Commissioner of Sales Tax, U.P. Vs.
Masneill and Barry Ltd., Kanpur [1985] INSC 242 (19 November 1985)
PATHAK, R.S. PATHAK, R.S.
TULZAPURKAR, V.D.
CITATION: 1986 AIR 386 1985 SCR Supl. (3) 739
1986 SCC (1) 23 1985 SCALE (2)1093
CITATOR INFO: RF 1986 SC1730 (8)
ACT:
U.P. Sales Tax Act, 1948 & Notification
No. ST 3124/X- 1012 (4) - 1964, dated July l, 1966 - Sales Tax - Levy of -
'Ammonia Paper' and' ferro paper ' - Whether "paper other than hand made
paper."
HEADNOTE:
The respondent-assessee, a dealer in
stationery and drawing material, sells ammonia paper and ferro paper. In
assessment proceedings under the U.P. Sales Tax Act, 1948 for the assessment
year 1966-67 the assessee claimed that ammonia paper and ferro paper were
liable to tax as unclassified goods at the rate of two per cent prescribed by
8.3 of the Act. The Sales Tax Officer
rejected the claim holding that ammonia paper and ferro paper fell under the
entry "paper other than hand made paper" included in notification
no.ST-3124/X-1012(4) - 1965 dated July 1, 1966 and its turnover was, therefore,
liable to tax at six per cent.
The appeal as well as the revision petition
of the assessee were dismissed.
At the instance of the assessee a reference
was made to the High Court, which held that "ammonia paper and ferro paper
do not fall within the category of paper".
Dismissing the Appeal of the Commissioner of
Sales Tax, ^
HELD: 1. Ammonia paper and ferro paper do not
fall within the entry "paper other than hand made paper" in the
notification dated July 1, 1966 issued under the U.P. Sales Tax Act, 1948. [743
D]
2. Ammonia paper and ferro paper are used for
preparing prints and sketches of site plans. An impression of the print or
sketch is made on the paper, and it is then exposed to light for a period of
time during which the chemical evaporates resulting in the emergence of the
print or sketch of the site plan. Therefore, ammonia paper and ferro paper
cannot be regarded as paper in the popular sense of that term. Paper is used
for 740 printing or writing or for packing. Ammonia paper and ferro paper are
not employed for any of the purposes and subjected to any of the processes for
which paper, as commonly understood, is generally used. [742 C-E] State of
Uttar Pradesh and Anr. v. Kores (India) Ltd., (1977) . 8 and State of Orissa v.
Gestetner Duplicators (P) Ltd.. (1974) 33 S.T.C. 333, relied upon.
Maharaja Book Depot v. State of Gujarat,
[1979] 2 S.C.R. 138, distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 133R of 1973.
From the Judgment and Order dated 19.2.1973
of the Allahabad high Court in sales Tax Reference No. 357 of 1971.
S.C. Manchanda, R.A. Gupta and Ujjal Singh
for the Appellant.
S.T. Desai, H,K. Puri, M.N. Tandon and
Randhir Chawla for the Respondent.
The Judgment of the Court was delivered by
PATHAK, J. The short question in this appeal by special leave is whether
ammonia paper and ferro paper can be described as "paper other than hand
made paper" for the purposes of the notification No. ST-3124/X-1012(4) -
1965 dated July 1, 1966 issued under the U.P. Sales Tax Act, 194&.
The respondent assessee is a dealer in
stationery and drawing material, and sells ammonia paper and ferro paper.
In assessment proceedings under the U.P.
Sales Tax Act, 1948 for the assessment year 1966-67 the assessee claimed that
ammonia paper and ferro paper were liable to tax as unclassified goods at the
rate of two per cent prescribed by s.3 of the Act. The claim was not accepted
by the Sales Tax Officer who hold that ammonia paper and ferro paper fell under
the entry "paper other than had made paper' included in notification No.
ST-3124/X-1012(4) - 1965 dated July 1, 1966 and its turnover was, therefore,
liable to tax at six per cent. Against the assessment 80 made the assessee appealed,
but his appeal was dismissed by the Assistant Commissioner (Judicial), Sales
lax. A revision petition by the 741 assessee thereafter was dismissed by the
Revising Authority.
At the instance of the assessee a reference
was made to the Allahabad High Court for its opinion on the following question
:
"Whether ammonia paper and ferro paper
fall within the category of paper?" The High Court has expressed the view
that ammonia paper and ferro paper, being chemically coated paper used for
obtaining prints and sketches of site plans, were paper to which a chemical
process had been applied and a chemical coating had been given, and were not
paper in the popular sense of the word, and therefore did not fall within the
entry in the aforesaid notification of July 1, 1966.
Accordingly it answered the question referred
to it in the negative, in favour of the assessee and against the Commissioner
of Sales Tax.
In this appeal, the entire contention on
behalf of the Commissioner of Sales Tax is that the opinion expressed by the
High Court to, erroneous and that upon a proper view ammonia paper and ferro
paper must be regarded as "paper other than hand made paper" within
the meaning of the aforesaid notification of July 1, 1966.
Section 3 of the U.P. Sales Tax Act charges sales
tax on goods sold by a dealer at a specified rate, the charge being imposed on
every sale in the series of sales through which the commodity may pass,
commencing from the manufacturer to the ultimate retail dealer. It imposes a
multi-point tax. Section 3 A of the act, however, provides for the imposition
of sales tax on one only of the sales of the commodity in the series of sales,
the single point being specified by notification by the State Government. If
ammonia and ferro paper fall under the entry "paper other than hand made
paper "mentioned in notification ST-3124/- X1012(4) - 1965 dated July 1,
1966 the turnover of ammonia and ferro paper sold by the assessee is liable to
tax at six per cent. The charge is imposed on the sale either by the manufacturer
or by the importer. Presumably, the assessee is either the manufacturer of
ammonia paper or ferro paper or their importer. If ammonia paper and ferro
paper do not fall within the aforesaid notification the turnover of such paper
is liable to sales tax under s.3 of the U.P. Sales Tax Act at two per cent on
every sale in the series of sales through which the goods pass.
According to the facts admitted between the
parties, the following extract set forth in the assessee's revision petition
explains accurately the nature of ammonia paper and ferro paper :
742 "The ferro and ammonia paper is made
of paper of rough and special texture by applying a chemical process and giving
chemical coating thereon. The chemicals which are used are dye, tartaric acid,
therein, ethylene, glycole and some other chemicals. These chemicals are
absorbed by the base paper and the coated paper is again passed through another
set of rollers so that the chemicals are properly and evenly impregnated in the
base paper. It is only this chemical coating which is important for making the
use of ammonia and ferro paper, otherwise it is nothing but an ordinary rough
base paper. This ferro and ammonia paper has got only this specific use of
obtaining prints and sketches of site plans and it cannot be used as an
ordinary paper because of these special texture and its chemical
properties".
The paper is used for preparing prints and
sketches of site plans. An impression of the print or sketch is made on the
paper, and it is then exposed to light for a period of time during which the
chemical evaporates resulting in the emergence of the print or sketch of the
site plan. Plainly, ammonia paper and ferro paper cannot be regarded as paper
in the popular sense of that term. Paper is used for printing or writing or for
packing. Ammonia paper and ferro paper are not employed for any of the purposes
and subjected to any of the processes for which a paper, as commonly
understood, is generally uses. In State of Uttar Pradesh and Anr. v. Kores
(India) Ltd., [1977] 39 S.T.C. 8, this Court held that carbon paper was not
paper as envisaged by the relevant entry in notification no. ST-3124/X-1012(4)
- 1965 dated July 1, 1966, and referred to the fact that carbon paper was
manufactured by coating tissue paper with a thermosetting ink based mainly on
wax, non-drying oils, pigments and dyes by means of a suitable coating roller
and equalising rod and then passing it through chilled rolls. It is used
between two sheets of plain paper in order to reproduce on the lower sheet that
which is written or typed on the upper sheet, making a replica or carbon copy
of the original document.
The learned Judges observed that carbon paper
could not be applied to the same uses to which paper, as generally understood,
was used, that is to say, for preparing, writing or printing or for packing or
drawing on or for decorating or covering the walls of a room. Indeed, the
learned Judges appear to have approved of this very judgment under appeal when
considering the question whether carbon paper could be regarded as paper within
the aforesaid notification.
743 Learned counsel for the Commissioner of
Sales Tax has invited our attention to Maharaja Book Depot v. State of Gujarat,
[1979] 2 S.C.R. 138, where this Court laid down that exercise books were
included within the term "paper" mentioned in sub-cl. (vii) of Cl.
(a) of s. 2 of the Essential Commodities Act, 1955 and in Item 13 of Schedule I
to the Gujarat Essential Articles Dealer (Regulation) order 1971. The learned
Judges supported their conclusion by reference to the object and purpose of the
Act and the Regulation order. That case in our opinion, is distinguishable from
the instant case. On the contrary, more to the point is the decision of the
Orissa High Court in State of Orissa v. Gestetner Duplicators (P) Ltd., [1974]
33 S.T.C. 333, where it was held that stencil paper was not paper within the
meaning of serial No. 7A of the Schedule to the notification issued by the
State Government under the first proviso to sub-s. (1) of s.5 of the Orissa
Sales Tax Act, 1947.
Accordingly, we agree with the High Court
that ammonia paper and ferro paper does not fall within the entry "paper
other than hand made paper" in notification No. ST-3124/X- 1012(4) - 1965
dated July 1, 1966.
The appeal is dismissed with costs.
A.P.J. Appeal dismissed.
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