1. In these tax revision cases filed by the assessees the only question that arises for consideration is whether pile carpets will fall under item 4 of the Third Schedule to the Tamil Nadu General Sales Tax Act, 1959.
2. The assessees were assessed for the year 1974-75 under the Tamil Nadu General Sales Tax Act, 1959, hereinafter referred to as the State Act as well as under the Central Sales Tax Act. In the Course of the assessment under the Central Sales Tax Act, the assessees disputed their liability on a turnover of Rs. 27,143 relating to the inter-State sales of pile carpets. In the course of the assessment under the State Act the assessees disputed the turnover of Rs. 1,08,668.44 relating to sales of pile carpets. The assessing authority brought the said two items of disputed turnover to tax treating them as sales turnover of pile carpets. Appeals against the said assessments to the Appellate Assistant Commissioner having failed, the matter was taken on appeal to the Sales Tax Appellate Tribunal.
3. Before the Tribunal the assessees filed a petition stating that the sum of Rs. 1,08,668.44 is a mistake for Rs. 4,59,102.71. The Tribunal did not, however accept this plea based on a mistake or error. Therefore the Tribunal proceeded on the basis that the disputed turnover under the State Act is only Rs. 1,08,668.44. Dealing with the merits, the Tribunal held that pile carpets will not fall under item 21 of the First Schedule to the Central excise tariff and that consequently it will not fall under item 4 of the Third Schedule to the State Act. The Tribunal had placed reliance on an order of the Government of India, Ministry of Finance dated 14th April, 1972 holding that carpets manufactured by Bharat Carpets Limited will not fall under item 21 of the Central excise tariff. The Tribunal thus rejected the assessees' case that notwithstanding the said order of the Government of India, pile carpets should be treated as woollen fabrics. The view of the Tribunal has been challenged by the assessees in these cases contending that as pile carpets fall under item 21 of the First Schedule to the Central excise tariff, it should only be treated as woollen fabrics and therefore, it should be taken to fall under item 4 of the Third Schedule to the State Act.
4. Item 4 of the Third Schedule takes in cotton fabrics, woollen fabrics and rayon or artificial silk fabrics, as defined in items 19, 21 and 22 respectively of the First Schedule to the Central Excise and Salt Act, 1944. Woollen fabrics mentioned in section 14 of the Central Sales Tax Act and in item 4 of the Third Schedule to the State Act refers to the definition in item 21 of the First Schedule to the Central Excises and Salt Act as the Central Excise Department is levying duty on the manufacturers of woollen fabrics. Therefore the carpets manufactured by the assessee should be taken to fall under woollen fabrics mentioned in the Central Sales Tax Act or in the State Act. According to the assessee the same article cannot be classified differently by the Central Excise Department in respect of the manufacturers and by the Commercial Taxes Department in respect of distributors. The learned counsel for the assessee also drew our attention to the decision of this Court in Narasimha Agency v. State of Tamil Nadu (1977) 40 STC 217 where collar stiffening material was held to come under cotton fabrics and claimed that on the same analogy woollen carpets sold by the assessee would also be taken to fall under woollen fabrics. The learned counsel for the Revenue contended that the articles sold by the assessee were only pile carpets and in the purchase invoices the description of the carpets is 'super-cut-pile', and that though the manufacturers of the pile carpets were levied excise duty under item 21 of the First Schedule to the Central Excise and Salt Act, they have challenged the levy on the ground that they are not woollen fabrics and the assessee who is only a distributor cannot take up the stand different from the manufacturers.
5. The Tribunal found that the manufacturers themselves have classified the goods as super-cut-pile which indicates that the article has been sold only as pile carpets. Having found that the articles sold are pile carpets, the Tribunal went into the further question as to whether it falls under item 21 of the First Schedule to the Central Excises and Salt Act. Item 21 of the First Schedule to the Central Excises and Salt Act reads as follows :-
'21. 'Woollen fabrics' means all varieties of fabrics manufactured wholly of wool or which contain 40 per cent or more by weight of wool and includes blankets, lohis, rugs, shawls and embroidery in the piece in strips or in motifs.'
6. The above item refers to cloth made of wool, i.e., material used for covering or wrapping the body of humans. The word 'fabric' normally means manufactured cloth, but the definition in item 21 takes in a few more items such as bedding materials by specifically including them within the definition. By using the principle of 'noscitur a sociis' the term can be interpreted to refer only to materials used for covering the body of humans or for use along with bedding, and carpets are usually intended to cover only flooring or staircases. They cannot be used as garments for humans or for their bedding. Thus carpets cannot come within the scope of item 21 of the Central Excises and Salt Act. At this stage it is significant to note that M/s. Bharat Carpets who had manufactured the carpets sold by the assessee were assessed to excise duty in respect of the carpets manufactured by them treating them as coming under item 21 of the First Schedule to the Central Excises and Salt Act. They questioned the levy before the Government of India, Ministry of Finance and the Government of India by their order dated 14th April, 1972 held that the carpets manufactured by M/s. Bharat Carpets Ltd., were not liable for excise duty by observing :
'The tufted carpets are produced on special type of machines, known as tufting machines which are operated in the country only by M/s. Bharat Carpets Ltd. in their factory at Faridabad. The carpets are made in a machine containing about a thousand needless and each needle is fed by a separate strand of woollen yarn through a tube leading to the needle. The needles force the yarn through a piece of stretched hessian at the other end of which a looper pulls the yarn a short distance before a sharp edge automatically cuts it. In this way, the woollen tufts are placed in hessian roll automatically. The resultant article, as it comes out of the machine, has the appearance of pile on one side and other side continues to have ordinary stitch. This side is then coated with a compound of rubber latex mixed with extenders like zinc oxide, sulphur and other chemicals like calcium carbonate, and is passed on to a curing chamber where the latex is cured with the aid of power.'
7. After describing the process of manufacturing, the Government of India has also gone into the question as regards classification and held the carpets were only wool tufted jute fabrics and not woollen fabrics. The observations in this connections are as follows :
'It is clear from the process of manufacture that a woollen pile, called a tuft, is raised on a jute fabric. The Government of India therefore consider that the material produced by M/s. Bharat Carpets can, therefore, be aptly called a wool tufted jute fabric. Now the question to decide is whether because of the percentage composition, the tufted fabric in question is a woollen fabric and it so, whether it is covered by the term 'rugs' used in tariff item No. 21. Government consider that, to be termed a woollen fabric, the fabric must have a woollen base, it may be a woven fabric, it may be a non-woven, bonded or even felted (fabric). It should be a material in which the wool fibre or yarn has been laid one upon the other by weaving or hand pressing. Theoretically, this test can be extended to fabrics made of wire or leather scrips, as the Collector has opined, where there is some kind of weaving of warp and weft, to bonding. Even the warp and weft may not be a necessary ingredient in a fabric as in the case of felted fabrics; yet an essential factor would be that the fibres are laid one upon the other. It this criterion is applied, the sort of tufting that is done in the carpeting in question would not constitute a base fabric of wool. On the other hand, the base fabric in this case is of jute. The tufting or raising of the pile would be similar to embroidering if that has been done in patches and flowery designs, in which case the percentage of wool content to be determined would have to be in relation to the base fabric only. The proviso to tariff item 21 reads as follows : 'Provided that in the case of embroidery in the pieces, in strips or motifs, the percentage referred to above shall be in relation to the base fabrics which are embroidered.'
The explanation under this very item reads as follows :
'Explanation I. - 'Base fabrics' means fabrics falling under sub-item (1) of this item, which are subjected to the process of embroidery.'
Thus it would be seen that the tariff item itself deals with two different things; one, the base fabrics and two, the embroider on it. Therefore the percentage of wool in a case like this would have to be determined in relation to the base fabric. It may be true that the manner in which the carpeting is produced by M/s. Bharat Carpets, it could not be termed as a process of embroidering, but as already pointed out above, it would be similar to embroidering except for the difference that in the present case it is all over the fabric. Therefore, in view of both the proviso and the explanation of the item, it is clear that a fabric has to have a wool base of atleast 40 per cent by weight of wool in it, to be termed as a woollen fabric. If instead of the jute based fabric in this case it had been a wool base fabric, with a wool fabric or yarn content of 40 per cent, there would have been some justification in classifying the carpet in question as woollen fabric under item 21.'
8. Thus, after a detailed consideration, the Government of India had held that the carpets in question cannot be termed as 'woollen fabrics' and that the manufacturers of such carpets are not liable to pay excise duty under item 21.
9. The question whether non-woven woollen felts were 'woollen fabrics' came up for consideration before the Supreme Court in Union of India v. Gujarat Woollen Felt Mills (1977) II SCJ 143 : 1977 E.L.T. 24 (SC). While holding that the felts were not 'fabrics' and that the woollen fabrics were not wide enough to cover every material made of wool, the Supreme Court made the following observations :
'....... entry 21 describes woollen fabrics as meaning all varieties of fabrics manufactured out of wool, barring the exceptions mentioned, including blankets lohis, rugs, shawls and embroidery in the piece, in strips or in motifs. If the term 'woollen fabrics' in this entry had been used in its technical or scientific sense and, if in that sense, it was wide enough to cover even woven or knitted material which is wool-based, then it is difficult to explain why the entry should specifically mention blankets, rugs and shawls as being included within it. No one could possibly be in any doubt in respect of these few items if the term was so pervasive, and there was no reason for singling out these specific objects. On the contrary, the mention of these items suggests that the word 'fabrics' in entry 21 has been used to mean woven material in which sense it is popularly understood, and blankets, rugs and shawls, etc., have been specifically included in the entry out of abundant caution to indicate that 'woollen fabrics' in entry 21 means not only woollen garments but also woollen material used as covering or for similar other purposes....'
10. In Porrits & Spencer (Asia) Ltd. v. State of Haryana - 1983 E.L.T. 1607 (SC) : (1978) 42 STC 433 the Supreme Court had to consider the word 'textiles' occurring in item 30 of Schedule B of the Punjab General Sales Tax Act, 1948. In that case it was held that the dryer felts made out of cotton or woollen yarn by the process of weaving according to the warp and woof pattern and commonly used as absorbents of moisture in the process of manufacture in paper manufacturing units fall within the ordinary and common parlance meaning of the word 'textiles'. The Supreme Court observed that the word 'textiles' in item 30 of Schedule B 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 and that 'textiles' normally means woven fabric in ordinary parlance and that when yarn, whether cotton, silk woollen, rayon, nylon or of any other description or made out of any other material is woven into a fabric, what comes into being is a 'textile' and it is know as such, and that the method of weaving adopted may be the warp and woof pattern, as is generally the case in most of the textiles, or it may be any other process or technique. In Delhi Cloth and General Mills Co. Ltd. v. State of Rajasthan : 1980(6)ELT383(SC) a similar view has been taken by the Supreme Court wherein rayon tyre cord fabric manufactured for use in the manufacture of tyres has been held to be woven fabric in which the intermediate process of weaving the weft thread across the warp cord is an integral stage of manufacture, and therefore, it is a rayon fabric covered by item 18 of the Schedule to the Rajasthan Sales Tax Act, 1954, and as such exempted from sales tax under the Central Sales Tax Act, 1956. In that case the Supreme Court held that in determining the meaning or connotation of words and expressions describing an article or commodity the turnover of which is taxed under a sales tax enactment, if there is one principle fairly well settled, it is that the words or expressions must be construed in the sense in which they are understood in the trade by the dealer and the consumer and that it is they who are concerned with it, and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted.
11. Thus it is clear that only woollen garments and woollen materials used as covering for the body or the bedding and for similar purposes will come under item 21 of the First Schedule to the Central Excises and Salt Act and item 4 of the Third Schedule to the State Act and therefore, the carpets dealt by the assessee should be treated only as pile carpets with jute base having woollen tufts and that therefore, it will not fall either under item 4 of the Third Schedule to the State Act or under section 14(x) of the Central Sales Tax Act. Therefore, the Tribunal is right in holding that the turnover in question should be treated only as relating to pile carpets.
12. We, therefore, upheld the order of the Tribunal in this case. The tax case is, therefore, dismissed with costs. Counsel's fee Rs. 500.