STATE OF KERALA Vs. S.S. TEXTILES, BALARAMAPURAM

JUDGEMENT

(1.) THE Revenue has filed the above revisions, raising an issue of classification of one commodity dealt with by the assessee being "cotton yarn in hanks". The assessee/respondent is a dealer in Cotton Yarn, Readymade and Textiles. The assessments completed for the years 2006 -07 and 2007 -08 were challenged unsuccessfully by the assessee before the first appellate authority. On second appeal, the Appellate Tribunal having accepted the classification adopted by the assessee, found the product to be coming within the exempted goods enumerated in the First Schedule. The issue of classification arises with respect to the "cotton yarn" dealt with by the assessee. The relevant entries, being entry 14 of First Schedule and entry 143(6) of the Third Schedule of the Kerala Value Added Tax Act (hereinafter referred to as "the Act"), have been extracted in the Tribunal's order. Entry 14 of the First Schedule contains the description "cotton and silk yarn in hank" and does not contain any HSN Code. Entry 143 of the Third Schedule deals with "yarn of all kinds other than cotton and silk yarn in hank and sewing thread", while clause (6) thereof specifically deals with cotton yarn, (a) 'containing 85% or more by weight of cotton' and (b) 'containing less than 85% by weight of cotton'. While the First Schedule enumerates the exempted goods, the Third Schedule levies tax at 4%.

(2.) THE assessee filed returns, contending that the commodity sold by them falls under the First Schedule and thus claimed the same to be exempted from tax. The assessee contended before the assessing officer as also the appellate authorities that the yarn in hanks were purchased by them and sold as such to handloom weavers for being used in weaving. The assessing officer, however, found that entry 14 of the First Schedule refers to only cotton and silk yarn in hank form, and sub -entries (6) and (7) of entry 143 of Third Schedule refers to cotton and silk yarn containing less than and more than 85% by weight of cotton and held the commodity of the assessee to be covered under entry 143(6) of the Third Schedule. The purchase bill produced by the dealer was said to contain the HSN Code - "5205.11" and the entry under 143(6)(a) also was noticed as containing HSN Code "5205" and on that premise the commodity was classified under Schedule -III and tax demanded at the rate of 4%.

(3.) THE learned Government Pleader would take us to the Rules of Interpretation of Schedules and contend that since the bill shows the HSN Code "5205.11" and entry 143(6)(a) of the Third Schedule also shows the HSN Code "5205", the commodity can only be held to be falling under entry 143(6)((a) of Third Schedule and taxable at 4%. The learned Government Pleader also would urge before us that but for a single invoice nothing was produced by the assessee to support the claim of the assessee and that the particular commodity dealt with cannot be on that solitary evidence be said to come within the exempted goods.