Delhi Cloth & General Mills Co. Ltd. & Ors. v. R.R. Gupta, Commercial Tax Officer, Jaipur & Anr.

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 Rajastban Salee 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 rele· vant 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 Addi-tional Duties of 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 !or the purpose of convenient transport or storage but form an integral part of the whole fabric".

500 SUPREME COURl REPORIS I 197Cl[ SL'l'PIE~!FNl,\l(Y

The petitioners state that the manufacturers of tyros 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 peti-tioner". Thus, the petitioners allege that they manufacture "a tex-tile" and also that it serves as part of raw material for what ultimate-ly also goes into the manufacture of a fabric.

After indicaling the manner in which and the substance out o[ which "rayon tyre cord fabric" is made and its composition, the petition sets out ilcm 22 of the first schedule of the Central Excises I and Salt Act, 1944, as the applicable entry covering the goods manu-factured by the petitioner. This item reads as follows :

"Rayon or artificial silk fabrics 'means all varieties of fabrics manufactured either wholly or partly from rJyon or artificial silk and includes embroidery in the piece, in strips or in the motifs and fabrics impregnated or deriva-tives or of other artificial plastic materials, but docs not in-clude any such fabrics :--

(i) If it contains 40% or more by weight of wo<1l.

(ii) If 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 res-pondent Commercial Tax Officer was not subjecting the goods of this description to sales mx and accepted the case of the petitioners that they were exempt from taxation. The reasoning of the Com-mercial Tax Officer, in exempting these goods, is also men-tioned. It is then stated that, as some questions were put itt 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 Com-mercial 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 as-sessments on the ground that the sales of_ these goods had ':"r?ngly escaped assessment, but these were dropped due to some preltmmary -Objections. Fresh notices were then issued and proccet!iugs 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 peti-tioners have, however, come up to this Court directly against the order and provisional assessment dated 21st November, 1972. It also appears from the writ petition that proceedings for the assess-ment year 1972-73 are 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, dismissing 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 U1e peti-tioners, was that the goods now sought to be taxed are not the "end product". The Hi~h Court did not go into the merits cf the case. It accepted the preliminary objection of the State of Rajasthan that the petitioner should first resort to alternative remedies providc<l un-der the Act so that the appellate authority under Section 13 of the Act may go into the whole ev'dence and decide disouted questions of fact. TI1ere is also provision for revision by the Board of Revenue under Section 14 when moved by the assessing authority. Tue High Court did not find any error "apparent upon the face of the record" The taxing authorities have the jurisdiction to decide the question before them either rightly or wrongly. In any case, its view was that, until thB statuto1y remedies had not been exhausted, leaving some "error apparent on the face of the record" still to be rectified by the I High Court, a case for interference under Article 226 of the Consti-

tution 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 tliat this view over-looks several matters, indicated below, including the admission on he ha If 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 I' fabric serves as raw material for another fabric which ulumately

emerges by subjecting the goods manufactured by Delhi Cloth Mills to a process of impregnating with rubber.

A sampk of the tyre cord fabric was actually produced before us. It is said that the "fabric" is manufactured in the same way ac doth is woven on looms. It consists of cords which could be said to constitute warps, running length-wise, and wefts, running brcadth-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 l 9 of the first scl1cJulc to ~he Central Excises and Salt Act, 1944, such as ''tussors", "corduroy", "gaberdine", "deniin'', Indeed, if the "tyre 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 ans-wer 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 teclmical 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 buildina". The fourth example of the first meanino is: "a manufactured material; now only a 'textile fabric', a woven stuff".

We think that we are necessarily concerned here only with "tex-tiles" as fabrics. This is clear from entries 19 to 22(0) of the first Schedule of the Central Excises and Salt Act, 1944. Entry 22AA is "textile fabrics not elsewhere specified". This residuary entry and 41 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 Clo!l1 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. Pr.esum-ably 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 dealirig \vi th a "fabric".

It is, therefore, difficult to find fault with the view of the High Court that there is no error apparent on the faee of the record and D. c. M. v. c.T.O. (Beg, J.) 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 a textile fabric. This is really a te~hnical 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 care-ful consideration of the ·technical processes of manufacturing, of the composition of the "tyre cord fabric", and an evaluation of opinions of experts on tile subject, to be able to decide the question satisfac-torily. It 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 fo not interfering with the decisions of tl1e taxing authorities at this stage.

We also think that for the same reason we could not interfere un-der 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 I> of the taxing authorities who had the power to decide the question either rightly or wrongly.

It has been ur!!:ed, on behalf of the Deihl Cloth Mills that the High Court should have interfered as the question whether the !)Te cord fabr;c is the end product or not in the final manufacture of an-other fabric was q:iite irrelevant. It was submitted that, 'o far as the Delhi Cloth Mills is concerned, the goods under con~ideration 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 in' dicated, the context in which the entry occurs show5 that it is meant for "texfle" fabrics and nn• for any kind of fabric. Therefore. even if the tyre cord fabric may be the end product for the Delhi Clotl1 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 used in the relevant entries entitled to exemption. In tho entries, it evidently means a fabric which is also a textile. The question, there-fore, to be determined by the Tax authorities themselves is whether the product for which the Delhi Cloth Mill claims exemption is a tex-tile fabric and not any other kind of fabric.

n Having indicated the nature of the enquiry which must be under-

taken by the taxing authorities, we find that there is no suflicient reason for overriding and discarding the High Court's view that, on what ap-I peared to the High Court 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 proper 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.

ORIGINAL JURISDICTION/CML APPELLATE JURISDICTION : Writ

Petition No. 49 of 1973.

Under Article 32 of the Constitution and

Civil Appeals Nos. 43 arid 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 Petittion Nos. 398/72 and 1885/71 respectively.

A. K Sen, B. Sen and H. K. Puri • for the Appellants .

S. T. Desai, S. M. lain and S. K. lain for the Respondents.