JAIMETS PVT LTD Vs. STATE OF U P

JUDGEMENT

(1.) Even though petitioner M/s. Jaimets Private Ltd. had already preferred appeals against the orders of the Sales Tax Officer, Ghaziabad, dated 31st of August, 1981 (annexures 1 and 2 to the petition), assessing it to sales tax under the Central as well as State Sales Tax Acts for the year 1979-80, it by means of the present petition also moved this Court for relief under Article 226 of the Constitution claiming, inter alia, that amendment in Notification No. 8224/X dated 31st of August, 1979, made by the U. P. Sales Tax (Amendment and Validation) Ordinance, 1981 (Ordinance No. 12 of 1981), with retrospective effect was unconstitutional and invalid. In the meantime, the appeals filed by the petitioner were dismissed by the Assistant Commissioner (Judicial), Sales Tax, Ghaziabad, vide his order dated 27th of March, 1982 (annexure RA-1), and Ordinance No. 12 was replaced by the U. P. Sales Tax (Amendment and Validation) Act, 1982. Accordingly, the petitioner moved an application seeking to question the validity of the Amendment Act on grounds identical to those on which the validity of Ordinance No. 12 of 1981 had been questioned by it.

(2.) The petitioner is a dealer in "acrylic yarn". It claimed that during the period 1st of April, 1979, to 31st of August, 1979, acrylic yarn was, under the provisions of the Sales Tax Act, taxable at the rate of 7 per cent, i.e., 6 per cent under Section 3-A of the Act plus additional tax at the rate of 1 per cent under Section 3-F of the Act. Likewise for the period 1st of September, 1979, to 31st of March, 1980, it was taxable at the rate of 3 per cent, i.e., at the rate of 2 per cent plus additional tax at the rate of 1 per cent and paid the tax accordingly. The Sales Tax Officer accepted the turnover as disclosed by the petitioner. He, however, came to the conclusion that cashmilon, i.e., acrylic yarn sold by the petitioner fell in the category of knitting wool inasmuch as in common parlance, it was so understood. It was used in knitting sweaters, socks and topas, etc., by crosia or knitting needles and that it was not used for purposes of spinning. He concluded that the goods sold by the petitioner did not fall in the category of yarn of all kinds and was, therefore, taxable at the rate of 7 per cent plus additional tax of 1 per cent total 8 per cent for the entire period between 1st of April, 1979, and 31st of March, 1980. The appellate authority affirmed the decision of the Sales Tax Officer and observed that even though knitting wool was also a kind of yarn, but for purposes of the provisions contained in the Sales Tax Act, it fell in the category of knitting wool and had to be taxed as such.

(3.) In order to appreciate and decide the points raised in this petition, it will be convenient to notice certain provisions of the Sales Tax Act as it stood at the relevant time and the notifications issued thereunder. Section 3-A(1) of the U. P. Sales Tax Act provides that sales tax shall be payable by a dealer under the Act on the turnover in respect of goods specified in the second column of the First Schedule at the point specified in the third column thereof at such rate not exceeding 15 per cent as the State Government may, by notification, declare. The second proviso to Sub-section (1) enables the State Government to, by notification, omit an entry in the schedule and to, in the like manner, restore any entry so omitted. Sub-section (2-A) then lays down that the turnover in respect of goods other than those mentioned in Sub-section (1) or (2) are liable to be taxed at the rate of 7 per cent but then it is open to the State Government to, from time to time by notification in official Gazette, modify the rate and the point of tax in respect of the goods covered by the sub-section. Entries and items Nos. 105, 106 and 108 of the Schedule referred to in Section 3-A(1) ran thus : 105. Woollen carpet yarn, rayon yarn, filature silk yarn, handspun silk yarn, staple fibre yarn and nylon yarn. 106. Woollen goods excluding carpets and hosiery but including knitting wool and ready-made garments made out of woollen cloth. 108. Yarn of all kinds including unspun fibre used in weaving, other than handspun yarn, but excluding cotton yarn, woollen carpet yarn, rayon yarn, filature silk yarn, staple fibre yarn and nylon yarn.