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PETITIONER: COMMISSIONER, SALES TAX, U.P.

       Vs.

RESPONDENT: AGRA BELTING WORKS, AGRA

DATE OF JUDGMENT29/04/1987

BENCH: MISRA RANGNATH BENCH: MISRA RANGNATH PATHAK, R.S. (CJ) RAY, B.C. (J)

CITATION:  1987 SCR  (3)  93        1987 SCC  (3) 140  JT 1987 (2)   514        1987 SCALE  (1)1061

ACT:     U.P.  Sales Tax Act, 1948--Section  3-AD--Imposition  of sales  tax on ‘beltings of all kinds’--Effect  of  Notifica- tions of 1958 and 1973.

HEADNOTE:     The  State Government issued a Notification on  November 25, 1958 In exercise of power vested under Section 4 of  the U.P. Sales Tax Act, 1948. This Notification exempted ’cotton fabrics of all varieties’ from sales tax. Under it, patta as an item of cotton fabric stood exempted from tax  liability. Subsequently, another Notification was issued on December 1, 1973  under Section 3-A of the Act. This  Notification  pre- scribed a rate of tax higher than that provided by Section 3 of  the Act which contains the charging provision  and  pre- scribes a uniform rate of tax on sales. Section 3-A empowers the State Government to modify the rate of tax by  Notifica- tion. This Notification of 1973 was issued without withdraw- ing the earlier Notification of 1958.     The  High  Court, affirming the order of  the  Tribunal, held  that in the absence of a Notification withdrawing  the earlier Notification of 1958, sales tax would not be  exigi- ble in terms of the Notification of 1973. Allowing the Appeal,     HELD: (Per majority Pathak, CJI and Ranganath Misra, J., Ray, J. dissenting)     1.  The High Court was not justified in holding that  in the absence of a notification withdrawing the earlier  Noti- fication  of 1958, sales tax would not be exigible in  terms of  the  Notification of 1973. The order  of  the  Tribunal, which has been affirmed by the High Court, is set aside  and the assessment restored. [96G]     2.  The Notification of 1958 issued under Section  4  of the  Act  exempted ’cotton fabrics of  all  varieties’  from sales tax. The Notification of 1973 under Section 3-A of the Act  prescribed sales tax of 7% on the sale of  beltings  of all kinds. There is no dispute that patta is a kind of 94 belting material and, on being treated as cotton fabric, was exempted from sales tax. [95FG]     3.  Section  3 is the charging  provision;  Section  3-A

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authorises  variation of the rate of tax and Section 4  pro- vides for exemption from the tax. When after a  Notification under Section 4 granting exemption from liability, a  subse- quent Notification under Section 3-A prescribes the rate  of tax, the intention is to withdraw the exemption and make the sale  liable to tax at the rate prescribed in the  Notifica- tion. [96B-D]     4. As the power both for the grant of exemption and  the variation  of the rate of tax vests in the State  Government and it is not the requirement of the Statute that a  Notifi- cation  of recall of exemption is a condition  precedent  to imposing tax at any prescribed rate by a valid  Notification under  Section  3-A, the second Notification can  easily  be treated  as a combined Notification--both for withdrawal  of exemption and also for providing higher tax. [96D-E]     5.  The exemption was in regard to a class of goods  and while the exemption continues, a specific item has now  been notified under Section 3-A of the Act. [96F] (Per Ray, J. dissenting)     1.  Cotton beltings fail within ’beltings of all  kinds’ as  notified under Section 4 of the Act, being  exempt  from the imposition of sales tax. As there is a general exemption granted by the Notifications issued in 1957 and 1958 exempt- ing  ’cotton  fabrics of all kinds’, it is not  possible  to hold,  in any view of the matter, that it will be  excisable to sales tax on the basis of the Notification dated December 1,  1973 under Section 3-A of the said Act, by  the  Govern- ment. i98F; G-H]     2.  So long as the general exemption granted under  Sec- tion 4 with regard to ’cotton fabrics of all kinds’  contin- ues,  no sales tax can be imposed on beltings of  all  kinds which fail within the ’cotton fabrics of all kinds’ and  the general  exemption  under Section 4 will  prevail  over  the Notification  made under Section 3-A of the Sales  Tax  Act. [99GH]     3.  It  is not possible to subscribe to  the  view  that since  the  Notification  under Section 3-A  has  been  made subsequent to the Notification issued under Section 4 of the Act,  the  subsequent Notification under  Section  3-A  will prevail  over the general exemption granted under Section  4 of the Act. [99H; 100A] 95     Porritts & Spencer Asia Ltd. v. State of Haryana, [1978] 42  S.T.C. 433 (SC); State of Tamil Nadu v.  Navinchandra  & Company,  [1981] (48) S.T.C. 118 (Madras); Delhi  Cloth  and General  Mills  Co. Ltd. v. State of Rajasthan  and  Others, [1980]  4 S.C.C. 71; Commissioner of Sales Tax v. M/s  Dayal Singh  Kulfi Wala, Lucknow, [1980] U.P.T.C. 360 and  Commis- sioner of Sales Tax v. Rita Ice Cream Co., Gorakhpur, [1981] U.P.T.C. 1239, referred to.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1134 (NT) of 1987.     From  the  Judgment  and Order dated 2.3.  1984  of  the Allahabad High Court in Sales Tax Revision No. 146 of 1983. Prithvi Raj, Ashok K. Srivastava for the Appellant.     S.T.  Desai, K.B. Rohtagi, S.K. Dhingra,  Baldev  Atreya and Shashank Shekhar for the Respondent. The following Judgments of the Court were delivered     RANGANATH MISRA, J. Special leave granted. Delay of  six days  is condoned. The short question for  consideration  in this  appeal at the instance of the Revenue is  whether  the

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High Court was justified in holding that in the absence of a notification  withdrawing  the  earlier  notification  dated 25.11. 1958 made in exercise of power vested under section 4 of  the  U.P. Sales Tax Act, 1948, Sales Tax  would  not  be exigible  in  terms  of the notification  dated  1.12.  1973 issued under section 3A of that Act.     The notification of 1958 exempted ’cotton fabrics of all varieties’ from sales tax. It is not disputed that under  it sale  of  patta, the goods in question on being  treated  as cotton fabric was exempted from sales tax. The  notification of  1973 made under section 3A of the Act  prescribed  sales tax of seven per cent on the sale of beltings of all  kinds. There  is  no dispute now that patta is a  kind  of  belting material.     Section 3 of the Act contains the charging provision and prescribes a uniform rate of tax on sales. Section 3A empow- ers the State Government to modify the rate of tax by  noti- fication. The notification of 1973 in fact prescribes a rate of tax higher than provided by section 3. In 1958, under the notification  referred to above, patta as an item of  cotton fabric stood exempted from tax liability. The High Court has 96 referred to some of its earlier decisions and has  concluded thus:               "Thus  the  consistent  view  of  this   court               throughout has been that by issuing a separate               notification  under  section 3A,  the  earlier               exemption  granted under section 4 of the  Act               cannot  be negatived. If the State  wanted  to               tax  ’beltings of all kinds’, it has to  amend               the general notification issued under  section               4  by  deleting cotton fabric belts  from  the               notification  issued  under section 4  of  the               Act.’’     As has been pointed out above, section 3 is the charging provision;  section 3A authorises variation of the  rate  of tax  and section 4 provides for exemption from tax. All  the three  sections are parts of the taxing scheme  incorporated in  the  Act and the power both under sections  3A  as  also under section 4 is exercisable by the State Government only. When after a notification under section 4 granting exemption from  liability, a subsequent notification under section  3A prescribes  the  rate of tax, it is beyond  doubt  that  the intention  is  to withdraw the exemption and make  the  sale liable to tax at the rate prescribed in the notification. As the power both for the grant of exemption and the  variation of  the rate of tax vests in the State Government and it  is not  the requirement of the statute that a  notification  of recall of exemption is a condition precedent to imposing tax at any prescribed rate by a valid notification under section 3A, we see no force in the contention of the assessee  which has  been  upheld  by the High Court. In  fact,  the  second notification  can easily be treated as a combined  notifica- tion--both for withdrawal of exemption and also for  provid- ing higher tax. When power for both the operations vests  in the State and the intention to levy the tax is clear we  see no justification for not giving effect to the 2nd  notifica- tion.  We would like to point out that the exemption was  in regard to a class of goods and while the exemption continues a  specific item has now been notified under section  3A  of the Act.     The  appeal is allowed. The order of the Tribunal  which has  been  affirmed by the High Court is set aside  and  the assessment  is restored. Parties are directed to bear  their respective costs throughout.

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   B.C.  Ray, J. I have had the privilege of going  through the judgment rendered by my learned brother but I am  unable to concur with the reasonings recorded by my learned brother in his judgment so far as it relates to the scope and effect of the notification dated 1.12.1973 made under Section 3A of the U.P. Sales Tax Act, 1948 by providing for imposition  of sales  tax on "beltings of all kinds" for the reasons  given hereunder:- 97     Under  Section  4 of the 1J.P. Sales Tax Act,  1948  the Government  issued two notifications No. S.T.  4486/x  dated 14.12.1957 and No. 4064/x-960(4)/58 dated 25.11. 1958 where- by  "cotton  fabrics of all kinds" were  exempted  from  the imposition of sales tax under the Act. Thereafter on 1st  of December  1973 a notification was issued by  the  Government under  Section 3-A of the said Act which introduces  in  the Schedule  in Item No. 8 "beltings of all kinds" for  imposi- tion of sales tax. The sole question arising in this  appeal is whether beltings of all kinds are excisable to sales  tax by  virtue of the notification dated 1.12. 1973 even  though they  fall  within "cotton fabrics of all kinds"  which  are exempted  from  tax  by virtue of  the  notifications  dated 14.12.  1957 and 25.11. 1958. Similar question arose in  the case  of Porritts & Spencer Asia Ltd. v. State  of  Haryana, [1978]  42 S.T.C. 433 (SC) before this Court for  considera- tion.  It was held by this Court that the words "all  varie- ties  of cotton, woollen or silken textiles". In item 30  of Schedule  B  to  the Punjab General Sales Tax  Act  must  be interpreted  according to its popular sense,  meaning  "that sense  which people conversant with the subject matter  with which  the statute is dealing would attribute to  it."  This Court  further  observed "whatever be the  mode  of  weaving employed,  woven fabric would be "textiles". What is  neces- sary is no more than weaving of yarn and weaving would  mean binding or putting together by some process so as to form  a fabric.  Moreover  a textile need not be of  any  particular size or strength or weight. It may be in small pieces or  in big  rolls:  It  may  be weak or  strong,  light  or  heavy, bleached  or dyed, according to the requirement of the  pur- chaser.  The use to which it may be put is  also  immaterial and  does not bear in its character as a textile. It may  be used  for  making wearing apparel, or it may be  used  as  a covering  or  bed-sheet  or it may be used  as  tapestry  or upholstery or as duster for clearing or as towel for  drying the body. A textile may have diverse uses and it is not  the use which determines its character as textile."     It  was also held that the textile has only one  meaning namely a woven fabric and that is the meaning which it bears in  ordinary parlance. The Court therefore held  that  dryer felts are textiles as these were made of yarn and the  proc- ess employed was that of weaving according to warp and  woof pattern.  It therefore falls within the meaning of  textiles and so exempted from tax.     Similar  question  arose in the case of State  of  Tamil Nadu  v.  Navinchandra  & Company, [1981]  (48)  S.T.C.  118 (Madras)  where  exemption  was claimed on the  basis  of  a notification under Section 4 of the Tamil Nadu General Sales Tax Act 1959 in respect of hair-belting 98 and cotton-belting as falling within item No. 4 of the Third Schedule of the said Act. This item No. 4 reads as follows:-     "All varieties of textiles (other than durries, carpets, druggets  and  pure  silk cloth) made wholly  or  partly  of cotton, staple fibre, rayon, artificial silk or wool includ- ing handkerchiefs, towels, napkins, dusters, cotton  velvets

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and velvetten, tapes, niwars and laces and hosiery cloth  in lengths." It  was held that textiles haying a wider meaning than  fab- rics  cottonbelting  and hair-belting were included  in  the expression cotton fabrics and as such they are exempted from taxation falling within Item No. 4 of the Third Schedule  as it stood prior to its amendment.     It  is pertinent to mention in this connection  that  in the case of Delhi cloth and General Mills Co. Ltd. v.  State of  Rajasthan and Others, [1980] (4) S.C.C. 71 the  question arose  whether  rayon tyre cord fabric manufactured  by  the appellate  company included within item No. 18  inserted  in the Schedule by the Rajasthan Taxation Laws (Amendment) Act, 1964 and rayon or artificial silk fabrics extended to exemp- tion under Section 4(1) of the Rajasthan Sales Tax Act which provides  for exemption of sales tax of goods  specified  in the Schedule. It has been held that the product falls within the  exempted item rayon or artificial silk fabrics in  item No.  18  of the Schedule inserted by Section 4 of  the  said Act.  This judgment was rendered by this Court to which  one of us was a party.     In the instant case the question arising for  considera- tion  is  whether patta covered by "cotton  fabrics  of  all varieties" is excisable to sales tax under the  notification dated 1.12. 1973 namely "beltings of all kinds". In view  of the decisions referred to hereinbefore cotton beltings  fall within  the  textiles  of all varieties  as  notified  under Section  4 of the said Act being exempt from the  imposition of  sales tax. The question that falls for consideration  is what is the effect of the notification issued under  Section 3-A of the said Act on 1.12. 1973 mentioned in the  Schedule "beltings  of all kinds". There is no dispute nor any  chal- lenge that these beltings.are cotton beltings falling within cotton fabrics of all kinds and as there is a general exemp- tion  granted  by the notification issued in 1957  and  1958 exempting ’cotton fabrics of all kinds’, it is not  possible to hold in any view of the matter that it will be  excisable to  sales  tax  on  the  basis  of  the  notification  dated 1.12.1973 under Section 3-A of the said Act, by the  Govern- ment. The next question for consideration is what is the effect of a   99 notification  under  Section 3-A including an  item  in  the Schedule  for  imposition  of sales tax though  there  is  a general  exemption  from sales tax under Section  4  of  the Sales Tax Act. It has been held in the case of  Commissioner of Sales Tax v. M/s Dayal Singh Kulfi Wala, Lucknow,  [1980] U.P.T.C. 360 as follows:-     "A  fiscal  statute  like the one before me  has  to  be interpreted strictly. If there is any ambiguity or doubt  it should  be  resolved in favour of the subject. There  is  no equity  about tax. The taxing liability must be express  and absolute.  In  the present case, the  specification  of  the goods  for purpose of section 3-A is one thing, but  whether or  not such goods would be exempted from tax is  the  power conferred  upon the State Government under section 4 of  the Act.  So long the exemption continues, the dealer  can  cer- tainly urge and with jurtisification that the mere  specifi- cation of goods under section 3-A or declaring the point  of sales at such turnover liable to tax would not take away the exemption  from  payment of tax which the goods  enjoyed  by virtue  of  the exercise of power by  the  State  Government under Section 4 of the Act. The operating fields of the  two sections  namely sections 3-A by itself cannot override  the

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power  under section 4. On the other hand, if certain  goods have  been classified for purposes of by the  State  Govern- ment,  if such goods had been exempted from sales,  the  De- partment  cannot  contend that the exemption should  not  be construed in favour of the assessee."     In  this  case the question arose  whether  the  general exemption  granted under Section 4 of the Act in respect  of milk  and  milk products is sufficient to exempt  kulfi  and lassi in respect of which a separate notification was issued under Section 3-A for imposition of tax.     A similar question also arose in the case of Commission- er  of  Sales Tax v. Rita Ice Cream Co.,  Gorakhpur,  [1981] U.P.T.C.  1239 and it was held that so long as  the  general exemption under Section 4 continues a particular item  noti- fied under Section 3-A of the Sales Tax Act cannot be taxed.     On  a conspectus of all these decisions  aforesaid,  the only  irresistible  inference follows that so  long  as  the general  exemption  granted under Section 4 with  regard  to cotton  fabrics of all kinds continues no sales tax  can  be imposed  on  beltings  of all kinds which  fall  within  the cotton fabrics of all kinds and the general exemption  under section  4  will prevail over the  notification  made  under section  3-A of the Sales Tax Act. I am unable to  subscribe to the view that since the notification under section 3-A of the U.P. Sales Tax Act has been made subse- 100 quent to the notification issued under Section 4 of the said Act,  the  subsequent notification under  Section  3-A  will prevail  over the general exemption granted under Section  4 of the said Act. In my considered opinion the reasonings and conclusions  arrived at by the High Court  are  unexception- able.     The appeal is accordingly dismissed and the judgment and order of the High Court of Allahabad is hereby affirmed. N.P.V.                                                Appeal allowed. 101