STATE OF TAMIL NADU Vs. VENUS TRADING COMPANY

JUDGEMENT

(1.) In this revision petition filed under section 38 of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter referred to as the Act), at the instance of the State of Tamil Nadu, the question that arises for consideration is whether the sales turnover of Rs. 41, 189.80 relating to the sales of stove wicks is not exigible to tax under section 8 of the Act for the assessment year 1975-76. The assessee (respondent herein) is a dealer in pressure cooker, glassware, flask, etc. For the assessment year 1975-76, a total and taxable turnover of Rs. 10, 05, 986.42 and Rs. 4, 19, 635.47 respectively was declared by the assessee. On a verification of the accounts of the assessee, the assessing authority found that the total turnover was Rs. 9, 72, 067.97 inclusive of a turnover of Rs. 41, 189.80 referable to sales of cotton wicks used in stoves. Certain other defects were also noticed in the accounts and the assessing authority issued a notice proposing to determine the total and taxable turnovers to the best of its judgment at Rs. 9, 80, 400.67 and Rs. 4, 69, 217.97. In the objection letter dated 24th December, 1976, amongst others, the assessee claimed that according to the amended entry in item 4 under the Third Schedule cotton fabrics are exempt from tax and stove wicks being braided cotton cord would be exempt from tax. The assessing authority noticed that item 4 under the Third Schedule of the Act had been amended with effect from 1st April, 1974, and found that the assessee has not proved that the stove wicks would fall under "cotton fabrics" as defined in item 19 of the Central Excises & Salt Act, 1944, and therefore, the turnover relating to the sale of stove wicks should be included in the taxable turnover. On appeal by the assessee to the Appellate Assistant Commissioner, he took the view that braided cords and/or stove wicks are not found in item 19, 21 or 22 of the First Schedule to the Central Excises & Salt Act, 1944, and, therefore, the claim of the assessee that the stove wicks should be treated as braided cords falling under "cotton fabrics" cannot be countenanced and the claim for exemption under section 8 of the Act was therefore not in order. In that view, the inclusion of the sales turnover of Rs. 41, 189.80 relating to sale of stove wicks in the assessable turnover of the assessee was upheld. Not satisfied with this, the assessee preferred an appeal before the Sales Tax Appellate Tribunal, Madras. The Tribunal, however, differed from the conclusions reached in this regard by the assessing authority as well as the appellate authority and found that the stove wicks made of cotton would fall within "cotton fabrics" as described in item 19 of the Central Excises & Salt Act, 1944. Consequently, the inclusion of a turnover of Rs. 41, 189.80 in the taxable turnover of the assessee was deleted. It is the correctness of this order of the Tribunal that is challenged by the State in this revision petition.

(2.) The learned Additional Government Pleader contended that the Tribunal was in error in holding that cotton wicks of the kind sold by the assessee will fall under entry 4 of the Third Schedule of the Act as neither in common parlance nor in commercial parlance, cotton wicks can be considered as "fabrics". On the other hand, the learned Counsel for the assessee submitted that the stove wicks sold by the assessee are made of cotton thread by bonding and braiding the threads and the wick thus fabricated out of cotton would appropriately fall under the head "cotton fabrics" in item 19 of the First Schedule to the Central Excises & Salt Act, 1944. Reliance in support of this was placed by the learned Counsel for the assessee on several decisions which we shall notice later in the course of this judgment.

(3.) In order to appreciate the rival contentions, it would be necessary to briefly notice the relevant provisions of the Act as well as the Central Excises & Salt Act, 1944. Under section 8 of the Act, subject to such restrictions and conditions as may be prescribed, a dealer who deals in the goods specified in the Third Schedule shall not be liable to pay any tax under the Act in respect of such goods. Item 4 of the Third Schedule as it stood at the time relevant for the assessment year in question read as under: "Cotton fabrics, woollen fabrics, and rayon or artificial silk fabrics, as defined in items 19, 21 and 22 respectively of the First Schedule to the Central Excises & Salt Act, 1944 (Central Act I of 1944)." * Items 21 and 22 of the First Schedule to the Central Excises & Salt Act, 1944, relate to woollen fabrics and man-made fabrics and have no application to this case. Item 19 as it stood at the relevant time alone is relevant and it runs as under:-