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PETITIONER: COMMISSIONER OF SALES TAX, U.P.

       Vs.

RESPONDENT: MASNEILL AND BARRY LTD., KANPUR

DATE OF JUDGMENT19/11/1985

BENCH: PATHAK, R.S. BENCH: PATHAK, R.S. TULZAPURKAR, V.D.

CITATION:  1986 AIR  386            1985 SCR  Supl. (3) 739  1986 SCC  (1)  23        1985 SCALE  (2)1093  CITATOR INFO :  RF         1986 SC1730  (8)

ACT:      U.P. Sales  Tax Act, 1948 & Notification No. ST 3124/X- 1012 (4)  - 1964, dated July l, 1966 - Sales Tax - Levy of - ’Ammonia Paper’  and’ ferro  paper ’  - Whether "paper other than hand made paper."

HEADNOTE:      The respondent-assessee,  a dealer  in  stationery  and drawing material,  sells ammonia  paper and  ferro paper. In assessment proceedings  under the  U.P. Sales  Tax Act, 1948 for the  assessment year  1966-67 the  assessee claimed that ammonia  paper  and  ferro  paper  were  liable  to  tax  as unclassified goods at the rate of two per cent prescribed by 8.3 of  the Act.  The Sales  Tax Officer  rejected the claim holding that  ammonia paper  and ferro  paper fell under the entry  "paper  other  than  hand  made  paper"  included  in notification no.ST-3124/X-1012(4)  - 1965 dated July 1, 1966 and its  turnover was,  therefore, liable  to tax at six per cent.      The appeal  as well  as the  revision petition  of  the assessee were dismissed.      At the instance of the assessee a reference was made to the High  Court, which  held that  "ammonia paper  and ferro paper do not fall within the category of paper".      Dismissing the Appeal of the Commissioner of Sales Tax, ^      HELD: 1.  Ammonia paper  and ferro  paper do  not  fall within the  entry "paper  other than hand made paper" in the notification dated  July 1, 1966 issued under the U.P. Sales Tax Act, 1948. [743 D]      2. Ammonia paper and ferro paper are used for preparing prints and  sketches of  site plans.  An impression  of  the print or sketch is made on the paper, and it is then exposed to light  for a  period of  time during  which the  chemical evaporates resulting in the emergence of the print or sketch of the  site plan.  Therefore, ammonia paper and ferro paper cannot be  regarded as  paper in  the popular  sense of that term. Paper is used for 740 printing or  writing or for packing. Ammonia paper and ferro

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paper are not employed for any of the purposes and subjected to any  of  the  processes  for  which  paper,  as  commonly understood, is generally used. [742 C-E]      State of  Uttar Pradesh and Anr. v. Kores (India) Ltd., (1977) .  8 and State of Orissa v. Gestetner Duplicators (P) Ltd.. (1974) 33 S.T.C. 333, relied upon.      Maharaja Book  Depot v.  State  of  Gujarat,  [1979]  2 S.C.R. 138, distinguished.

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 133R of 1973.      From the  Judgment and  Order dated  19.2.1973  of  the Allahabad high Court in sales Tax Reference No. 357 of 1971.      S.C. Manchanda,  R.A. Gupta  and Ujjal  Singh  for  the Appellant.      S.T. Desai,  H,K. Puri,  M.N. Tandon and Randhir Chawla for the Respondent.      The Judgment of the Court was delivered by      PATHAK, J. The short question in this appeal by special leave is  whether ammonia  paper  and  ferro  paper  can  be described as  "paper other  than hand  made paper"  for  the purposes of  the notification  No. ST-3124/X-1012(4)  - 1965 dated July  1, 1966  issued under  the U.P.  Sales Tax  Act, 194&.      The respondent  assessee is  a dealer in stationery and drawing material,  and sells  ammonia paper and ferro paper. In assessment proceedings under the U.P. Sales Tax Act, 1948 for the  assessment year  1966-67 the  assessee claimed that ammonia  paper  and  ferro  paper  were  liable  to  tax  as unclassified goods at the rate of two per cent prescribed by s.3 of  the Act. The claim was not accepted by the Sales Tax Officer who  hold that  ammonia paper  and ferro  paper fell under the  entry "paper  other than had made paper’ included in notification  No. ST-3124/X-1012(4)  - 1965 dated July 1, 1966 and  its turnover  was, therefore, liable to tax at six per cent.  Against  the  assessment  80  made  the  assessee appealed, but  his appeal  was dismissed  by  the  Assistant Commissioner (Judicial),  Sales lax.  A revision petition by the 741 assessee thereafter was dismissed by the Revising Authority. At the  instance of the assessee a reference was made to the Allahabad High  Court  for  its  opinion  on  the  following question :           "Whether ammonia paper and ferro paper fall within           the category of paper?"      The High  Court has  expressed the  view  that  ammonia paper and  ferro paper,  being chemically  coated paper used for obtaining  prints and sketches of site plans, were paper to which  a chemical process had been applied and a chemical coating had  been given,  and were  not paper in the popular sense of  the word,  and therefore  did not  fall within the entry  in  the  aforesaid  notification  of  July  1,  1966. Accordingly it  answered the  question referred to it in the negative,  in   favour  of  the  assessee  and  against  the Commissioner of Sales Tax.      In this  appeal, the entire contention on behalf of the Commissioner of  Sales Tax  is that the opinion expressed by the High  Court to,  erroneous and  that upon  a proper view ammonia paper  and ferro  paper must  be regarded  as "paper other than  hand made  paper"  within  the  meaning  of  the aforesaid notification of July 1, 1966.

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    Section 3  of the  U.P. Sales Tax Act charges sales tax on goods  sold by  a dealer  at a specified rate, the charge being imposed  on every  sale in the series of sales through which  the   commodity  may   pass,  commencing   from   the manufacturer to  the ultimate  retail dealer.  It imposes  a multi-point tax.  Section 3  A of the act, however, provides for the  imposition of sales tax on one only of the sales of the commodity in the series of sales, the single point being specified  by  notification  by  the  State  Government.  If ammonia and  ferro paper  fall under  the entry "paper other than hand  made paper  "mentioned in  notification ST-3124/- X1012(4) -  1965 dated  July 1, 1966 the turnover of ammonia and ferro paper sold by the assessee is liable to tax at six per cent.  The charge  is imposed  on the sale either by the manufacturer or by the importer. Presumably, the assessee is either the  manufacturer of  ammonia paper or ferro paper or their importer. If ammonia paper and ferro paper do not fall within the aforesaid notification the turnover of such paper is liable  to sales  tax under s.3 of the U.P. Sales Tax Act at two per cent on every sale in the series of sales through which the goods pass.      According to  the facts  admitted between  the parties, the following  extract set  forth in the assessee’s revision petition explains accurately the nature of ammonia paper and ferro paper : 742           "The ferro  and ammonia  paper is made of paper of           rough and  special texture  by applying a chemical           process and  giving chemical  coating thereon. The           chemicals which  are used  are dye, tartaric acid,           therein,  ethylene,   glycole   and   some   other           chemicals. These  chemicals are  absorbed  by  the           base paper  and the  coated paper  is again passed           through  another   set  of  rollers  so  that  the           chemicals are  properly and  evenly impregnated in           the base  paper. It  is only this chemical coating           which is  important for  making the use of ammonia           and ferro  paper, otherwise  it is  nothing but an           ordinary rough  base paper. This ferro and ammonia           paper has  got only this specific use of obtaining           prints and sketches of site plans and it cannot be           used as an ordinary paper because of these special           texture and its chemical properties".      The paper  is used for preparing prints and sketches of site plans.  An impression of the print or sketch is made on the paper,  and it  is then exposed to light for a period of time during  which the  chemical evaporates resulting in the emergence of  the print or sketch of the site plan. Plainly, ammonia paper and ferro paper cannot be regarded as paper in the popular  sense of  that term. Paper is used for printing or writing or for packing. Ammonia paper and ferro paper are not employed for any of the purposes and subjected to any of the processes  for which a paper, as commonly understood, is generally uses.  In State of Uttar Pradesh and Anr. v. Kores (India) Ltd.,  [1977] 39  S.T.C. 8,  this  Court  held  that carbon paper  was not  paper as  envisaged by  the  relevant entry in  notification no.  ST-3124/X-1012(4) -  1965  dated July 1, 1966, and referred to the fact that carbon paper was manufactured by  coating tissue  paper with  a thermosetting ink based  mainly on wax, non-drying oils, pigments and dyes by means of a suitable coating roller and equalising rod and then passing  it through  chilled rolls.  It is used between two sheets of plain paper in order to reproduce on the lower sheet that  which is  written or  typed on  the upper sheet, making a  replica or  carbon copy  of the original document.

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The learned  Judges observed  that carbon paper could not be applied to  the same  uses  to  which  paper,  as  generally understood, was used, that is to say, for preparing, writing or printing  or for  packing or drawing on or for decorating or covering  the walls of a room. Indeed, the learned Judges appear to  have approved  of this very judgment under appeal when considering  the question whether carbon paper could be regarded as paper within the aforesaid notification. 743 Learned counsel  for  the  Commissioner  of  Sales  Tax  has invited our  attention to  Maharaja Book  Depot v.  State of Gujarat, [1979]  2 S.C.R.  138, where  this Court  laid down that exercise  books were  included within  the term "paper" mentioned in  sub-cl. (vii)  of Cl.  (a)  of  s.  2  of  the Essential Commodities Act, 1955 and in Item 13 of Schedule I to the  Gujarat Essential Articles Dealer (Regulation) order 1971. The  learned  Judges  supported  their  conclusion  by reference to  the object  and purpose  of the  Act  and  the Regulation   order.   That   case   in   our   opinion,   is distinguishable from the instant case. On the contrary, more to the  point is  the decision  of the  Orissa High Court in State of Orissa v. Gestetner Duplicators (P) Ltd., [1974] 33 S.T.C. 333,  where it  was held  that stencil  paper was not paper within the meaning of serial No. 7A of the Schedule to the notification  issued by  the State  Government under the first proviso  to sub-s.  (1) of s.5 of the Orissa Sales Tax Act, 1947.      Accordingly, we  agree with the High Court that ammonia paper and  ferro paper does not fall within the entry "paper other than  hand made  paper" in notification No. ST-3124/X- 1012(4) - 1965 dated July 1, 1966.      The appeal is dismissed with costs. A.P.J.                                     Appeal dismissed. 744