COMMONWEALTH TRUST INDIA LTD Vs. STATE OF KERALA

JUDGEMENT

(1.) The assessee is the revision petitioner in each of these two cases. For the assessment years 1974-'75 and 1975-'76, the assessee contended that the turnover representing the sale proceeds of woollen carpets sold by it to Air India was exempt from tax under S.9 of the Kerala General Sales Tax Act, 1963 (the "Act") read with Item.7 of the Third Schedule to the Act. This contention was rejected by the assessing authority as well as by the appellate authorities. The petitioner made "wool jute based loop pile carpets" specially for the purpose of Air India, Indian Airlines and such other customers. These carpets are fireproof because of the prevolcanised latex mixed with Hydraulic Alumina coating at the base. The carpets admittedly consist of 60 per cent of wool in addition to jute and other material. The petitioner's contention that it was exempt under the relevant entry as woollen fabric was rejected for the reason that the coating of prevolcanised latex mixed with Hydraulic Alumina changed the character of the commodity so as to take it out of the relevant entry.

(2.) S.9 exempts from tax goods specified in the Third Schedule to the Act. Entry.7 of the Third Schedule reads:

(3.) It is not disputed by the revenue that the carpet is manufactured in the correct proportion of wool and other materials so as not to fall outside the ambit of the entry. The entry prescribes a minimum mix of 40 per cent of wool by weight, whereas admittedly the carpet is made of 60 percent wool by weight. The question then is whether by reason of the coating with the solution and the slicing of the carpet, what was originally manufactured as a woollen fabric ceased to be the same commodity. It does rot seem to have been appreciated that the undisputed facts do not indicate that the carpet as originally manufactured did not change its identity as carpet or as woollen fabric by reason of the base coating or cutting. The identity remains the same, notwithstanding the coating or the slicing of the article into sizes. There is no evidence that what was manufactured as woollen carpet was sold as a different commodity by reason of the coating and the slicing. Functionally the carpet, as originally manufactured, retained its character. It continued to be sold, understood and used as a carpet. In common parlance it remained a woollen carpet notwithstanding the processing by means of coating with the solution or cutting to sizes. Significantly, the entry itself speaks of pieces or strips.