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Supreme Court of India
The Commissioner, Commercial … vs S/S Rujhan Studio on 2 March, 2021Author: Hon’Ble Dr. Chandrachud
Bench: Hon’Ble Dr. Chandrachud, M.R. Shah
CA 793/2021
1
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal No 793 of 2021
(Arising out of SLP(C) No 3885 of 2021 @ SLP(C) D No 12951 of 2020)
The Commissioner, Commercial Tax, Appellant
U.P., Lucknow
Versus
S/s Rujhan Studio Respondent
WITH
Civil Appeal No 794 of 2021
(Arising out of SLP (C) No 3886 of 2021 @ SLP(C) D No 12953 of 2020)
Civil Appeal No 795 of 2021
(Arising out of SLP (C) No 3887 of 2021 @ SLP(C) D No 12962 of 2020)
JUDGMENT
Signature Not Verified
Digitally signed by
Chetan Kumar
Date: 2021.03.08
16:59:58 IST
Reason:
CA 793/2021
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Dr Dhananjaya Y Chandrachud, J
Civil Appeal No 793 of 2021 [Arising out of SLP(C) No 3885 of 2021]
1 Delay condoned.
2 Leave granted.
3 By a judgment and order dated 11 September 2019, a Single Judge of the High Court of
Judicature at Allahabad dismissed a Sales/Trade Tax Revision 1 instituted by the
Commissioner of Commercial Taxes.
4 The respondent is a dealer registered under the provisions of the Uttar Pradesh Value
Added Tax Act 2008 (“UP VAT Act 2008”). The respondent carries on the business of
purchasing textiles and selling dress material for women. A survey was conducted at
the establishment of the respondent on 9 March 2010 by the Special Investigation
Branch. During the course of the survey, the statement of a partner of the respondent
was recorded in which the nature of the business was described in the following terms:
“The business of manufacture and unstitched suit, salwar, kameeze,
dupatta etc. is carried out. The work of design/embroidery is carried out
on kameeze, Kurta and Dupatta. The sewing process is carried out in the
neck portion of the kameeze/kurta. No stitching is done on Salwar. “PECO”
is done on the borders of Dupatta. The entire activity is got completed with
the help of machine/manual labour. The process of “Tanka” as carried out
on Kurta/Kameeze is commonly known as “Rough Stitching” i.e., “Kachchi
1 Sales/Trade Tax Revision Defective No 95/2019
CA 793/2021
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Silai”.”
5 During the course of the assessment, a similar statement on oath was made by the
representatives of the dealer before the Assessing Authority, which was recorded by the
Tax Assessment Officer in the following terms:
“…Shri Bhushan Kumar Malhotra, authorised the representative, appeared
on behalf of the trader and stated on oath that the business is of
unstitched dress material. The cloth is purchased in bulk. Thereafter, by
cutting it as per the length of the suit of the ladies and cutting as per the
size of the neck of the shirt, the cutting of different sizes of neck is done
and thereafter, the embroidery of the same is done. The head
scarves/chunni, which is made of the thin cloth, the edges of the same are
picoed. All the head scarves are not picoed. No work is done on the lower
garment (salwar). The pieces of the same are cut and by matching with the
shirt and headscarf, the set of the same is made out. We do only the
cutting and embroidery work in the factory. This is the 1st year of the
business and even now the business is continuing. From the business year
2008 – 09 till now, the nature has remained the same.
The cloth, threads, stars, beads are used as the material…”
6 The dealer was assessed to a tax of Rs 99,42,870 for assessment year 2009-2010, by
treating the product as an unclassified item under Schedule V of the UP VAT Act
2008, under which the rate of tax is 12.5%. The respondent filed an appeal 2 before
the Additional Commissioner, Gr.-2, (Appeal) IV, Ghaziabad. By an order dated 13
February 2013 the first appellate authority partly allowed the appeal and classified
the goods as “textile made ups” which are subject to a duty of 4% under Serial
2 Appeal No 83/2013
CA 793/2021
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Number 16 of Schedule IIA. The order passed by the appellate authority was assailed
by the appellant and by the respondent before the Commercial Tax Tribunal
(“Tribunal”). By an order dated 27 April 2019, the Tribunal allowed the appeal filed
by the respondent and rejected the appeal of the Revenue. The product sold by the
respondent was classified as a ‘textile’ within the meaning of Entry 21 of Schedule I
and was, therefore, held to be exempt from tax. The appellant unsuccessfully
challenged the decision in a revision before the High Court which has been dismissed
in limine by the impugned judgment and order dated 11 September 2019.
7 Notice was issued in the Special Leave Petition filed by the appellant on 28 August
2020. The Office Report indicates that the respondent has been served. No
appearance has been entered on behalf of the respondent.
8 In order to facilitate the disposal of the appeal, it would be necessary to advert to the
relevant entries in the Schedules to the UP VAT Act 2008 which have a bearing on the
controversy. Schedule I provides a list of exempt goods. Serial No 21 of Schedule I is
extracted below, both in its English and Hindi descriptions:
Sr. No. Name and description of goods
21 Silk Fabrics; Handloom cloth of all kinds; handloom
shawls & lois whether plain, printed, dyed or
embroidered; Dhoties and Saris; textiles of following
varieties manufactured on power- loom excluding the
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items described in schedule-II:-
(a) cotton fabrics of all varieties;
(b) rayon or artificial silk fabrics, including staple
fibre fabrics of all varieties;
(c) woolen fabrics of all varieties;
(d) fabrics made of a mixture of any two or more of the
above fibres, viz. cotton, rayon, artificial silk, staple fibre
or wool, or of a mixture of any one or more of the said
fibres with pure silk fibre;(e) canvas cloth.
The Hindi Text of the said entry is also reproduced
hereunder:
िस� फ़ैिब्रक, सम� प्रकार का ह� डलूम कपड़ा, शाल एवं लोई,
चाहे सादी, छपी �ई, रं गी �ई अथवा कढ़ी हो; धोती और साड़ी,
पावरलूम पर िनिम�त िन� प्रकार के कपड़े िजसके अं तग�त अनु सूची
दो म� विण� त व�ुए नहीं ह� –
1) सभी प्रकार का सू ती कपड़ा;
2) रे यन या कृित्रम रे शम का कपड़ा िजसके अं तग�त सभी िक़�
का �े िपल फ़ाइबर फ़ािब्र� भी है ;
3) सभी िक़� का ऊनी कपड़ा;
4) उपयु� � फ़ाइबस� अथा� त् सू ती, रे यन, कृित्रम रे शम, �े िपल
फ़ाइबर या ऊन के िकसी भी दो या अिधक के िमश्रण या शु �
िस� के साथ उपयु� � फ़ाइबस� के िकसी एक या एकसे
अिधक के िमश्रण से बना कपड़ा;
5) कैनवास का कपड़ा
CA 793/2021
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Schedule II provides a list of goods which are taxed at 4%, of which Entry 16 is
in the following terms:
Sr. No. Name and description of goods
List of goods taxed at 4%
16 Bed sheets (other than unstitched bed sheets),
pillow cover & other textile made ups.
The Hindi Text of the said entry is also reproduced
hereunder:
बेडशीट (अन��चड बेडशीट को छोड़कर), तिकया का िगलाफ
एवं कपड़े की बनी अ� व�ुय�
Finally, it is necessary to advert to Schedule V which furnishes a list of goods which
are taxed at 12.5%. The residuary entry in that regard is as follows:
SCHEDULE – V
List of goods taxed at 12.5%
Sr. No. Name and description of goods
1 All goods except goods mentioned or described in
CA 793/2021
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Schedule-I, Schedule-II, Schedule-III and Schedule-IV of
this Ordinance.
9 The issue which falls for consideration in the present appeal is whether the commodity
which is described as an “embroidered ladies suit”, which the respondent claims to be
unstitched, would fall within the description of a ‘textile’ under Entry 21 of Schedule I
(as the respondent asserts). The other competing entries are Entry 16 of Schedule II
which is “other textile made ups” and the residuary entry in Schedule V.
10 We would first deal with the question as to whether the product falls within the
description of Entry 21 of Schedule I. Before dealing with the nature of the product, it
would be material to advert to the definition of the expression “manufacture” in
Section 2(t) which reads as follows:
“2(t) “manufacture” means producing, making, mining, collecting,
extracting, mixing, blending, altering, ornamenting, finishing, or
otherwise processing, treating or adapting any goods; but does not
include such manufacture or manufacturing processes as may be
prescribed;”
11 The definition of the expression “manufacture” is in broad and comprehensive terms.
The definition, inter alia, includes altering, ornamenting, finishing or otherwise
processing, treating or adapting any goods. The respondent purchases textile material
CA 793/2021
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in bulk which is then cut to the length of a salwar kameez suit for women. The work of
sewing, design and embroidery is carried out on the neck portion of the kameez or
kurta. No stitching is done on the salwar. The dupatta is subjected to ‘peco’ work.
12 The respondent contended before the Tax Assessment Officer that it carries on the
work of cutting and embroidery in its factory. On the basis of the description which
was indicated by the respondent, it is difficult to accede to the view of the Tribunal that
the product will fall within the description contained in the list of exempt goods in
Schedule I, more particularly, Entry 21. Entry 21 deals with silk fabric, handloom cloth
of all kinds and textiles of several varieties manufactured on power loom excluding
items which are described in the Second Schedule. This includes cotton fabric of all
varieties, rayon or artificial silk fabric, woolen fabric made of a mixture of two or more
of the listed fabrics and canvass cloth. It is evident from the work which is carried on by
the respondent in its factory that the textile material which is purchased in bulk is cut
to the size of a salwar kameez. The court must have regard to the common parlance
meaning and understanding of the expression ‘textile’. Evidently, the respondent cuts
the textile material which is then subjected to the work of embroidery on the neck
portion. The textile material which is cut may not assume the character of a final article
of apparel which can be worn by the consumer because the final work of stitching is not
carried out by the respondent. This is done to ensure that the ultimate consumer may
get the salwar kameez stitched to their specifications and dimensions. What is sold is
an unstitched ‘suit’ and not textile fabric. The important point to note is that as a result
CA 793/2021
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of the work which is carried out by the respondent in the factory, the material ceases to
be textile within the meaning of Entry 21 and assumes the character of an article which
has a distinct meaning and description.
13 This leaves the Court with the issue as to whether the view of the Assessing Authority
was correct or whether the order of the first appellate authority should be maintained.
The Assessing Authority taxed the product under the residuary entry in Schedule V and
subjected it to at the rate of duty of 12.5%. The First Appellate Authority on the other
hand took the view that the product should be classified under Entry 16 of Schedule II
and would be subject to the rate of 4%. The residuary entry would be attracted if no
other specific entry applies. The appellant had also challenged the order of the first
appellate authority before the Commercial Tax Tribunal. Entry 16 of Schedule II refers
to bedsheets (other than unstitched bedsheets), pillow covers and “other textile made
ups”. This description in the English version is also in accordance with the text in Hindi.
14 Mr R K Raizada, learned senior counsel appearing on behalf of the appellant submits
that the expression “other textile made ups” is not a stand-alone entry, but occurs in
the same entry together with bedsheets (other than unstitched bedsheets) and pillow
covers. Hence, the learned counsel submitted that the expression “other textile made
ups” should be read in conjunction with the other goods which are specified in Entry 16.
There is merit in the submission which has been urged, for two reasons. Firstly, the
expression in Entry 16 of Schedule II is “other textile made ups”. A textile made up is an
CA 793/2021
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article which is manufactured or stitched from any type of cloth. In the present case,
going by the case of the respondent, the product is unstitched because the ultimate
work of stitching the salwar kameez is yet to be performed and is not carried out by
the respondent. In the circumstances, the product can certainly not be called as a
textile made up. Secondly, the entry “other textile made ups” is not a residuary entry
for Schedule II, but is used in conjunction with the expression “bedsheets and pillow
covers”. The expression “other textile made ups” must be read ejusdem generis with
the articles which precede it and should hence comprehend goods of the same class
and description. The general entry “other textile made ups” must receive a meaning
and connotation bearing in mind the preceding items of Entry 16. Hence, it is not
possible to accept the view of the first appellate authority that the product falls within
the purview of Entry 16 of Schedule II.
15 In view of the above discussion, the product would fall for classification under Serial 1
of Schedule V which is a residuary entry which covers all goods except those which are
mentioned and described in Schedules I, II, III and IV.
16 The High Court declined to exercise its jurisdiction in the revision which was filed by the
Department. The High Court was of the view that the factual findings of the Tribunal did
not warrant interference. The High Court has manifestly erred in ignoring the plain
meaning of the entries in the Schedules to the UP Vat Act 2008 which have been
discussed earlier in the course of this judgment.
CA 793/2021
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17 For the above reasons, we allow the appeal and set aside the impugned judgment and
order of the Single Judge of the Allahabad High Court dated 11 September 2019. For the
reasons which we have indicated, we are also of the view that the judgment of the
Tribunal as well as of the first appellate authority would have to be set aside. The order
of the Assessing Authority would stand restored.
18 The appeal shall stand disposed of in the above terms. There shall be no order as to
costs.
19 Pending applications, if any, stand disposed of.
Civil Appeal No 794 of 2021 [Arising out of SLP(C) No 3886 of 2021] &
Civil Appeal No 795 of 2021 [Arising out of SLP(C) No 3887 of 2021]
1 Leave granted.
2 These appeals arise from a judgment and order of the Allahabad High Court dated 11
September 2019 in a batch of three Sales/Trade tax revisions. The High Court has
disposed of the revisions by a common judgment and order. For the reasons which are
indicated above while allowing the appeal filed by the Department against the
CA 793/2021
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judgment of the High Court, the present appeals shall stand disposed of in terms of the
judgment in Civil Appeal No 793 of 2021.
3 Pending applications, if any, stand disposed of.
……………..……..…………….…………………………J.
[Dr Dhananjaya Y Chandrachud]
………………………….………..……………….………..J.
[M R Shah]
New Delhi;
March 02, 2021
CKB
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