K.C. PAPPU Vs. STATE OF KERALA

JUDGEMENT

(1.) The order of the court was pronounced by Subramonian Poti, Acting C. J. - The main question arising for decision in this revision is whether sewing thread is cotton yarn. During the relevant period cotton yarn was taxable only at the point of first sale in the State by a dealer who is liable to tax under S.5. We are concerned in this Tax Revision Case with an assessment order of the year 1973-74 during which year the revision petitioner firm was carrying on the business of sale of sewing machines, cotton thread etc. The firm was assessed to Sales Tax on the turnover of sewing thread, silk yarn, lace cloth and woven lace. It is the taxation of these items that is under dispute in this revision. The assessing authority, the Appellate Commissioner and the tribunal have all held that the sales of these items are liable to tax. That is challenged in this revision.

(2.) As indicated earlier sewing thread was contended to be cotton yarn so much so that according to the assessee he is not liable to tax on the sales of sewing thread as the sale was at the second point in the State and not the first and the sale at the first point has been taxed. If the item which was sold is not shown to be cotton yarn naturally it will be liable to tax at every point of sale and therefore the Sales Tax authorities would be right in assessing tax on the turnover of sewing thread. Item 4 (ii) in Schedule II of the General Sales Tax Act is "Cotton yarn, other than handspun yarn, but not including cotton yarn waste". The rate of tax at the point of first sale in the year 1972-73 was 1 percent and the general rate of tax during that year was 31/2% Cotton yarn, according to Revision Petitioner, includes not only spun yarn as such but also yarn converted into thread or into other forms, for, according to the petitioner the goods even then essentially retain their character as cotton yarn and therefore would fall within item 4 (ii) of Schedule II.

(3.) Cotton yarn is no doubt used for the purpose of manufacturing sewing thread. Sewing thread is sold for purposes different from that for which cotton yarn is sold. Cotton yarn is consumed for the manufacture of textiles but sewing thread is not one of the components in the manufacture of textiles.