SAKTHI TEXTILES LIMITED Vs. STATE OF TAMIL NADU

JUDGEMENT

(1.) THE assessees are dealers in cotton yarn. In respect of the assessment year 1970-71, on the ground that certain turnover was not assessed at the final assessment, the Deputy Commercial Tax Officer, who assessed the assessees originally, took proceedings for revising the assessment. A turnover of Rs. 37, 000 reported to be the proceeds of sale of cone winding machines fitted with electrical motors was found to have escaped assessment and accordingly, the assessing officer proposed to include this turnover in the taxable turnover. THE assessees objected to the same on the ground that they were not dealers in cone winding machines fitted with electrical motors and that, therefore, the said sale proceeds were not liable to be included in the taxable turnover. THEy also contended that even if they were to be included in the taxable turnover, they are not "electrical goods" falling under item 41 of the First Schedule to the Act and that, therefore, they are liable to be taxed at multi-point at 3 per cent. as any other goods. THE assessing officer rejected both these contentions and held that the sale proceeds of cone winding machines fitted with electrical motors would fall under item 41 of the First Schedule and are liable to be taxed at 9 per cent. and, accordingly, he included this turnover in the assessment. THE assessees took up the matter in appeal to the Appellate Assistant Commissioner. THE Appellate Assistant Commissioner was of the view that the sale of cone winding machines had to be considered as a sale of capital goods and, therefore, not liable to be taxed. He also accepted the contention of the assessees that the assessees were not dealers in cone winding machines and they could not be treated as dealers on the ground that it is incidental or ancillary to their main business.

(2.) ACCORDINGLY, the Appellate Assistant Commissioner deleted the turnover of Rs. 37, 000 and allowed the appeal. The Board of Revenue took up suo motu proceedings and, after issuing the notice of hearing, held that the sale of cone winding machines is incidental to the business of the mills, and the machinery and other such like articles required for the business have to be periodically renewed and the condemned article sold. Therefore, such sales are incidental to the business. ACCORDINGLY, the Board held that the turnover in question was liable to be taxed. On the contention whether it is to be taxed at single point or multi-point, the Board held that it is goods falling under item 41 of the First Schedule liable to be taxed at 9 per cent. ACCORDINGLY, it revised the assessment, set aside the order of the Appellate Assistant Commissioner deleting the turnover and included the same in the assessable turnover. It is as against this order of the Board that this appeal has been filed.The first contention of the learned counsel for the assessees was that the assessees are carrying on business in cotton textiles and that the sale of cone winding machines could not be treated to be their business or incidental or ancillary to their main business and, hence, it was not liable to be taxed. This contention is not tenable and it is directly against the decision of the Supreme Court in State of Tamil Nadu v. Burmah Shell Co. Ltd.and the two decision of this Court that followed the Supreme Court decision, namely, State of Tamil Nadu v. Thermo Electrics and Deputy Commissioner (C.T.) v. Vijayalakshmi Mills Ltd. In State of Tamil Nadu v. Burmah Shell Co. Ltd. the assessee, Burmah Shell Co., sold certain scrap, unserviceable oil drums, rubber hoses, jerry cans rims, unserviceable pipe fittings, old furniture and advertisement materials.

(3.) THIS entry was substituted for the original entry by Madras Act 15 of 1964, which came into force on 1st September, 1964. Under the entry, as it originally stood, the word "machinery" did not find a place. Though the entry itself is rearranged, it did not make any difference on the scope of the entry itself. The contention of the learned counsel for the assessees is that, in the context in which the word "machinery" is used in entry 41, it should be understood as machinery of the same nature as electrical goods and any other machinery which could not be characterised as electrical goods would not fall within entry 41. On the other hand, the learned Additional Government Pleader relied on this word "machinery" and said, whether the machinery is run with the use of electrical power or not, if it is a machinery, it will come within item 41. The learned Additional Government Pleader in this connection also relied on the provision, as it stood originally and after its amendment introduced by Madras Act 15 of 1964. A similar question came up for consideration in the decision reported in Textool Company Limited v. State of Madras In that case, the assessee was carrying on business in the manufacture of textile machinery along with other items. In respect of the sales of textile machinery the assessee was contending that it was liable to pay at the ordinary rate of 2 per cent. as sales of general goods and that it was not liable to pay sales tax at single point on the ground that they are electrical goods.