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PETITIONER: COMMISSIONER OF SALES TAX, U.P.

       Vs.

RESPONDENT: M/S.  SARIN TEXTILES MILLS

DATE OF JUDGMENT21/04/1975

BENCH: SARKARIA, RANJIT SINGH BENCH: SARKARIA, RANJIT SINGH GUPTA, A.C.

CITATION:  1975 AIR 1262            1975 SCR  743  1975 SCC  (4) 308  CITATOR INFO :  RF         1988 SC2237  (8)  RF         1989 SC 317  (21)

ACT: U.P. Sales Tax Act, 1948, ss. 3 and 3A-’Woollen Carpet Yarn’ if unspun fibre used in weaving.

HEADNOTE: The  respondent is a manufacturer of and dealer in  ’Woollen Carpet  Yarn’, popularly known as kati.  For the  assessment years  1959-60  and 1961-62 he was taxed by  the  Sales  Tax officer  at  6  pies  per  rupee  and  3  pies  per   rupee, respectively, under two notifications applicable to the  two assessment  years respectively, issued under the U.P.  Sales Tax Act, 1948.  On appeal, the Assistant Commissioner  held, that  kati  was an unclassified item taxable at 2  pies  per rupee tinder s. 3 of the Act, and the order was confirmed on revision and by the High Court on reference. The two Notifications provided (1) that turnover of ’Yarn of all kinds including unspun fibre used in weaving’ is  liable to tax at 6 pies per rupee, and (2) turnover of yarn of  all kinds  including unspun fibre used in weaving, is liable  to tax  at  3 pies per rupee.  There was  another  notification which  provided  that turnover of "Woollen  goods  excluding carpet but including knitting wool" is liable to tax at  one anna per rupee. The authorities under the Act found that kati are short  cut pieces  of unspun fibre about 2 inches in length ; that  the pieces  have very little tensile strength and are not  used, and are not capable of being used, for weaving, knitting  or rope-making  ; that the only use to which kati is put is  by attaching each piece by hand around two warp threads ;  that it  is not a component of the basic fabric of the  carpet  ; that it is not an integral constituent of the warp and  weft of  the carpet which consists of a different spun  fibre  of great tensile strength ; and that the process of looping  or knotting kati is different and distinct from the process  of lengthwise  and  cross-wise  combining  of  warp  and   weft components  which  makes the woven basic  structure  of  the carpet. Dismissing the appeal to this Court. HELD   :  (1)  Kati  is  not  ’yam’  because  one   of   the

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characteristics  of  yam is that it should be  spun  thread, whereas kati is unspun fibre. [231-H] (2)  It  is  not  unspun fibre Used in  weaving  within  the meaning of the first two notifications because, on the facts found,      it     is     not     used      in      weaving. [233-C-D] (3)  it is not ;woollen goods’ within the meaning of the 3rd notification, because. (233-C-D] (a)  Katri  is only raw material from which ’woollen  goods’ are prepared and [233-E] (b)  Yarn  used in weaving the warp and weft of carpets,  or woollen fibre used in weaving is, tinder the  notifications, taxable  at  a par lower rate than woollen  goods’.  and  it could never have been intended that a mere component or  raw material,  used by a manual process, not being a process  of weaving  in  the manufacture of ’woollen  goods’  should  be taxed  at a higher rate treating kati as  finished  ’woollen goods’. [233-E.F.]                             229 (4)  Therefore, it is an unclassified item and the turn-over is liable to tax only at 2 pies per rupee.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1934-35  of 1970 and 1172-73 of   1974. Appeal  by Special Leave from the Judgment and  Order  dated the  30-4-1970 for the Allahabad High Court in S. T. R.  No. 191 of 1969. O.   P. Rana for the appellant. S.   C. Manchanda and P. C. Kapoor for the respondent. The Judgment of the Court was delivered by SARKARIA,  J.-These. appeals by special leave  are  directed against  the  judgment  of  the  High  Court  of   Allahabad answering  in favour of the assessee the following  question referred  to it under s. 11 of the U.P. Sales Tax Act,  1948 (for short called the Act):               "Whether  the articles "carpet. woollen  Yarn"               is  covered  by the term ’yarn’  mentioned  in               item No. 4 of notification No. ST-907/X, dated               31-3-1956 and item No. 33 of notification  No.               S.T.  1365/X dated 1-4-1960 taxable at 6  pies               and 3 pies per cent respectively or a kind  of               woollen  goods  as mentioned at  item  No.  46               taxable  at  one anna per rupee  according  to               notification  No.  ST-905/X dated  31-3-56  or               whether it is an unclassified item taxable  at               2%". M/s.   Sarin  Textile Mitts, Agra is a manufacturer  of  and dealer  in "woollen carpet yam", popularly known as  "kati". The  relevant  assessment years are 1959-1960  and  1961-62. The  only  dispute is whether such kati should be  taxed  as "yarn"  at 3% or as "woollen goods" at one anna  per  rupee, under-the relevant notification issued under s. 3-A or as an unclassified item at 2% under s. 3 of the Act. The Sales-tax Officer by his order dated 6-10-1965  regarded it as a ’kind of yarn’ covered by Entry No. 4,  Notification no.  ST-907/ X dated 31-3-1956, and so taxed it at six  pies per  rupee for 1959-60 and at 3 per cent for the  year  1961 62    in  view of subsequent notification ST-]  365/X  dated 1-4-1960. On appeal by the assessee the Assistant Commissioner  (Judi- cial)  reversed  that interpretation and held  that  woollen carpet  kati was an ’unclassified item’ taxable at the  rate

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of 2 per cent.                             230 The Commissioner of Sales-Tax moved the Revisional Authority under  s. 10 of the Act against the order of  the  Assistant Commissioner (Judicial).  The’ Judge (Revisions) agreed with the  interpretation  adopted by the  Assistant  Commissioner (Judicial) and dismissed the revision application. On  application filed by Commissioner under s. 11(3) of  the Act, the Judge (Revisions), referred the aforesaid  question to the High Court. THe High Court also held that the woollen carpet kati is not ,yarn’ since it is unspun fibre not used in weaving, and, as such,  it  is  not taxable as a ’kind  of  yarn’  under  the aforesaid notification.  It further rejected the alternative contention  of  the  Revenue that woollen  carpet  kati’  is taxable  under  the notification No. ST-905/ X  as  "woollen goods".   In  the  result,  the  High  Court  answered   the questions against the Revenue.  Hence these appeals. Mr. Rana learned Counsel for the appellant contends that the term  "yam"  used in the aforesaid  notification  should  be interpreted  in  the  sense in which  it  is  understood  by persons engaged in the trade.  Stress has been placed on the fact that in English, even the assessee has been  describing the  article  in question as "woollen carper  "yran".   Such kati,  it  is  pointed out is used in  the  manufacturer  of carpets  by  a  process of  ’knotting’,  which  in  ordinary parlance is described as ’weaving’.  According to Mr.  Rana, the  distinction drawn by the High Court, between  ’weaving’ and  ’knotting’  being  too  fine  and  artificial,  is  not justified.  It is maintained that the Sales-tax Officer  had rightly held that all twisted wool fibres are yarn’.   Since this woollen kati is such a fibre, it is yarn and taxable as such under the aforesaid notifications.  In the alternative, Counsel  submits that this article falls within the  purview of "woollen goods" and in taxable as such under notification No. ST-905/X of 1956. As  against  this, Mr. Manchanda, learned  Counsel  for  the assessee  contends that in the past for about 8  years,  the Revenue had been understanding and treating for the  purpose of  taxation, "woollen carpet kati" as an article  different front "yarn" and "woollen goods" within the contemplation of the  aforesaid notifications.  It is stressed that  for  the first ’time it was on 23-9-1963 that the Sales-tax  Officer departed  from  this time honoured interpretation  and  held "woollen   carpet  kati"  to  be  "yarn"  within  the   said notifications.   It  is  submitted  that  the  High  Court’s opinion,  that  woollen carpet kati is  neither  "yarn"  nor "woollen  goods", proceeds on facts found by  the  Assessing Authority  on  the basis of evidence adduced  regarding  the nature  and  use  of this article.  On those  facts,  it  is maintained, no other reasonable interpretation than the  one accepted by the High Court is possible. The notifications concerned issued under s. 3-A of the  Act, are, these:               "  (i)  Notification No. ST 907/X  dated  31st               March, 1956. It declares that the turnover  of               certain commodities men-                                    231               tioned  therein  should be taxed at  a  single               point,   at   the  point  of   sale   by   the               manufacturer  or the importer, at the rate  of               six  pies  per rupee.  The relevant  entry  of               this notification is no. 4, which reads:               "Yarn  of  all kinds, including  unspun  fibre               used in weaving, other than handspun yarn  but

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             excluding  cotton  yarn in  cops  and  cones".                             (emphasis added)               (ii)  Notification  No.  ST.  1365/X-990  1956               dated April 1, 1960.               It is also a notification under section 3-A of               the Act and the relevant entry is at item  No.               33 which reads :               "Yam of all kinds including unspun fibre  used               in weavingother   than  handspun   yarn   but               excluding cotton yarn.(emphasis added)  (iii)Notification No. No. ST-905/X dated               31st March,     1956.               The relevant entry is at item No. 46 which reads.               "Woollen goods excluding carpet but  including               knitting wool."               The  rate  of tax prescribed is one  anna  per               rupee. The first point to be considered is, whether "woollen carpet kati"  is "yarn" within the meaning of Notification (i)  and (ii) catalogued above. "Yarn" has not been defined either in the Act and the Rules, or in the Notifications.  We have therefore to construe this term  in  its  ordinary  grammatical  sense.   According  to "Oxford Dictionary" "yarn" means:               "Any  spun thread specially of kinds  prepared               for weaving, knitting or rope-making".               Webster’s New World Dictionary also, gives its               meaning thus:               "Any fibre, as wool, silk, flax, cotton, nylon               etc.  spun into strands for weaving,  knitting               or making thread". Thus,  a fibre in order to answer the description of  "yarn" in   the   ordinary   commercial  sense,   must   have   two characteristics.   Firstly,  it  should be  a  spun  strand. Secondly,  such strand should be primarily meant for use  in weaving, knitting or rope-making.  Now,  it is an undisputed fact, in the instant  case,  that "woollen  carpet kati" is unspun fibre.  It lacks the  first characteristic  of "Yarn".  It is therefore possible to  say that,  by itself, the expression "yam of all kinds"  in  the notifications, quoted above, would not cover unspun  fibres. But the succeeding phrase "including unspun fibre 10 SC/75-16 232 used  in weaving" qualifies the preceding expression  "yarn" of  all kinds".  This phrase, which, in one  sense,  extends the  connotation of "yarn" by including in it unspun  fibre, pinpoints  and highlights, on the other hand, the  usability of   such  unspun  fibre  in  weaving  as  a   determinative circumstance. The  question thus narrows down into the issue : Is  woollen carpet  kati--which  is  admittedly  unspun  fibre-"used  in weaving"  within the contemplation of these notifications  ? Again, "weaving" has not been defined in these notifications or  the  other statutory provisions.  We have  therefore  to fall  back  upon its ordinary dictionary meaning.   In  that sense, ’weaving’ implies the process of forming thread  into fabric by interlacing.  "The most important method by  which wool  products are produced is weaving, the  interlacing  at right angles of two or more systems of threads.   Variations are  almost limitless but all are derived from  three  basic weaves, plain, satin and twill.  Hundreds of yarns, wound on large  spool  or  beam form the warp.  Each  yarn  is  drawn through  the  eye of a heddle or wire mounted on  a  harness frame.  The alternateraising and lowering of the frames,

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each with its hundreds of heddlescontrolling   the    warp yarns, forms the shed, the space through whichthe   weft or   filling  yarn  is  carried  by  the  shuttle,  a   long streamlinedbox holding a bobbin of yarn in its  hollowed centre. Each trip of the shuttle is called a pick.   After each pick the harnessframes shift position in accordance with the predetermined pattern,producing  a new shed  or different combination of raised and loweredwarp     yarns. The  filling  yarn are beaten down with a weaver’s  read  to make a tighter weave". (Encyclopaedia Brittanica Vol. 23, p. 342,1971 Edn.) Thus  "weaving"  is the process of combining warp  and  weft components (respectively lengthwise and cross-wise) to  make a  woven  structure.  The threads that  lie  lengthwise  are called the warp.  The other threads which are combined  with the  warp  and lie width wise, are called the  "weft",  also known  as  "woof".  An individual thread from  the  warp  of indefinite length, is called an end; each individual  length of  weft  from  one  edge to the other  is  called  a  pick. Consecutive  picks  are usually consecutive lengths  of  one piece of weft yarn that is repeatedly folded back on itself. In  all  methods  of  weaving before a  length  of  weft  is inserted  in the warp, the warp is separated, over  a  short length  extending  from the cloth already formed,  into  two sheds.   The  process is called shedding.  The  sequence  of primary  operations in one weaving cycle is  thus  shedding, picking  and beating in. (Encyclopaedia Brittanica Vol.  23, p. 342). Weaving is differentiated from both warp and weft,  knitting from braiding, and from net making, in that these  processes all make use of only one set of elements.  In addition there are geometrical differences". (Encyclopaedia ibid). The ground having been cleared, it is to be seen whether the process by which woollen carpet Kati is used in  preparation of carpets, can properly be called "weaving".                             233 Now, the facts found on the basis of evidence adduced by the Additional Appellate Commissioner and the Judge  (Revisions) Sales Tax are that such woollen kati are short cut pieces of unspun  fibre  (each  of which according  to  the  aforesaid Encyclopaedia  is  about 2 inches in length).  It  has  very little tensile strength and is not used-as it is not capable of  being  used-for weaving, knitting or  rope-making.   The only  use to which the kati or pile is put is  by  attaching each piece by hand around two warp threads.  The kati is not a component of the basic fabric of the carpet.  It is not an integral  constituent  of the warp and weft  of  the  carpet which  consists of a different spun fibre of  great  tensile strength  i.e. of yarn.  The process of looping or  knotting these pile tufts is different and distinct from the  process of  lengthwise  and  crosswise combining of  warp  and  weft components,  which  makes the woven basic structure  of  the carpet. In  view  of  these  primary  facts  found  by  the   taxing authorities,  the  conclusion is inescapable,  that  woollen carpet  kati  is neither yarn", nor "unspun  fibre  used  in weaving"   within   the  contemplation  of   the   aforesaid notifications issued under s. 3-A. This takes us to the second question as to whether such kati would  fall within the ambit of "woollen goods" under  entry 46 of Notification (iii) set out above. Here also, we find ourselves in agreement with the  Division Bench of the High Court that woollen carpet kati is only raw material  from which "woollen goods" are prepared.  In  this connection  it is to be noted that yarn used in weaving  the

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warp  and weft of carpets, or woollen fibre used in  weaving has  been  made taxable at a far lower  rate  than  "woollen goods"  under  the  Notifications.  It could  never  be  the intention that a mere component or raw material used in  the manufacture of woollen goods by a manual, process, not being a process of weaving, should be taxed at a far higher  rate, by treating the same as a finished "woollen goods". For  the  foregoing  reasons, we are of  the  opinion that "woollen carpet kati" is neither "yarn" nor "woollen  goods" falling under the aforesaid notifications issued under S. 3- A.  It is an unclassified item and its turnover is liable to tax at the rate of 2% under S. 3 of the Act.  Accordingly we affirm  the answer given by the High Court to  the  question referred and dismiss these appeals with one set of Costs. V.P.S.                            Appeals dismissed. 234