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PETITIONER: DELHI CLOTH & GENERAL MILLS CO. LTD. & ORS.

       Vs.

RESPONDENT: R. R. GUPTA, COMMERCIAL TAX OFFICER, JAIPUR & ANR.

DATE OF JUDGMENT03/05/1976

BENCH: BEG, M. HAMEEDULLAH BENCH: BEG, M. HAMEEDULLAH RAY, A.N. (CJ) SINGH, JASWANT

CITATION:  1977 AIR 2086            1976 SCR  497  1976 SCC  (3) 443  CITATOR INFO :  RF         1980 SC1552  (3)

ACT:      Rajasthan  Sales   Tax  Act,   1954-Statutory  remedies provided under  the Act  not exhausted-No  error apparent on the face of the record-If petition under Art. 226 lay.      Constitution  of   India,   1950-Art.   32-Absence   of jurisdiction to  assess not  shown-If remedy lies under Art. 32.

HEADNOTE:      Rayon tyre cord fabric which is a textile consisting of rayon threads  in the warp and cotton threads in the weft is manufactured on  weaving looms  in the  same manner  as  any other ordinary  textile. The  tyre manufacturers to whom the product is  supplied. impregnate  the fabric with rubber and weave it  into fabric.  Under Entry  18 of  Schedule of  the Rajasthan Sales  Tax Act,  1954, rayon  fabrics were  exempt from sales tax. When the Commercial Tax officer rejected the petitioners’ objections  to sales  tax being levied on rayon tyre cord  fabric, the  e petitioners filed a petition under Article  32   of  the   Constitution  alleging   breach   of Fundamental Rights.      In  respect   of  certain   earlier  assessment  years, however, the view of the Commercial Tax officer was that the goods were  not the  end product. when, the matter was taken to the  High  Court,  it  held  that,  until  the  statutory remedies had  been exhausted, no case for interference under Art. 226  arose. It  did not  find any error apparent on the face of the record. Hence, the appeals by special leave. E      In the  write petition as well as in the appeals it was contented that  the goods  constituted the end-product which the petitioners  sell in  the market  and,  therefore,  were exempt from sales tax.      Dismissing the petition and appeals. ^      HELD: (1)(a)  It is  difficult to  find fault  with the view of  the, High  Court there was no error apparent on the face of the record and that the taxing authorities should be left tb  determine whether  the tyre  cord  fabric  is  more correctly capable  of being  described as  a  fabric  or  as

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merely cord passing of as a textile fabric. This is really a technical question.  In any  case. it is a question on which two views may be possible. [503C]      (b) The  fact that the tyre cord fabric manufactured by the petitioners  is woven  by its purchases into a fabric in the same  way as is being done by the petitioners means that the tyre cord fabric serves also as raw material for another fabric which ultimately emerges by subjecting the goods to a process  of  impregnating  it  with  rubber.  The  essential question to  determine is the stage at which the goods under consideration became  textile fabrics if they do become that at all. [502C; 503A]      (2) This  Court cannot interfere under Art. 32 with the decision  of   the  Commercial   Tax  Officer,   because  no Fundamental Right  is shown  to  be  affected  by  the  mere determination of  the question.  There  was  no  absence  of jurisdiction of  the taxing authorities who had the power to decide the question either rightly or wrongly. [503E]      34 -833 SUP CI/76 498                          ARGUMENTS For the petitioners      Respondent No.  1 did  not produce  or get any evidence from the  commercial community  dealing with rayon tyre yarn and  cord   and  rayon   tyre  fabric  for  the  purpose  of controverting  the   conclusive  evidence  produced  by  the petitioners to  the effect  that in the commercial community dealing with  the said goods these goods were different both from the  point of  view of  manufacture and  also from  the point of  view of ultimate end-product and are considered to be different  by the commercial community, which heats rayon tyre cord  fabric as  fabric. There  was no  evidence on the contrary to  come to  the conclusion  that  the  rayon  tyre fabric was  not fabric.  The High Court wrongly relied on 25 STC 407  which had  no  application  in  the  present  case, ignoring the  decision in  22 STC 470 and 28 STC 431. It was therefore not  a case  of disputed  question of  fact, but a case of  admitted fact  by the  commercial community against which there was no evidence before the respondent.      The  alternative   remedy  of  appeal  is  not  at  all efficacious in  the facts  and circumstances  of the present case inasmuch  as the  Commissioner and the State Government having already  made up  their mind  to levy  tax, no relief could be  expected by  the appellants  from him and the High Court should  have  interfered  under  arts.  226  and  227. Further ill  this case  there was  no question  of  disputed facts. The  sample was  admitted. There  was  uncontradicted evidence that  the product  of the  petitioners is  known as rayon cord  fabric by the commercial community and by common parlance. The  case is  a misdirection of law on the part of the assessing authority. For the respondents      There was  no error  of law apparent on the face of the record as  contended by  the petitioners.  The  High,  Court rightly rejected the writ petitions on the ground that there were disputed  facts and  there are alternative remedies and full and adequate machinery under the Act itself.      The assessee  mills, when  paying excise  duty, paid it only as  on yarn under entry 18 of the First Schedule to the Central  Excise   and  Salt  Act.  The  mills  did  not  pay additional duty under the Additional Duties of Excise (Goods of Special  Importance) Act  1956 on  the  ground  that  the material was  not fabric.  When  it  suited  the  mills  the material wag  said to  be yarn  and in  case of sales tax it contended that  it was fabric. This fact itself was a strong

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indication that this was a disputed question of fact.

JUDGMENT:      ORlGINAL  JURISDICTION/ClVlL   APPELLATE  JURISDICTION: Writ Petition No. 49 of 1973.      Under Article 32 of the Constitution and             Civil Appeals Nos. 43 and 44 of 1973      Appeals by  Special Leave  from the  Judgment and order dated the  27th October  1972 of the Rajasthan High Court in D.  B.   Civil  Writ  Petition  Nos.  398/72  and  1  885/71 respectively.      A. K. Sen, B. Sen and H. K. Puri for the Appellants.      S. T.  Desai, S.  M.  lain  and  S.  K.  Jain  for  the Respondents. 499      The Judgment of the Court was delivered by      BEG. J.-We  have before  us a petition under Article 32 of the  Constitution and  two appeals  by Special leave from the judgment of the High Court of Rajasthan between the same parties. The  three cases  before us raise the same question of law.  It is: Do the goods called "Rayon tyre Cord Fabric" sold by  the  Delhi  Cloth  &  General  Mills  Co.  Ltd.  to manufacturers of  tyres, who  use  it  for  the  purpose  of impregnating it  with rubber,  fall under  entry 18  of  the Schedule of  the Rajasthan  Sales Tax Act, 1954 (hereinafter referred to as ’the Act’ ) ?      The schedule  mentioned above  gives a list of goods on the sale  or purchase  of which  no tax is payable under the Act. "The  relevant entry  18, which  was omitted  in  1973, reads as follows:           "18. All  cotton fabrics, rayon or artificial silk      fabrics, woollen fabrics, sugar and tobacco, as defined      in the  Additional Duties  cf Excise  (Goods of Special      Importance) Act, 1957 (Central Act 58 of 1957)". Section 2(C)  of the  Additional Duties  of Excise (Goods of Special Importance) Act, 1957, lays down:           "2  (C)   the  words   and  expressions   ’sugar’,      ’tobacco’, ’cotton  fabrics’, ’silk  fabrics’, ’woollen      fabrics’ and  rayon or  artificial silk  fabrics  shall      have the  meanings respectively  assigned  to  them  in      Items Nos.  1, 4,  19, 20,  21  and  22  of  the  First      Schedule to the Central Excise and Salt Act, 1944".      The Writ  Petition of the Delhi Cloth and General Mills Co.  Ltd.   states  that   "rayon  tyre   cord  fabric"   is "manufactured out  of rayon  yarn and  cord". It  goes on to explain that  this fabric  is "a textile consisting of rayon threads in  the warp  and cotton  threads in the weft and is manufactured on weaving looms in the same manner as in other ordinary textile". It is also stated there:           "The fabric consists of more than 60% by weight of      rayon and is unprocessed. The weft threads are not used      merely for  tying the  warp threads  together  for  the      purpose of  convenient transport or storage but form an      integral part of the whole fabric". 500      The petitioners  state that  the manufacturers of tyres to whom  the fabric  is supplied "impregnate the fabric with rubber and  weave it  into a  fabric in  the same  way as is being done  by the  first petitioner". Thus, the petitioners allege that  they manufacture  "a textile"  and also that it serves as part of raw material for what ultimately also goes into the manufacture of a fabric.      After indicating  the manner in which and the substance

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out of  which "rayon  tyre cord  fabric"  is  made  and  its composition, the  petition sets  out item  22 of  the  first schedule of  the Central  Excises and Salt Act, 1941, as the applicable entry  covering the  goods  manufactured  by  the petitioner. This item reads as follows:           "Rayon  or  artificial  silk  fabrics  ’means  all      varieties of  fabrics  manufactured  either  wholly  or      partly from  rayon  or  artificial  silk  and  includes      embroidery in the piece, in strips or in the motifs and      fabrics  impregnated   or  derivatives   or  of   other      artificial plastic materials, but does not included any      such fabrics:-           (i)  If it contains 40% or more by weight of wool.           (ii) lf it contains 40% or more by weight of silk.           (iii)If it  contains cotton  and less  than 60% by                weight of rayon or artificial silk; or           (iv) If it contains no cotton and less than 40% by                weight of wool and less than 40% by weight of                rayon or artificial silk".      The petitioners  assert that,  from years 1966 to 1969, the respondent Commercial Tax officer was not subjecting the goods of this description to sales tax and accepted the case of the  petitioners that they were exempt from taxation. The reasoning of  the Commercial Tax Officer, in exempting these goods, is  also mentioned.  It is  then stated that, as some questions  were  put  in  the  Rajasthan  State  Legislative Assembly, on  or about  20th April,  1971,  asking  for  the reason why  this particular type of goods of the petitioners were exempted from Sales tax, the Commissioner of Commercial Tax issued  a letter  to the  Commercial Tax Officer to levy Sales tax  on the  "rayon cord  fabric" manufactured  by the petitioner. Thereafter,  notices under  the  proviso  to  S. 12(1) of the Act were issued for the years 1965 to 1969 with a view  to reopening  the assessments on the ground that the sales of  these goods  had wrongly  escaped assessment.  but these were dropped due to some preliminary 501 objections. Fresh  notices were  then issued and proceedings for subsequent  assessment years  were also taken. By orders passed on various dates, the Commercial Tax officer rejected the petitioners’ objections to Sales tax on "rayon tyre cord fabric". The  petitioners have,  however, come  up  to  this Court directly  against the order and provisional assessment dated 21  st November,  1 972. It also appears from the writ petition that  proceedings fol  the assessment  year 1972-73 arc still  pending before  the Commercial Tax officer. Civil Appeals Nos.  43 of 1973 and 44 of 1973 by special leave are directed against  a common  judgment of  a Division Bench of the High Court of Rajasthan, given on 27.10.1972, dismissal, the appellants’  Writ Petitions against the assessment order dated 26th  March, 1971,  for the  years 1968-69 and 1969-70 made by the Commercial Tax officer..      The view  of the  Commercial Tax Officer, questioned by the petitioners,  was that  the goods now sought to be taxed are not  the "end  product". The  High Court did not go into the  merits   of  the  case.  It  accepted  the  preliminary objection of  the State  of Rajasthan  that  the  petitioner should first  resort to  alternative remedies provided Under the Act  so that the appellate authority under Section 13 of the Act  may go  into the whole evidence and decide disputed questions of  fact. There  is also provision for revision by the Board  of Revenue  under Section  14 when  moved by  the assessing authority.  The High  Court did not find any error "apparent  upon   the  face   of  the   record"  The  taxing authorities have  the. jurisdiction  to decide  the question

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before them either rightly or wrongly. In any case, its view was  that,   until  the  statutory  remedies  had  not  been exhausted, leaving  some "error  apparent on the face of the record" still  to be rectified by the High Court, a case for interference under  Article 226 of the Constitution will not arise.      It is  urged on behalf of the Delhi Cloth Mills that no disputed question  of fact  arises. It is submitted that, on admitted facts,  it could  be decided whether the "tyre cord fabric" is  an exempted  "fabric" or not. We think that this view over-looks  several matters, indicated below, including the admission  on behalf  of the  Delhi Cloth Mills that, in the case  before us,  the "tyre cord fabric" manufactured by it is woven by its purchasers "into a fabric in the same way as is  being done  by the  first petitioner". This certainly means that  the tyre  cord fabric serves as raw material for another fabric  which ultimately  emerges by  subjecting the goods manufactured  by Delhi  Cloth Mills  to a  process  of impregnating with rubber. 502      A sample  of the tyre cord fabric was actually produced before us.  It is  said that the "fabric" is manufactured in the same  way as  cloth is  woven on  looms. It  consists of cords which  could be  said  to  constitute  warps,  running length-wise, and  wefts,  running  breadth  wise.  But,  the spaces  left  between  them  are  so  wide,  presumably  for purposes of  impregnation with  rubber, that it may not pass for an  ordinary "fabric’.  Like one  of those  mentioned in entry 19  of the  first schedule  to the Central Excises and Salt Act,  1944, such as "tussors", "corduroy", "gaberdine", "denim‘’. Indeed,  if the  "lyre cord  fabric"  is  so  well established a  category of  rayon "fabric",  it  could  have found mention specifically in item 22 in the same way as the numerous varieties  of cotton  fabrics are mentioned in item 19. In  answer to this argument, it could be urged that, for some reason,  entry No. 22 does not enumerate rayon and silk fabrics in  the same  fashion  as  the  cotton  fabrics  are specified by name in item 19.      It is  certainly a  question which  appertains  to  the knowledge  of  technical  aspects  of  textile  weaving  and production to  determine at  what  stage  threads  or  cords forming warps  and wefts  really amount to a "fabric". It is true that  the term  fabric has  a wide  meaning. Its  first meaning given  in  the  Oxford  English  Dictionary  is:  "A product of skilled workmanship". The first example of such a product is:  "An edifice, a building". The fourth example of the first meaning is: I "a manufactured material; now only a ’textile fabric’, a woven stuff".      We think  that we  are necessarily  concerned here only with "textiles" as fabrics. This is clear from entries 19 to 22(D) of  the first Schedule of the Central Excises and Salt Act, 1944.  Entry 22AA  is "textile  fabrics  not  elsewhere specified". This  residuary entry  and the  descriptions  in preceding entries  seem to  us to  make it  abundantly clear that we  are dealing  here only  with "textile fabrics". The case of the Delhi Cloth Mills also is that the product is a. "textile". There  fore, the  essential question to determine is the stage at which the goods under consideration become a ’textile fabric".  The meaning  of the term "textile", given in the  Oxford Dictionary,  is: "A woven fabric; any kind of cloth". It  must acquire a body and a texture. Presumably it is not  just the  skeleton of  a textile.  Apparently, it is more than  that. But, against pushing this point of view too far it  may be  urged that  in the  technical and commercial parlance we are dealing with a "fabric".

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    It is, therefore, difficult to find fault with the view of the  High Court  that there  is no  error apparent on the face of the record and 503 that the  taxing authorities  should be  left  to  determine whether the  "tyre cord fabric" is more correctly capable of being described  as a fabric or as merely cord pretending to pass off  as ar  textile fabric  This is  really a technical question. In  any case,  it is a question on which two views seem possible  on apparent  facts. And,  neither of  the two views can  be rejected  outright as  untenable. It  requires careful  consideration   of  the   technical  processes   of manufacturing, of the composition of the "tyre cord fabric’, and an  evaluation of  opinion of experts on the subject, to be able  to decide  the question  satisfactorily rt may also require some examination of commercial usage and terminology or the  language of  the market  in goods  of this type. We, therefore, think  that the  High  Court  was  right  in  not interfering with  the decisions of the taxing authorities at this stage.      We also  think that  for the  same reason  we could not interfere  under   Article  32  with  the  decision  of  the Commercial Tax  officer. Indeed,  no  fundamental  right  is shown to be affected by a mere determination of the question indicated above.  There is no absence of jurisdiction of the taxing authorities  who had the power to decide the question either rightly or wrongly.      It has  been urged,  on behalf of the Delhi Cloth Mills that the  High Court  should have interfered as the question whether the  tyre cord  fabric is  the end product or not in the  final   manufacture  of  an-  other  fabric  was  quite irrelevant. It was submitted that, so far as the Delhi Cloth Mills is concerned, the goods under consideration constitute the "end product" which they sell in the market. The example given was  that of  cloth which is the "end product" for the mills which  manufacture cloth,  but,  it  becomes  the  raw material for  tailors and  for  those  who  make  ready-made clothes to sell them. This argument overlooks that it is not so much  the point  of manufacture  at which  the Mills sell their own product which determines the nature of goods which are entitled  to exemption,  but it  is the stage reached by this product,  in the  process of manufacture of fabrication of a "textile", which should decide the question. As we have already indicated,  the context  in which  the entry  occurs shows that it is meant for "textile" fabrics and not for any kind of  fabric. Therefore  even if the tyre cord fabric may be the end product for the Delhi Cloth  Mills,  the  crucial question is:  Does this product constitute a fabric which is a textile?  A textile fabric does not cover everything which could be  made into  a fabric.  Mere cord  does not become a textile fabric  just because  it requires some skill to make it. The rather wide dictionary meanings of the term "fabric" do not  appear to  us to  give the exact meaning of the term "fabric" as 504 used in  the relevant  entries entitled to exemption. In the entries, it  evidently  means  a  fabric  which  is  also  a textile. The  question, therefore,  to be  determined by the Tax authorities  themselves is whether the product for which the Delhi  Cloth Mill  claims exemption  Is a textile fabric and not any other kind of fabric.      Having indicated  the nature  of the enquiry which must by undertaken  by the taxing authorities, we find that there is no  sufficient reason  for overriding  and discarding the High Court’s  view that,  on what appeared to the High Court

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to be  a question  Of fact, it should not decide whether the product under consideration constitutes a fabric entitled to exemption.      There was  no appeal by the State of Rajasthan. It does not, therefore,  seem propel.  for us  to finally decide, on merits, the  question argued before us in the appeals by the Delhi Cloth  Mills which  are before us unless we could have decided the matter in favour of the appellant. We could have only done  that if  we  were  of  opinion  that  the  taxing authorities had  committed error apparent on the face of the record. But,  as already indicated above, we are not of this opinion.      For all the reasons given above, we think that the Writ Petition as  well as the appeals by special leave are liable to be dismissed, and, we hereby dismiss them with one set of costs. P. B. R.                                   Appeal dismissed. 505