STATE OF TAMIL NADU Vs. INDIAN EYELETS INDUSTRIES

JUDGEMENT

(1.) THE question that arises in these tax cases is which an adhesive sold by the assessee under the name Fiksol falls under the entry under 138 of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, covering "dyes and chemicals" taxable at 8 per cent as contended by the revenue or at 4 per cent multi-point as contended by the assessee. In this case the assessee has sold the commodity called Fiksol-S. 69 and it claimed that this is chargeable only at multi-point. But the assessing authority, proceeding on the basis of a clarification issued by the Commissioner of Commercial Taxes in his letter L. Dis. A-2/3220/80 dated 12th March, 1981, clarifying that synthetic adhesives, i.e., synthetic rubber solutions such as synotex are liable to tax at 8 per cent at the point of first sale under item 138 of the First Schedule with effect from 25th July, 1977, held that Fiksol-S. 69 being also a rubber based synthetic adhesive attracts liability to tax at 8 per cent under item 138 of the First Schedule and rejected the contention of the assessee that Fiksol-S. 69 is liable to tax at 4 per cent multi-point.

(2.) THE assessee, aggrieved by the order of the assessing authority, went before the appellate authority. THE appellate authority took the view that since the ingredients which went to make Fiksol-S. 69 are all chemicals, it should be taken to fall within the expression "dyes and chemicals" under item 138 of the First Schedule. THE appellate authority relied on its own earlier decision in another case that vulcanising solution will come within the purview of "dyes and chemicals" under item 138 of the First Schedule.

(3.) IT was held in that case that since there was no chemical change by the use of the adhesive, the adhesives in that case could not be treated as chemicals. In State of Gujarat v. Shah Bhagwanji Manekchand the Gujarat High Court has also taken the same view. In that case the court held that for an article to be qualified as "chemicals" within the meaning of entry 9 of Schedule II, Part A, to the Gujarat Sales Tax Act, 1969, it must be an intermediary chemical product which can be utilised as such for producing other finished products and that the word "chemicals" should normally be understood as a chemical which could be used as an intermediary chemical product and not as an "end-product". We find that the expression "dyes and chemicals" used in item 138 of the First Schedule is practically identical to the language considered by the Gujarat High Court. Here the commodity which is sold as an adhesive is not an intermediary product producing a chemical effect, but is an end-product which is to be used only as an adhesive and the use of which does not produce any chemical effect or bring about any chemical change. We have, therefore, to hold that the Tribunal has come to the right conclusion in these cases. The tax cases are therefore dismissed.