SRINIVASA DISTRIBUTING AGENCIES Vs. STATE OF ORISSA

JUDGEMENT

(1.) THE Member, Sales Tax Tribunal, Orissa, has stated this case under section 24 (1) of the Orissa Sales Tax Act and the following question has been referred for the opinion of the court :

(2.) THE relevant assessment period is 1970-71. The assessee, a registered dealer, carries on business in sewing thread along with certain other goods. For the year, the assessment was completed under section 12 (4) of the Act. On a sale transaction of Rs. 28,542. 32 of sewing thread, tax was demanded at 3 per cent according to serial No. 3 of the schedule of taxable goods. The assessing officer discovered these facts subsequently and initiated a proceeding under section 12 (8) of the Act and after hearing the assessee reassessed by demanding tax at 5 per cent by applying the residuary rate. The assessee appealed to the Assistant Commissioner. Relying on Circular No. 18641/ct dated 16th December, 1959, issued by the Commissioner of Sales Tax, the appellate authority held that cotton yarn and sewing thread are one and the same commodity. He, therefore, took the view that the sales turnover representing sewing thread was liable to be assessed at the rate prescribed under serial No. 3. Since the assessment had earlier been made by adopting that rate, he annulled the reassessment under section 12 (8) of the Act. The revenue preferred a second appeal to the Tribunal challenging the first appellate order. Relying on a decision in the case of Mohta Trading Co. v. Commissioner of Sales Tax, U. P. , Lucknow ([1976] 38 S. T. C. 11), of the Allahabad High Court, the Tribunal held that cotton yarn and sewing thread are two different commodities and, therefore, sewing thread was not exigible to tax at the rate prescribed under serial No. 3. As there was no special rate prescribed for sewing thread - lower or higher than the general rate - the sales turnover of sewing thread was exigible to tax at the residuary rate of 5 per cent. Accordingly the Tribunal restored the order of reassessment. Thereupon, the assessee moved for the reference.

(3.) BY Notification No. 33927-CTA-130/57-F dated 30th December, 1957, in exercise of the powers under the first proviso to sub-section (1) of section 5 of the Act, the State Government prescribed rates. Item No. 3 in the schedule was cotton yarn which was liable to tax at 2 per cent. From paragraphs 4 and 5 of the appellate order of the Assistant Commissioner it transpires that the sales turnover of sewing thread when treated as cotton yarn is liable to be assessed at 2 per cent, but the appellate authority took the view :