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State of Orissa Vs. Orissa Fisheries Development Corporation Limited and ors. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtOrissa High Court
Decided On
Case NumberS.J.C. Nos. 113 to 116 and 185 of 1973 and 48 to 51 and 149 to 151 of 1974
Judge
Reported in[1976]37STC25(Orissa)
AppellantState of Orissa
RespondentOrissa Fisheries Development Corporation Limited and ors.
Appellant AdvocateStanding Counsel (S.T.)
Respondent AdvocateB.K. Mohanty, ;N.N. Bhattacharya and ; B. Agarwalla, Advs.
Cases ReferredT. Commissioner v. S. S. Navigation Co. Ltd.
Excerpt:
.....example, casein from skimmed milk and soy-bean meal from soy-beans. here the water is driven off and the short molecules join up end to end like a chain of paper clips, to form the long chain polymer called nylon. plastic articles convey a sense of hard material such as toys, slippers, trays,.cups and saucers, frames and the like......of the notification dealing with the taxable goods would not cover nylon articles. accordingly, nylon goods would be exigible to tax at the general rate under sub-section (1) of section 5 of the act and the departmental authorities have gone wrong in holding that nylon goods being included in entry no. 7-c of the notification are exigible to tax at the higher rate of 7 per cent. 5. mr. bhattacharya appearing for one of the assessees advocated the contention that 'nylon twine' is nothing but 'artificial silk' within the ambit of section 14(vii) of the central sales tax act. therefore, according to the learned counsel, relying on the fourth proviso to section 5(1) of the state act, the rate of tax cannot exceed three per cent as per provision in section 15 of the central act. learned.....
Judgment:

R.N. Misra, J.

1. These are references made under section 24(1) of the Orissa Sales Tax Act (hereinafter referred to as the 'Act') by the Sales Tax Tribunal on application made by the State of Orissa. In S. J. C. Nos. 113 to 116 of 1973, the following questions have been referred :

(1) Whether, on the facts and in the circumstances of the case, the Member, Additional Sales Tax Tribunal, has not misdirected himself in law in reducing the assessments to the returned figures

(2) Whether, on the facts and in the circumstances of the case, nylon yarn is taxable at the rate of seven per cent as per serial No. 7-C of the schedule of taxable goods or at the rate of five per cent as unclassified goods ?

In S. J. C. No. 185 of 1973, the following question has been referred:

Whether, in the facts and circumstances of the case, the nylon and filament twine required for the preparing fishing net are taxable at seven per cent as per serial No; 7-C or as an unclassified item taxable at the general rate of tax of five per cent under Section 5 of the Orissa Sales Tax Act ?

In S. J. C. No. 48 of 1974, the questions referred are as follows:

(1) Whether, on the facts and in the circumstances of the case, the Member, Additional Sales Tax Tribunal, was correct in holding that nylon yarn is artificial silk yarn and as such taxable at the rate of five per cent as unclassified goods

(2) Whether, on the facts and in the circumstances of the case, nylon yarn is taxable at the rate of 7 per cent as per serial No. 7-C of the schedule of taxable goods ?

In S. J. C. Nos. 149 to 151 of 1974, the following question has been referred:

Whether, in the absence of a definition of the word 'nylon' in the sales tax statute, the Tribunal was justified to hold that nylon, not being understood as plastic in popular and commercial sense, is liable to be taxed only at the rate of 5 per cent or whether it should be taxed at the rate of 7 per cent, as per serial No. 7-C of the schedule of taxable goods?'

2. Under Section 5(1) of the Act, the tax payable by a dealer is prescribed to be 5 per cent on his taxable turnover. The first proviso reads thus:

Provided that the State Government may, from time to time, by notification and subject to such conditions as they may impose, fix a higher rate of tax not exceeding 7 per cent or any lower rate of tax payable under this Act on account of the sale or purchase of any goods or class of goods specified in such notification.

In exercise of power vested in the State Government under the first proviso a notification was published on 30th December, 1957, whereunder the turnover in respect of different items of notified goods have been subjected to tax at varying rates. Serial No. 7-C of the notification provides that sale of:

Plastic celluloid, bakelite goods and goods made of similar substance, plastic sheets and fabrics and articles made of such sheets or fabrics

is taxable at 7 per cent. The sole point of dispute in these cases is as to whether the turnover of nylon yarn and nylon twine is exigible at the normal rate indicated in Section 5(1) of the Act or would be covered by serial No. 7-C of the notification of taxable goods and be exigible to tax at the enhanced rate of 7 per cent. In some of these cases, assessments at the normal rate had been made, but reassessment proceedings were undertaken on the footing that the turnover had been assessed at too low a rate.

3. Nylon as such is not within the entry. It is contended on behalf of the taxing department that nylon is a plastic product or is goods made of similar substance and, therefore, sale of nylon yarn and nylon twine is exigible at 7 per cent. In the case of Commissioner of Sales Tax v. Jaswant Singh Charan Singh [1967] 19 S.T.C. 469 (S.C.) the question for consideration was as to whether 'charcoal' was covered within the meaning of 'coal'. On behalf of the State it was argued that (i) coal and charcoal are different products, one being a mineral product, and the other prepared from wood and other articles by human agency; (ii) while construing such entries, the dictionary meaning should not be preferred to the popular meaning or the meaning in the commercial sense; and (iii) the legislative policy in reference to the term 'coal' shows that it is not used by the legislature in India so as to include charcoal. The Supreme Court referred to its own decision in the case of Ramavatar Budhaiprasad v. Assistant Sales Tax Officer, Akola [1961] 12 S.T.C. 286 (S.C.) and to certain English authorities. The principle for guidance was indicated in the following manner:

The result emerging from these decisions is that while construing the word 'coal' in entry 1 of Part III of Schedule II, the test that would be applied is what would be the meaning which persons dealing with coal and onsumers purchasing it as fuel would give to that word. A sales tax statute, being one levying a tax on goods, must, in the absence of a technical term or a term of science or art, be presumed to have used an ordinary term as coal according to the meaning ascribed to it in common parlance. Viewed from that angle both a merchant dealing in coal and a consumer wanting to purchase it would regard coal not in its geological sense but in the sense as ordinarily understood and would include 'charcoal' in the term 'coal'. It is only when the question of the kind or variety of coal would arise that a distinction would be made between coal and charcoal; otherwise, both of them would in ordinary parlance as also in their commercial sense be spoken as coal.

In the case of Commissioner of Sales Tax v. S. N. Brothers [1973] 31 S.T.C. 302 (S.C.). the question for consideration before the Supreme Court was whether 'food colour' and 'essence' were covered by the entries 'dyes and colours' and 'scents and perfumes'. The tests indicated by the Supreme Court in Jaswant Singh Charon Singh's case [1967] 19 S.T.C. 469 (S.C) as also by the Madras High Court in the case of Kishinchand Chellaram v. Joint Commercial Tax Officer, Chintadripet [1968] 21 S.T.C. 367 were approved. Dua, J., speaking for the court, endorsed the view expressed by the Madras High Court and stated: .The extreme, peculiar and scientific meaning of the goods which might sometimes deviate from the popular meaning, cannot prevail. The meaning which the trade, Government officials and statutes attribute to the words 'artificial silk' was considered by the High Court to be the ordinary and popular meaning of that expression....

In the case of Avadh Sugar Mills Ltd. v. Sales Tax Officer [1973] 31 S.T.C. 469 (S.C.) the true meaning of the term 'oil-seed' was required to be found out by the Supreme Court. Hegde, J., spoke for the court thus:

We shall now proceed to consider whether groundnuts are seeds and further whether they are oil-seeds. In finding out the true meaning of the term 'oil-seeds' found in the sales tax law in question, we are not to refer to dictionaries. We are to find out the meaning ascribed to that term in commercial parlance....

In the case of Mangulu Sahu Ramahari Sahu v. Sales Tax Officer [1973] 32 S.T.G. 494 (S.C) (a matter which went in appeal from this Court), the point for consideration was whether 'lemons and chillies' were included in 'vegetables'. The Supreme Court observed:

A word which is not defined in the Act but which is a word of every day use must be construed in its popular sense...

4. Admittedly, 'plastic' and 'nylon' are words without statutory definition. In the absence of definition, assistance of the dictionary can be taken for the purpose of finding out what is meant by the words, but the ultimate guidance has to be drawn from what meaning these words convey in the commercial field. According to the Shorter Oxford English Dictionary, the word 'plastic' has a Latin root and derivatively means 'a thing which can be moulded; moulding, or giving form to clay, wax, etc.

The Reader's Digest Great Encyclopaedic Dictionary indicates the meaning of the word 'plastic' thus:

Any of a group of substances, natural or synthetic, chiefly polymers of high molecular weight, that can be moulded into any form by heat or pressure or both, as bakelite, cellulose acetate, nylon, etc.

The Corpus Juris Secundum, Vol. 70, gives the following meaning of 'plastic':

The term applies to a substance capable of being moulded and pressed into form. A substance is plastic which changes conformation in response to pressure above a critical degree peculiar to the given substance, but which retains conformation when pressure upon it falls below the critical degree....

The Encyclopedia Americana, 1961 Edition, Volume XXII, dealing with 'plastic' states:

The modern plastic industry deals chiefly with moldable materials manufactured from organic compounds, that is, combinations of carbon with hydrogen, oxygen, nitrogen and other elements. The inorganic molding materials, such as concretes, cements, and ceramics, and also rubber, an organic substance, are not generally included within the scope of plastic trade as it is known today, inasmuch as the industries utilizing these materials are considerably older and were already individually organised and developed prior to the advent of the newer plastics.

'Organic plastics' is said to be of four types:--

(1) Synthetic resins; (2) natural resins; (3) cellulose derivatives; and (4) protein substances....

Synthetic resin plastics: These are known commercially under such trade names as bakelite, cataliu, beetle, glyptal and vinylite. They are used in an ever-growing variety of applications, such as electrical parts, automotive parts, closures, containers, costume accessories including buttons, buckles, and jewellery, hardware, table and kitchen-ware, and miscellaneous novelties....

Natural resins: These are more familiarly known to the public by their common names, such as shellac, rosin, asphalt, and pitch, than by the proprietary names, attached by manufacturers to molding compositions prepared from them. They are used in industry for the production of the fusible type of molded product as distinguished from the infusible articles formed by some of the synthetic resins....

Cellulose derivatives: The third type of organic plastics, the cellulose derivatives, is probably the most widely used and best known of any of these materials. To this group belong celluloid plastics used for making toys, toilet-ware, pen and pencil barrels, and the like; cellulose acetate commonly used in the celanese type of rayon, safety film, and in place of the slightly less expensive nitrated cellulose when non-flammability is desired and regenerated cellulose, familiar to all as the wrapping material cellophane and the common or viscose type of rayon....

Protein plastics: Such plastics are perhaps best known according to the source of the raw material--for example, casein from skimmed milk and soy-bean meal from soy-beans. These protein substances are thoroughly kneaded into a colloidal mass, which is then formed into sheets, rods, or tubes by suitable presses or extrusion devices. The formed pieces are hardened by treatment with formaldehyde. The finished products, such as buttons, buckles, beads, and game counters, may be machined from blanks out from the hardened material or may be shaped from the colloidal casein mass and then hardened....

'Plastic' as a verb conveying the idea of susceptibility to influence or flexibility has been in wide use in English language from the eighteenth century. But the discovery of plastic in the commercial sense seems to be a matter of twentieth century origin. The Encyclopedia Americana further indicates .Polyamide resins are made from polyamides and polybasic acids. The basic raw materials for nylon resins are castor-oil, from which sebacic acid (a ten carbon dibasic acid) is obtained, and phenol which, by hydrogenation and oxidation, yields adipic acid (a six carbon dibasic acid). Hexa-methylene diamine made from adipic acid and decamethylene diamine made from sebacic acid are typical diamines used in synthesizing these resins. Nylon resin was made available on a large scale by E. I. Du Pont de Nemours and Company, Inc., during 1940. It quickly proved its suitability for hosiery to manufacturer and consumer alike and was accepted as a superior bristle material for tooth brushes, hair brushes, and brushes for miscellaneous industrial purposes. It has proved a tremendous military asset to the United States to have nylon available to replace silk in the manufacture of parachutes. Nylon moldings are being widely used for cams, bearings, fastening devices, and other industrial mechanical parts, many of which are buried within operating mechanisms.

'Nylon' according to the Reader's Digest Great Encyclopaedic Dictionary is:

Any of a group of long chain, synthetic polymeric amines of which the structural units or molecules can be oriented in one direction, and which are thus capable of being formed into filaments of great tensile strength; a textile fibre of this structure and character; garments, esp. women's stockings, made of this.

The Webster's Universal Dictionary gives the meaning of the word 'nylon' as:

A synthetic fibre derived from coal, water and air; it can be made into threads as fine as natural silk, or fibres as coarse as tooth brush bristles.

The Encyclopedia Americana dealing with 'nylon' states:

Nylon, the first of the truly synthetic textile fibers, was the culmination of fundamental research on linear superpolymers instituted in 1928 by a group of E. I. Du Pont de Nemours and Company, Inc., chemists headed by Dr. Wallace H. Carothers. Polymer 66, so called bacause there are 6 carbon atoms in the diamine and 6 in the dibasic acid used in making the polymer, was one of the many materials investigated. In October, 1938, this textile fiber was announced as nylon, a name which can be properly used for a considerable family of long chain synthetic linear polymeric amides from which textile fibers can be made.

A plant for commercial production started operations at Seaford, Del., in December, 1939. On 15th May, 1940, the first nylon stockings went on sale in stores throughout the United States. This yarn served the need for something to take the place of silk in parachutes and also had other military applications during World War II. After the war, when it again became available for civilian purposes, its use extended from hosiery into clothing, home furnishings, and also into the industrial field.

The process for manufacture starts with high pressure synthesis of adipic acid and hexamethylene diamine, starting with such basic raw materials as coal, petroleum, natural gas, furfural (made from corn cobs, oat hull, and other agricultural by-products), air and water. The adipic acid and hexamethylene diamine are combined in water to form a complex salt, consisting of electrically charged diamine and dibasic acid parts. The water solution of the nylon salt is heated in a sort of pressure cooker called an autoclave. Here the water is driven off and the short molecules join up end to end like a chain of paper clips, to form the long chain polymer called nylon....Nylon is made in the form of multi-filament continuous yarn, mono-filament continuous yarn, staple, and tow. Fine mono-filament yarn is used in knitting sheer hosiery and also in sheer woven and knit fabrics. Multi-filament yarn is used in fabrics for dresses, lingerie, blouses, bathing suits, and upholstery. Staple is found in heavier fabrics for dresses, slacks, and outer-wear. It is often blended with other fibers to add strength and wear resistance. Nylon is also used in socks, under-garments, shirts, sport clothes, hand-knitting yarns, curtains, draperies, hawsers, fish nets, tires, industrial fabrics and typewriter ribbons.

Admittedly, both plastics and nylon are synthetic products. To the scientist engaged in experiments in his laboratory, plastic and nylon would very often appear to be essentially one product. Plastic by its very quality of being pliable would admit of various combinations. Nylon as a synthetic material would also admit of composition. It would not, however, be appropriate to carry the idea of the scientist into the words for getting their true meaning. In the commercial field, plastic and nylon have definite connotations and on account of the fact that they are alike products or are drawn from essentially the same class of articles, there is no overlapping in the understanding of the words. Plastic articles convey a sense of hard material such as toys, slippers, trays,. cups and saucers, frames and the like. Now is the world of plastics and it would be embarrassingly difficult for us to give a catalogue of plastic goods in the market. Nylon on the other hand is taken as a part of the textile world and is understood either as the twine or thread of the fabric made out of it. Undoubtedly, the imaginative manufacturer with the assistance of the scientific knowledge available to him makes a hundred and one uses of nylon today, but essentially in the commercial field, nylon belongs to the textile group while plastics belong to a non-textile section. This is a broad distinctive feature between the two and a man in the trade or the consumer seeking to buy them in the market does not make any confusion. To him the difference is clear. Plastic is 'plastic' and nylon is 'nylon'. He does not bear in mind the scientific basis--the fact that 'nylon' is drawn from plastic, and 'plastic' is a common term covering nylon and hundred and one articles within it. We are required, following the guideline indicated by the Supreme Court in the cases referred to above, to attach a common parlance meaning and to understand the term in its commercial sense. In that sense 'nylon' (both twine and fabric) is different from 'plastic goods'. Therefore, nylon-ware or twine would not be covered by the term 'plastic'. Entry No. 7-C of the notification dealing with the taxable goods would not cover nylon articles. Accordingly, nylon goods would be exigible to tax at the general rate under Sub-section (1) of Section 5 of the Act and the departmental authorities have gone wrong in holding that nylon goods being included in entry No. 7-C of the notification are exigible to tax at the higher rate of 7 per cent.

5. Mr. Bhattacharya appearing for one of the assessees advocated the contention that 'nylon twine' is nothing but 'artificial silk' within the ambit of Section 14(vii) of the Central Sales Tax Act. Therefore, according to the learned Counsel, relying on the fourth proviso to Section 5(1) of the State Act, the rate of tax cannot exceed three per cent as per provision in Section 15 of the Central Act. Learned Counsel for the taxing department claims that such a contention is not open to be advanced as the matter was not raised before the Tribunal and cannot be said to arise out of the appellate order in view of the rule laid down by the Supreme Court in the case of /. T. Commissioner v. S. S. Navigation Co. Ltd. [1961] 42 I.T.R. 589 (S.C.). It is also his contention that the assessee had suffered assessment at the rate of five per cent and the liability worked out on such basis had become final. The dispute has arisen because of the Sales Tax Officer raising the additional demand under Section 12(8) of the Act on the footing that the assessee's turnover had been assessed at too low a rate. We think both these objections are insurmountable and preclude us from entertaining the new contention canvassed for the first time before us.

6. It is unnecessary to answer each of the questions separately. In our view, a combined answer would serve the purpose and our answer, therefore, is:

Nylon-ware and nylon twines are not covered by entry No. 7-C of the notification dated 30th December, 1957, made in exercise of the powers under the first proviso to Section 5(1) of the Orissa Sales Tax Act.

The assessees in these references shall be entitled to costs except in the first batch of cases (S. J. C. Nos. 113 to 116 of 1973), where the assessee went ex parte. Hearing fee is assessed at rupees one hundred for each of the assessees.

N. K. Das, J.

I agree.


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