SHAKTI LACE FACTORY Vs. COMMISSIONER OF SALES TAX

JUDGEMENT

(1.) By way of this revision the assessee challenges the correctness of the view taken by the Sales Tax Tribunal, Allahabad, and claims that the Tribunal having come to the conclusion that the case of assessee was covered under notification issued under section 4 of the U. P. Sales Tax Act, committed an error in not declaring the assessee non-taxable on the turnover of cotton labels, only, because in the case of the assessee for earlier year it had been held liable to pay tax under Notification No. 333 dated 15th November, 1971. Circumstances in which the controversy has arisen appear to be that in the assessment year 1972-73 the assessing authority treated cotton labels manufactured by the assessee as unclassified item and imposed tax on it. This view did not appeal to this Court and in Shakti Lace factory v. Commissioner of Sales Tax 1980 ATJ 259 it was held that cotton labels, etc. , manufactured by the assessee was covered by Notification No. 333 dated 15th November, 1971, and was taxable as tapes and laces. In the year in dispute the assessee claimed further that although cotton labels manufactured by it may be covered by tapes and laces yet it was also cotton fabric and as cotton fabric was exempt from any tax under section 4 of the U. P. Sales Tax Act the assessee should be declared non-taxable. This view did not find favour with the assessing authority but the Assistant Commissioner (Judicial), Sales Tax, relying on the observation made in the case mentioned above held it to be cotton fabric. The Tribunal did not agree with the appellate authority and allowed the appeal of the Commissioner of Sales Tax. While setting aside the appellate order the Tribunal did not set aside the finding that cotton labels manufactured by assessee was cotton fabric rather appeared to have agreed with the learned counsel for the assessee yet allowed the appeal of the Commissioner because accepting the contention of the assessee would have resulted in invalidating Notification No. 333 dated 15th November, 1971. In taking this view the Tribunal obviously committed an error of law. The claim of the assessee was not that the notification was invalid or ultra vires but that cotton labels were covered by two notifications, one of levying tax and other granting exemption. And according to the assessee the notification which should have been applied was notification granting exemption. This did not involve any question of invalidity or ultra vires of notification nor could the assessee be refused relief only because in the case of the assessee for earlier year these items were held to be covered as tapes and laces in Notification No. 333. It is well-settled that each assessment year is an independent unit and the order passed in earlier years does not operate as res judicata. Whatever had been held in the assessment year 1972-73 did not preclude the assessing authority from holding that cotton labels manufactured by the assessee was cotton fabric and it was entitled to be declared as non-taxable. It is also essential to mention that if an item is covered under two notifications then it is the notification which is more beneficial to the assessee which should be applied. The principle applies with greater rigour in case where an item is covered by two notifications, the one exempting it from payment of tax and the other levying tax on it. If an item is covered by notification issued under section 4 of Act then notwithstanding that it may be covered by other notification issued the taxability or otherwise has to be determined with reference to section 4. The learned counsel for the assessee argued on the strength of two Supreme Court's decisions in Porritts and Spencer v. State of Haryana [1978] 42 STC 433 (SC) and Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan [1980] 46 STC 256 (SC) that cotton labels was nothing but cotton fabric. Reliance was also placed on observation made by brother Rastogi, J. , in the earlier decision of this very assessee. It is, however, not necessary to decide it as prima facie the Tribunal appears to have been inclined to have the same view. The controversy shall be decided when the mater is taken up by the Tribunal under section 11 (8) of the U. P. Sales Tax Act. In the result this revision succeeds and is allowed. The order passed by the Tribunal is aside. The question of law raised by the Commissioner of Sales Tax is decided by saying that in a case where there are two notifications, one granting exemption and other levying tax then the notification which grants exemption should be applied. Further the finding recorded in earlier assessment year in respect of applicability of a particular notification does not operate as res judicata in subsequent years. A copy of this order shall be sent to the Tribunal to pass appropriate order under section 11 (8) of the Act. The assessee shall be entitled to its costs which are assessed at Rs. 300. .