if the appellant did not pay additional excise duty, he was exempt from sales tax on the turnover of rayon tyre cord fabric for the assessment years under consideration." 28. In the present case, it is not the stand of the State that they are taxing the specified commodity, i.e. Hook and Loop Tape Fasteners. It is the clarification issued by the COCT bringing it under a different head in order to levy tax without relying upon the nature of goods and the entry under which it has been made under ADE Act, 1957. 29. As to what is a Narrow Fabric and Hook and Loop Tape Fasteners, the learned counsel referred to the publication of the first petitioner company regarding the description of Narrow Fabric and Hook and Loop Tape Fasteners, which reads as follows : "1. What is a Narrow Fabric? Narrow fab....
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.... so wondrous is the variety of fabrics manufactured from materials hitherto unknown or unthought of and so many are the new techniques invented for making fabric out of yarn that it would be most unwise to confine the weaving process to the warp and woof pattern. Whatever be the mode of weaving employed, woven fabric would be 'textiles'. What is necessary is no more than weaving of yarn and weaving would mean binding or putting together by some process so as to form a fabric. Moreover a textile need not be of any particular size or strength or weight. It may be in small pieces or in big rolls: it may be weak or strong, light or heavy, bleached or dyed, according to the requirement of the purchaser. The use to which it may be put is also immaterial and does not bear in its character as a textile. It may be used for making wearing apparel, or it may be used as a covering or bedsheet or it may be used as tapestry or upholstery or as duster for cleaning or as towel for drying the body. A textile may have diverse uses and it is not the use which determines its character as textile. It is, therefore, no argument against the assessee that 'dryer felts' are used only as absorbents of moist....
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....ngineering and Locomotive Co. Ltd. reported in (1997) 8 SCC 730 = AIR 1998 SC 287 = 1997 (96) E.L.T. 209 (S.C.) and contend that the High Court in exercise of its jurisdiction cannot give guidelines to the Assistant Collector about the manner and mode in which assessment should be made and the authorities are entitled to assess as they think fit and the assessee must avail the statutory remedy. 34. He also placed reliance upon the judgment of the Supreme Court in Tin Plate Co. of India Ltd. v. State of Bihar reported in (1998) 8 SCC 272 for the very same purpose of rejecting the case in view of alternative remedy. In case, the writ petitions are to be dismissed on that ground, then no opinion need to be expressed as to how the authorities should decide the matter. 35. He also relied upon the judgment of the Supreme Court in Punjab National Bank v. O.C. Krishnan reported in (2001) 6 SCC 569 and also Titaghur Paper Mills Co. Ltd. v. State of Orissa reported in (1983) 2 SCC 433 for the very same purpose. 36. The learned counsel also placed reliance upon the judgment of the Kerala High Court in Kerala Textile & Garments Dealers Welfare Association and another v. State....
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....ation, it is mandatory for the COCT to write a speaking order. After referring to the relevant materials placed by the assessee, the COCT simply rejected the stand of the dealers and held that the entry 58.06 will not apply and the materials produced are not satisfactory. It cannot be said that the dealers have not provided legally sustainable materials. On the other hand, in the absence of any clear definition, the definition of the State enactments on the clarification issued therein also will have to be taken in account. In the present case, it was clearly demonstrated that the product in question is a narrow woven fabric. Merely because it is described differently, it cannot be taken out of purview of the entry 58.06 under the appendix to the ADE Act. The attempt made by the Commissioner to bring it in some other head, i.e. 58.07 does not stand to reason as it is neither badge nor label nor similar article of textile materials in the piece, in strips or cut to shape or size. It is a strange interpretation arrived at by the Commissioner only for the purpose of taxing the petitioners/dealers. It goes against the earlier understanding of the very same Commissioner covered by the c....