Read :- 1. Application dated 17th Jan, 2005
from M/s. Santogen Exports Ltd.
2. This office letter dated 9th
June, 2006 calling the applicant for hearing on 10th
January, 2006.
Heard :- Shri Mahabirprasad S. Deora, STP attended on
behalf of the applicant.
PROCEEDINGS
(Under Section 52(1) (e) of the Bombay Sales Tax Act, 1959)
No.DDQ-11/2005/Adm-5/4/B-6 Mumbai,dt. 27/03/2006
An application is received from
M/s. Santogen Exports Ltd. of Tax Centre N-402/403,4th
flr., 26A, Chandivali Saki Vihar Road,Andheri (East),Mumbai-400
072 holder of Registration Certificate No.400072/S/1527
w.e.f. 1.4.1996, posing the question for determination as
“Whether the sale of Terry Towel is exempted under Entry 134
of Group A under the notification issued under section 41 of
the Bombay Sales Tax Act,1959 ?“. The applicant desires to
know whether the sale witnessed by the
Sale Invoice No. 583 dt. 11/01/05 whereby the product “Terry
Towel” is sold, is exempt from tax in view of the above
mentioned notification.
BACKGROUND OF THE CASE
02.
The applicant company is engaged in the manufacture and
export of Terry Towels at its factory situated at Khopoli,
Dist. Raigad in Maharashtra. The goods are sold in
Maharashtra as well as out of Maharashtra and India.
The applicant submits that “Terry Towel” is included in
the word “Towel” for the purpose of Notification entry
A-134. The applicant submits that his unit cannot be
branded as a Composite Mill, as a Composite Mill is supposed
to be a full fledged Composite Textile Unit manufacturing
yarn and then fabrics and involving processing activities.
The applicant has no resources to manufacture yarn and is
therefore purchasing yarn from the market and then weaving
the towels on his weaving machines. Hence the applicant is
of the opinion that his unit can be described as a Powerloom
Unit and not a Composite Mill. The notification entry 134 of
Group A pertains to towels, chaddars and wall hangings
produced on handlooms or powerlooms not being a composite
mill. The applicant is of the view that the towels
manufactured and sold by him are exempted from whole of tax
since the notification entry specifically includes items
produced on handlooms or powerlooms but excludes items
produced in a composite mill.
The applicant, as a matter of precaution,
seeks hereby to confirm his views about the impugned product
being covered by the said
notification
entry.
DETAILS SUBMITTED ALONGWITH APPLICATION
03.
The applicant has submitted the following details along
with the application :-
1) Copy of the Invoice No.
583
dated
11/01/05
selling therein “Terry Towels”.
2) Letter of Authority authorizing Shri. Mahabirprasad
S. Deora, STP to attend on behalf of the applicant.
3) Certification from Superintendent of Central Excise
certifying therein that M/s. Santogen Exports Ltd. is not a
Composite Mill and are having weaving and processing
facilities.
CONTENTION AND HEARING
04.
The applicant is of the opinion that his product “Terry
Towel” falls under
Entry 134 of Group A of the notification issued under
section 41 of the Bombay Sales Tax Act, 1959 and thereby
exempt from whole of tax.
The notification entry specifically excludes items produced
in a composite mill and the applicant not being a composite
mill would squarely be covered by the scope of the entry. In
brief the applicant is of the opinion that his product would
be exempted from tax by coverage under notification entry
134 of Group A. He seeks confirmation of his opinion
through this application for determination.
The case was kept for hearing on 10th
January, 2006. Shri Mahabirprasad S. Deora, STP, duly
authorized, attended on behalf of the applicant. The facts
as presented in the application were reiterated in the
hearing.
OBSERVATIONS
05.
I have gone through the facts of the case. The
applicant has posed the question as regards the rate of tax
applicable to their product “Terry Towel” sold vide Invoice
No.
583 dt. 11/01/05.
TREATMENT UNDER BST ACT, 1959
Let me first look at the treatment to the impugned
product under the Bombay Sales Tax Act, 1959 so far 3
relevant notifications under section 41 are reproduced
below:
1. Notification No. A-80 :
|
Col. 1
|
Col.2 |
Col.3 |
Col.4 |
Col. 5 |
|
Notification Entry |
Class of sales or purchase. |
Extent of Exemption |
Conditions |
Period |
|
A-80 |
Sales or purchases made on or after the 27th
day of March, 1987 by a dealer of towels and Solapuri
Chaddars |
Whole of Tax |
(i)
The goods referred to in Column (2) are produced
on powerlooms by an independent powerloom owner, not
being a textile mill.
(ii)
The claimant dealer has not collected tax
separately in the bill/ cash memo/ invoice issued to
customer.
(iii)
Notwithstanding anything contained in Column (3),
if the tax has been paid or otherwise recovered in part
or full in respect of the period starting on the 27th
March,1987 and ending on the 1st May,1998
[both days inclusive] then the exemption shall be
subject to following conditions :
1)
where tax is paid or recovered in full then no
exemption shall be granted,
OR
2) Where tax is paid or recovered in part then the
exemption shall be restricted to the extent of unpaid
tax. |
27/03/1987 to
31/03/1999 |
2.
Notification No. A-123 :
|
Col. 1
|
Col.2 |
Col.3 |
Col.4 |
Col. 5 |
|
Notification Entry |
Class of sales or purchase |
Extent of Exemption |
Conditions |
Period |
|
A-123 |
Sales or Purchases of towels and Solapuri Chaddars by a
dealer made during the period commencing on the 27th
March, 1987 and ending on the 31st March,1999 |
Whole of Tax |
(i)
The goods referred to Column (2) were produced on
handlooms or in the composite mills situated outside the
State.
(ii)
The claimant dealer has not collected tax
separately in the Bill/Cash Memo/Invoice issued to
customer.
(iii)
Notwithstanding anything contained in Column (3),
if the tax has been paid or otherwise received in part
or full in respect of the period commencing on the 27th
March,1987 and ending on the 31st March,1999
(both days inclusive) then the exemption shall be
subject to the following conditions :-
(1)
Where tax is paid or recovered in full then no
exemption shall be granted
OR
(2)
Where tax is paid or recovered in part then the
exemption shall be restricted to the extent of unpaid
tax. |
27/03/1987
to
31/03/1999 |
3.
Notification No. A-134 :
|
Col. 1 |
Col.2 |
Col.3 |
Col.4 |
Col. 5 |
|
Notification Entry |
Class of sales or purchase |
Extent of Exemption |
Conditions |
Period |
|
A-134 |
Sales or purchases by a dealer made on or after 1st
April, 1999 of towels, chaddars and wall hangings
produced on handlooms or powerlooms not being a
composite mill |
Whole of Tax. |
(i)
The claimant dealer has not collected tax
separately in the bill/cash memo/invoice issued to
customers.
(ii)
Notwithstanding anything contained in Column (3),
if the tax has been paid or otherwise recovered in part
or full in respect of the period commencing from the 1st
April,1999 then the exemption shall be subject to
following conditions:-
(1)
Where tax is paid or received in full then no
exemption shall be granted
OR
(2)
Where tax is paid or recovered in part then the
exemption shall be restricted to the extent of unpaid
tax.
|
01/04/1999 to
31/03/2005 |
What the above notifications convey could be
summarized thus :-
1) (a) During the period from 27-3-1987 to 31-3-1999,
towels were exempted
from whole of tax.
(b) The exemption at (a) above was
subject to certain conditions, such as :-
(a) The towels should have been produced on powerloom/handloom
[not being a textile mill/composite mill].
(b) The claimant dealer should not have collected tax
separately.
(c) If the tax is paid or recovered in full, then no
exemption shall be granted.
(d) If
the tax is paid or recovered in part, then the exemption
shall be restricted to the extent of unpaid tax.
2)
a) During the period from 1-4-1999 to 31-3-2005,
towels were again exempt from the whole of tax.
(b) The
exemption at (a) above was subject to certain conditions
such as :-
(a) The exemption was restricted only to towels produced
on handloom or powerloom, not being a composite mill.
(b) The claimant dealer should not have collected tax
separately in the bill.
(c) If the tax is paid or recovered in full, then no
exemption shall be granted.
(d)
If the tax is paid or recovered in part, then the
exemption shall be restricted to the extent of unpaid tax.
Thus, tax on towels, if produced on handloom/powerloom
was Nil, subject to fulfillment of conditions as mentioned
above.
The applicant’s sale is on date 11/01/2005.
Hence, notification entry A-134 would be applicable to his
case. Now as mentioned above, the notification entry becomes
applicable only if the conditions mentioned therein are
satisfied. The notification entry A134 pertains to sales or
purchases by a dealer made on or after 1st April,
1999 of towels produced on handlooms or powerlooms not being
a composite mill.
Here I would not enter into the debate as
regards whether ‘Towels’ would include ‘Terry Towels’. A
‘Towel’ as per Webster’s Dictionary means “a piece of
absorbent material used to dry something”. A “Terry cloth”
as per Webster’s Dictionary means “a cotton pile fabric
made of uncut loops, used e.g. for toweling”. The
notification entry pertains to Towels and Towels would
include all types of towels unless they are specifically
excluded from the scope of Towels meant for the purpose of
the said notification entry. The notification entry has no
such exclusion clause. Under Central Excise, towels are
covered by the tariff heading 6304 – Other furnishing
articles, excluding those of heading 9404.
6304 92 50 Terry Towel
6304 92 60 Towels, other than terry towel
Thus towels are classified under the same
tariff heading. There actually is no relevance of this
treatment under the Central Excise Act as under the Bombay
Sales Tax Act,1959, the item notified is ‘Towels’ which
includes in its fold all types of towels.
Hence now what is to be seen is (a) whether
the applicant unit is a handloom or powerloom unit AND
(b) whether the applicant unit is/is not a composite mill.
The applicant has produced a Certification
from the Superintendent of Central Excise, certifying
therein that M/s. Santogen Exports Ltd. is not a Composite
Mill and that they are having weaving and processing
facilities.
In view of the above, let me take a look at
the meaning of a Composite Mill.
1]
A ‘Composite Mill’ has been defined in one of the judgments
under Central Excise as “ a ‘Composite Mill’ is one which
contains two departments amongst others, namely spinning and
weaving departments and the yarn manufactured in spinning
department is consumed in weaving department of the same
mill “– Collector v. Kohinoor Mills -1995 (77)
E.L.T.42 (S.C.).
2] For the purposes of the notifications
(e.g 62,63) under Central Excise , “ a “composite mill”
means a manufacturer who is engaged in the processing of
fabrics with the aid of power along with weaving or knitting
or crocheting of fabrics within the same factory and
includes a multi-locational composite mill, i.e., a public
limited company which is engaged in the processing of
fabrics with the aid of power along with weaving or knitting
or crocheting of fabrics in one or more factories owned by
the same public limited company.” [Notification No.
52/2001-C.E. (N.T.) dated 29-6-2001 as amended by
Notification No. 8/2003- C.E. (N.T.), dated 1-3-2003]
The above definitions assume the fact that spinning and
weaving/knitting/crocheting must be carried on in the same
mill. Thus a composite mill is one in which both the
activities of spinning and cloth manufacturing exist in the
mill. In the context of the present case, the fact is that
the applicant‘s unit does not manufacture yarn. The yarn is
purchased from the market and then the towels are woven on
their weaving machines. Thus, the activities of spinning and
weaving do not co-exist in the applicant’s unit. Hence, the
applicant is rightly of the opinion that his unit can be
described as a Powerloom Unit or a weaving unit and not a
Composite Mill. This fact is also confirmed in writing by
the Superintendent of Central Excise.
The facts that the applicant does not
manufacture yarn as well as the certificate by the
Superintendent of Central Excise go to prove that the
applicant’s unit cannot be regarded as a composite mill.
CONCLUSION
06.
In view of the above, I am of the opinion that the
applicant’s unit, not being a composite mill, can avail of
the benefits of the
notification
issued under section 41 of the Bombay Sales Tax Act, 1959.
As a result, the rate of tax on “towels” sold vide Invoice
No.
583 dt.
11/01/05
would be NIL, being covered by the above entry,
i.e., A-134 subject to fulfillment of conditions as
reproduced herein above specified for the purpose of the
said notification.
07.
In view of the deliberations put forth hereinabove, I
proceed to pass an order as follows :
ORDER
(Under Section 52(1) (e) of the Bombay Sales
Tax Act, 1959)
No.DDQ-11/2005/Adm-5/20/B-06
Mumbai, dt. 27.03.2006
The question posed for determination as regards
the applicability of
Entry 134 of Group A under the notification issued under
section 41 of the Bombay Sales Tax Act, 1959
to the sale of “Terry Towel” evidenced by Invoice No.
583 dt. 11/01/05 is
herein answered in the affirmative. The transaction would,
therefore, attract tax @ NIL rate
subject to the fulfillment of conditions as reproduced
hereinabove specified for the purpose of the said
notification.
(B. C. KHATUA)
Commissioner of Sales Tax,
Maharashtra State, Mumbai
