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Commissioner of Sales Tax Vs. Dharampur Leather Cloth Company Private Limited - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtMumbai High Court
Decided On
Case NumberSales Tax Reference Nos. 100, 101 and 102 of 1976
Judge
Reported in[1978]41STC274(Bom)
ActsBombay Sales Tax Act, 1959 - Sections 31, 35 and 52; Central Sales Tax Act, 1956 - Sections 8(2A) and 9(2)
AppellantCommissioner of Sales Tax
RespondentDharampur Leather Cloth Company Private Limited
Appellant AdvocateG.S. Jetly and ;
Respondent AdvocateHemendra K. Shah, Adv.
Excerpt:
sales tax - sales - sections 31, 34 (1), 35 and 52 of bombay sales tax act, 1959, sections 8 (2 a) and 9 2 of central sales tax act, 1956 and bombay sales tax law (special exemptions) act, 1957 - assistant commissioner allowed sales of rexine cloth effected by respondents for concerned period as covered by entry 1 of schedule 1 to act of 1957 - assistant commissioner further held that rexine was exempt from levy of sales tax under act of 1959 and consequently exempt under section 8 (2 a) - as per section 35 tribunal erred in law in holding that there was mistake apparent from record in order of assistant commissioner of sales tax - tribunal further erred in holding that action of deputy commissioner of sales tax in revising under section 31 orders passed in appeal in so far as exemption..........period 1st april, 1958, to 31st march, 1959; sales tax reference no. 101 of 1976 is under the bombay sales tax act, 1953, in respect of the assessment period 1st april, 1959, to 31st december, 1959; and sales tax reference no. 102 of 1976 is under the central sales tax act, 1956, in respect of the assessment period 1st april, 1959, to 31st december, 1959. sales tax reference no. 101 of 1976 is made under section 34(1) of the bombay sales tax act, 1953, while the other two references are made under the said section 34(1) read with section 9(2) of the central sales tax act, 1956. as this, however, makes no difference to the decision of these reference, it will be convenient to dispose of these by a common judgment. 2. the respondents were registered as dealers both under the bombay.....
Judgment:

Madon, J.

1. These are three references made by the Sales Tax Tribunal at the instance of the Commissioner of Sales Tax. The respondents in all these references are the same and two identical questions have been referred to us in each of these references. The material facts necessary for deciding these references are also the same, the only difference being that Sales Tax Reference No. 100 of 1976 is under the Central Sales Tax Act, 1956, in respect of the assessment period 1st April, 1958, to 31st March, 1959; Sales Tax Reference No. 101 of 1976 is under the Bombay Sales Tax Act, 1953, in respect of the assessment period 1st April, 1959, to 31st December, 1959; and Sales Tax Reference No. 102 of 1976 is under the Central Sales Tax Act, 1956, in respect of the assessment period 1st April, 1959, to 31st December, 1959. Sales Tax Reference No. 101 of 1976 is made under section 34(1) of the Bombay Sales Tax Act, 1953, while the other two references are made under the said section 34(1) read with section 9(2) of the Central Sales Tax Act, 1956. As this, however, makes no difference to the decision of these reference, it will be convenient to dispose of these by a common judgment.

2. The respondents were registered as dealers both under the Bombay Sales Tax Act, 1953, and the Central Sales Tax Act, 1956. They carry on business as manufactures, inter alia, of rexine cloth and bookbinding cloth. In respect of their assessments both under the Bombay Act and the Central Act in respect of the periods 1st April, 1958, to 31st March, 1959, and 1st April, 1959, to 31st December, 1959, the respondents contended that sales of rexine cloth and bookbinding cloth made by them were exempt under the Bombay Sales Tax Laws (Special Exemptions) Act, 1957. The claim of the respondents in respect of rexine cloth was rejected by the Sales Tax Officer, but their claim in respect of bookbinding cloth was accepted, and sales of bookbinding cloth made by the respondents were held to be exempted under the said Bombay Sales Tax Laws (Special Exemptions) Act, 1957. Against the rejection by the Sales Tax Officer of their claim for exemption of sales of rexine cloth the respondents filed appeals to the Assistant Commissioner of Sales Tax. Relying upon a decision of the Deputy Commissioner, Central Division, Poona, and upon a decision of the Commissioner of Sales Tax, the Assistant Commissioner of Sales Tax allowed the respondents' appeals and granted to them the exemption claimed. Subsequently, the Deputy Commissioner of Sales Tax issued notices under section 31(1) of the Bombay Sales Tax Act, 1953, calling upon the respondents to show cause why the orders of the Assistant Commissioner of Sales Tax granting exemption in respect of the sales of rexine cloth and of the Sales Tax Officer granting exemption in respect of the bookbinding cloth should not be revised. After hearing the respondents, the Deputy Commissioner of Sales Tax revised suo motu both the said orders. He held that the decisions referred to by the Assistant Commissioner of Sales Tax did not apply to the facts of the case. He also held that some other decisions cited on behalf of the respondents also did not apply. According to him, that applied was a decision of the Sales Tax Tribunal and he, therefore, held that none of the sales were entitled to exemption but were taxable under the residuary entry, namely, entry 80 of Schedule B to the Bombay Sales Tax Act, 1953. Against these orders of the Deputy Commissioner of Sales Tax the respondents filed appeals to the Tribunal. Before the Tribunal the respondents, inter alia, contended that the Deputy Commissioner of Sales Tax had no jurisdiction to revise the said orders. They also contended that the decision of the Tribunal relied upon by the Deputy Commissioner of Sales Tax did not apply to the facts of the case. Both these contentions had also been taken by the respondents before the Deputy Commissioner of Sales Tax. There were certain other contentions also urged before the Deputy Commissioner of Sales Tax and taken by the respondents before the Tribunal, which it is unnecessary to set out. So far as the sales of bookbinding cloth were concerned, the Tribunal held that as by these impugned orders the Deputy Commissioner of Sales Tax revised only the orders of the Assistant Commissioner of Sales Tax and as sales of bookbinding cloth did not form the subject-matter of the appeal before the Assistant Commissioner of Sales Tax, the Deputy Commissioner of Sales Tax had no jurisdiction to take away the exemption in respect of the sales of bookbinding cloth granted by the Sales Tax Officer. So far as the sales of rexine cloth were concerned, the Tribunal held that what the Deputy Commissioner of Sales Tax had purported to do by his orders was to rectify a mistake apparent from the records and that since this was a course of action covered by section 35 of the Bombay Sales Tax Act, 1953, the Deputy Commissioner of Sales Tax had no jurisdiction suo motu to revise the said order of the Assistant Commissioner of Sales Tax but that the proper authority to rectify such mistake was the Assistant Commissioner of Sales Tax himself acting under the said section 35. As the Tribunal took the view that the Deputy Commissioner of Sales Tax had no jurisdiction to revise the order of the Assistant Commissioner of Sales Tax, the Tribunal did not consider nor gave any decision in respect of the other contentions urged before it on behalf of the respondents. The Tribunal set aside the orders of the Deputy Commissioner of Sales Tax. The applicant has come in reference from the order of the Tribunal which was a common order in all the three appeals filed by the respondents only so far as the sales of rexine cloth are concerned.

3. The two questions which have been referred to us in each of these reference are as follows :

'(1) Whether, on the facts and in the circumstances of the case and on a true and proper interpretation of section 35 of the Bombay Sales Tax Act, 1953, the Tribunal erred in law in holding that there was a mistake apparent from the record in the order of the Assistant Commissioner of the Sales Tax wherein the said Assistant Commissioner allowed the sales of rexine cloth effected by the respondents for the said period as covered by entry 1 of Schedule I to the Bombay Sales Tax Law (Special Exemptions) Act, 1957, and, therefore, exempt from the levy of sales tax under the Bombay Sales Tax Act, 1953, and, consequently, exempt under section 8(2A) of the Central Sales Tax Act, 1956

(2) Whether, on the facts and in the circumstances of the case, the Tribunal has erred in holding that the action of the Deputy Commissioner of Sales Tax in revising under section 31 of the Bombay Sales Tax Act, 1953, the orders passed in appeal in so far as the exemption from tax on sales of rexine cloth was concerned was clearly without jurisdiction ?'

4. Two points were urged before us by Mr. Jetly, the learned counsel for the applicant, namely, (1) that the Tribunal was in error in holding that this was a case of a mistake apparent from the record, (2) that assuming this was a case of a mistake apparent from the record, the Commissioner of Sales Tax could nevertheless in exercise of his revisional jurisdiction under section 31(1) of the Bombay Sales Tax Act, 1953, revise any such mistake and that similarly any officer acting under the authority of the Commissioner of Sales Tax in that behalf delegated to him, as the Deputy Commissioner of Sales Tax did in this case, could validly revise and correct any such mistake.

5. The first question which, therefore, falls to be decided is whether there was any mistake apparent from the record. It is now well-settled that mistakes apparent from the record which can be rectified are both mistakes of law and facts, but in the case of a mistake of law it must be a glaring and obvious mistake, such as, for instance, the levy of tax under a statutory provisions which is subsequently held by the Supreme Court to be inoperative and ineffective or making an assessment which on the basis of a later decision of a High Court or the Supreme Court is found to be erroneous or time-barred (see M. K. Venkatachalam, Income-tax Officer v. Bombay Dyeing and . : [1958]34ITR143(SC) ). Where, however, the matter is debatable or involves long and elaborate arguments, it cannot be said that it is a mistake apparent from the record. This proposition is now too well-settled see M. V. Govindaraju Chetty v. Commercial Tax Officer, Hassan Circle, Hassan [1968] 22 S.T.C. 46. and Concrete Spun Pipe Works v. Sales Tax Officer, Sector V, Kanpur 3; see also Nandlal Mangaram Pannani v. G. Lakshminarasimhan : [1971]82ITR1(Bom) and J. M. Shah v. J. M. Bhatia, Appellate Assistant Commissioner of Wealth-tax : [1974]94ITR519(Bom) .

6. The question, therefore, to which we must address ourselves is whether this was a case of a glaring and obvious mistake or a case which involved long and elaborate arguments and investigation of fresh facts in order to determine whether there was a mistake made by the Assistant Commissioner of Sales Tax in coming to the conclusion that the sales of rexine cloth made by the respondents were not (sic) exempted under the said Bombay Sales Tax Laws (Special Exemptions) Act, 1957. In order to determine this point it is necessary to set out certain statutory provisions. The Bombay Sales Tax Laws (Special Exemptions) Act, 1957, exempts the goods set out in Schedule I to the said Act from payment of any tax inter also under the Bombay Sales Tax Act, 1953. The first item in Schedule I to the said Act is 'all varieties of cloth manufactured in mills or on powerlooms, excluding pure silk cloth'. Entry 11 of Schedule B to the Bombay Sales Tax Act, 1953, prescribes the rate of tax on 'coarse and medium cotton cloth made in mills or woven on powerlooms'. There were three explanations to that entry which respectively defines the expressions 'coarse cloth', 'medium cloth' and 'cotton cloth'. We are not concerned with the first two explanations which give the definitions of 'coarse cloth' and 'medium cloth', for these definitions turn upon the count of warp yarn employed in manufacturing cloth. Explanation 3 defines 'cotton cloth' as meaning 'any cloth in which the proportion of cotton yarn is not less than 98 per cent.'. In Trambaklal Ratilal v. State of Bombay [1956] 7 S.T.C. 258., Bench of the Sales Tax Tribunal consisting of the President and two Members had to consider whether bookbinding cloth which belonged to the 'medium variety' and was subsequently subjected to the processes of bleaching, dyeing and starching still remained in the category of medium cloth. In that case, the Commissioner of Sales Tax held that the conversion of ordinary medium cloth into a staff, non-porous and highly moisture resisting article no longer capable at all of being put to uses to which medium cloth ordinarily is put represented a fundamental alteration and no longer fell under the said entry 11. Reversing the decision of the Commissioner of Sales Tax, the Tribunal held that it could not be said that the count of the cloth, after the process to which it was subjected, was altered, nor could it be said that after such processing it ceased to be cloth. It further held that even after the processing, the elements required in order that the cloth might be 'medium cloth' within the meaning of the said entry 11 were still present and that however stiff or non-porous or highly moisture resisting article it might have become by its being subjected to the process of bleaching, dyeing, starching and calendering, it did not lose the essential attributes which originally brought it under the said entry 11.

7. In granting exemption to the respondents in respect of the sales of rexine cloth, the Assistant Commissioner of Sales Tax relied upon a decision of the Deputy Commissioner of Sales Tax, Central Division, Poona, in Appeal No. CD/101/288/58-59/B-966 dated 28th April, 1961, in the case of Bhor Industries Limited. In that case, the Deputy Commissioner of Sales Tax had held that oilcloth and leather cloth, twin tex cloth, plastic cloth, fumigation cloth, etc., were also coarse and medium cloth and were covered by the said entry 11. He also relied upon a decision given by the Commissioner of Sales Tax in determination proceedings in the case of the respondents themselves under section 52 of the Bombay Sales Tax Act, 1959, namely, Proceeding No. DDQ-1160/467/B decided on 27th September, 1960. In the case, the Commissioner of Sales Tax determined that plastic cloth, that is, polyvinyl chloride leather cloth, was 'cotton fabrics' within the meaning of the old entry 15 of Schedule A to the Bombay Sales Tax Act, 1959, and was thus exempt from the levy of any tax under the said Act. The description of goods contained in the said old entry 15 was 'cotton fabrics as defined in item No. 12 of the First Schedule to the Central Excises and Salt Act, 1944'. The said item No. 12 defined 'cotton fabrics' as meaning 'all varieties of fabrics manufactured fully or partly from cotton'. It also included certain specific items such as dhoties, saris, etc., and excluded such fabrics as contained 40 per cent. or more by weight of wool or silk or 60 per cent. or more by weight of rayon or artificial silk and fabrics manufactured on a handloom. The Assistant Commissioner of Sales Tax held that if cloth to which certain process was applied to make plastic cloth was covered by the phrase 'cotton fabrics', cloth to which process was applied to convert it into rexine cloth equally was cotton fabrics and since the rexine cloth was made of coarse and medium cloth as defined by the said entry 11, it was accordingly exempt under the Bombay Sales Tax Laws (Special Exemptions) Act, 1957. The Deputy Commissioner of Sales Tax, however, held that the said decisions of the Commissioner of Sales Tax and the Deputy Commissioner of Sales Tax did not apply. He has given some reasons for arriving at this decision. We are not required to consider the correctness of these reasons because we are not called upon to decide on merits whether the sales of rexine cloth made by the respondents were exempted by the said Bombay Sales Tax Laws (Special Exemptions) Act, 1957, because that question has not been decided by the Tribunal. What the Deputy Commissioner of Sales Tax did was that he relied upon another decision of the Tribunal in the case of Messrs. Jaisinh Waterproof Works v. State of Bombay 10 S.T.D. 118. In that case, it was contended by the assessees that rubberised cloth was exempted by the said Special Exemptions Act. In support of their contention, the assessees relied upon the said earlier decision of the Tribunal in the case of Trambaklal Ratilal [1956] 7 S.T.C. 258.. A Bench of two Members of the Sales Tax Tribunal, however, held that the composite article made up of mill-made or powerloom cloth and a rubber solution applied thereto could not be said to be cloth manufactured in a mill or on a powerloom and that this article was not generally known as handloom cloth but as rubberised cloth. They have assumed that it would be cloth but not cloth manufactured in a mill. It further appears that in that case the process which made it rubberised cloth was applied outside a mill. Though the Tribunal has referred to the said decision in Trambaklal Ratilal's case [1956] 7 S.T.C. 258., the judgment does not show how and in what manner that decision was distinguished. In fact, there is no discussion of the earlier decision in Trambaklal Ratilal's case [1956] 7 S.T.C. 258. or as to the view taken in that case that the fact that the uses to which cloth could be put after being subjected to a particulars process were wholly different from the uses to which cloth could be put was not relevant and did not take away the inherent character of cotton fabrics which that article possessed. The Deputy Commissioner of Sales Tax, however, decided the matter before us, as he himself puts in his order, 'on the analogy of this decision of the Maharashtra Sales Tax Tribunal'. He has further stated that he was following the ratio of the decisions in that case because of the reasoning of the Tribunal. The Deputy Commissioner of Sales Tax further held that the earlier decision of the Tribunal in the case of Trambaklal Ratilal [1956] 7 S.T.C. 258. was modified by the Tribunal by its judgment in the case of Messrs. Jaisinh Waterproof Works 10 S.T.D. 118. To us, it appears debatable, whether a Bench of two Members of the Tribunal can modify or reverse a decision of the Bench of three Members of the Tribunal. To this aspect the Deputy Commissioner of Sales Tax, however, did not direct his mind.

8. The above reference by us to the aforesaid decisions would show that the question was highly arguable and not free from doubt. One feature which might be salient and which does not appear in the order of the Deputy Commissioner of Sales Tax is also whether the process to convert cloth into rexine cloth was itself carried out in a mill or not and, if not, whether it would make any difference. In their additional grounds of appeal to the Tribunal, the respondents have contended that they had purchased medium cloth on payment of additional excise duty in lieu of sales tax and had processed such cloth in their mills, and hence even on that ground, they were entitled to the exemption claimed by them. They have also challenged the correctness of the decision of the Deputy Commissioner of Sales Tax on merits that rexine cloth was covered by entry 80 of Schedule B to the Bombay Sales Tax Act, 1953. It is obvious that the said decision in Messrs. Jaisinh Waterproof Works 10 S.T.D. 118 is not on all fours with the respondents' case. Mr. Jetly, the learned counsel for the applicant, strongly relied upon this fact in order to make good his submission that his was not a mistake apparent from the record. We have carefully considered this submission of Mr. Jetly, examined the various decisions referred to by the Assistant Commissioner of Sales Tax and the Deputy Commissioner of Sales Tax and have found that contention of Mr. Jetly that the case of the respondents cannot be said to be on all fours with the case of Messrs. Jaisinh Waterproof Works 10 S.T.D. 118. to be correct. We have also found his contention that the matter is highly arguable and debatable and that any authority or tribunal or court can come to either decision also to be correct. In this view of the matter, it cannot be said that this was a case of a mistake apparent from the record. So for as Mr. Jetly's alternative submission, namely, that even if this was a mistake apparent from the record the Deputy Commissioner of Sales Tax could in exercise of his sup motu powers of revision under section 31(1) of the Bombay Sales Tax Act, 1953, revise and correct such mistake, is concerned, we find it unnecessary to decide the point, since in view of the fact that the present case cannot, in any way, be characterised as a case of a mistake apparent from the record. It may also be mentioned that Mr. Shah, the learned counsel for the respondents, objected to this point being urged before us on the ground that such a contention was never advanced before the Tribunal. This appears to the correct position; but it is also unnecessary to consider this objection because indisputably if this was not a case of a mistake apparent from the record, the Deputy Commissioner of Sales Tax had jurisdiction to revise the order.

9. For the reasons set out above, we answer the two questions referred to us in each of the above references in the affirmative.

10. The Tribunal will now proceed to dispose of all these cases in the light of our judgment and after considering and deciding all the other contentions which had been urged before us on behalf of the respondents but on which it did not give any decision by reason of the fact that it upheld the point of want of jurisdiction argued by the respondents.

11. In view of the facts and circumstances of these cases, in our opinion, a fair order for costs would be that each party should bear and pay its own costs of each of these references.

12. Reference answered in the affirmative.


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