Kores India Ltd. vs State of Karnataka

B.B. Naik, M.-The appellant has filed these two appeals against the revisional order passed by the Deputy Commissioner of Commercial Taxes, Bangalore city division, Bangalore under KST/SMR 69 & 70/78-79 dated 13-12-1978 for the year 1973-74 and 1974-75.

The facts of the case are that the Assistant Commissioner of Commercial Taxes, headquarters, Bangalore had passed the assessment order for the year 1973-74 on 31-7-1975, while for the year 1974-75 he had passed the assessment order on 22-5-1976. In these two orders he had levied tax at multi point under section 5(1) on the sales of teleprinter paper rolls and telex paper rolls at Rs. 87,527-61. for the year 1973-74 and Rs. 1,1555-87 for the year 1974-75. The Deputy Commissioner of Commercial Taxes, City Division, Bangalore had taken up so-motu revision and held that the teleprinter and telex paper rolls fall under entry 125 of Second schedule to the Karnataka Sales Tax Act, 1957 as they come under the purview of all kinds of paper liable to tax at a higher rate and they are not general goods. Therefore they were subjected to tax at 6%. Hence this appeal is filed against the said orders.

Sri A.N. Jayaram, the learned advocate represented the cases and contended that the Dy Commissioner of Commercial Taxes has committed an error in law in holding that the teleprinter and telex paper rolls manufactured and sold by the appellant fall under entry 125 of Second schedule to the Act. These goods come under general goods taxable under section 5(1) only. The telex and teleprinter paper rolls cannot be characterised as paper as they have special quality and use. They cannot be used in any other manner. The Deputy Commissioner has mis-understood that all kinds of paper include paper products also which is not correct. The learned counsel who appeared on behalf of the appellant brought to our notice the entries No. 64, 67, 68 and 110 of Second schedule and contended that the entry 64 includes, Precious stones and also the articles in which they were set. Entry 67 includes furs and skins and articles made thereof. Entry No. 68 includes stainles steel sheets and articles made thereof. But entry 125 of second schedule does not include the articles made of paper; it refers only to all kinds of paper. Therefore the telex paper rolls and teleprinter paper rolls are articles of paper and will not fall under entry 125, but they fall under section 5(1). He cites the decision of the Allahabad High Court in the case of Kores (India) Ltd., Kanpoor vs. State of U.P, 26 STC 126. This case was taken up in appeal to the Supreme Court and the Supreme Court in the case of State of Uttar Pradesh vs. Kores India Ltd, 39 STC 8 SC, has held that carbon paper is not paper. Therefore he pleads that the telex paper rolls and teleprinter paper rolls are not paper. Therefore they will not fall under entry 125. Hence he pleads that the order of the revisional authority should be set aside.

Sri Boregowda, the learned State Representative contended that the Uttar Pradesh Sales Tax Act contains the entry "paper other than hand made paper". This entry is not wide enough to cover all kinds of paper as per entry No. 125 of Second schedule to the Karnataka Sales Act, 1957. Therefore the carbon paper was held that it was not paper as it was not meant for writing, typing or printing. But under the Karnataka Sales Tax Act, 1957 carbon paper is specifically included under entry 125. He further contended that the telex paper rolls and teleprint paper rolls are nothing but paper which can be used for writing, printing and typing, and therefore he pleads that the order passed by the revisional authority should be confirmed.

The point for consideration in this case is whether the teleprinter and telex paper rolls are paper falling under entry 125 of Second schedule to the Karnataka Sales Tax Act, 1957.

The entry No. 125 reads as follows:

"125. All kinds of paper including carbon paper but excluding paper falling under S1. No. 55."

The carbon paper which cannot be called as paper as it is commonly understood, is specifically included in this entry, but this entry excludes the paper falling under Sl. No. 55 The Sl. No. 55 of Second Schedule includes Cinematographic plates paper. From this it is clear that the Cinematographic plates paper would have been taxed under entry 125 only if it was not specifically excluded from that entry as it is also a kind of paper. The entry 125 is wide enough to include all kinds of paper whether big or small in size and of any kind or colour and whichever use it is put to. In the instant case the learned counsel on behalf of the appellant produced before us a sample of telex paper roll and teleprinter paper roll and on examination of which it is seen that the appellant has purchased the paper in big sizes from the mills and has cut into sizes which will fit into the machines of teleprinters and telex machines. The paper has not undergone any process. It is used for receiving the information which are typewritten by special machanism. The Supreme Court in the State of Uttar Pradesh vs. Kores India Ltd it is held as follows:

"From the above definitions, it is clear that in popular parlance, the word ''paper'' is understood as meaning a substance which is used for bearing writing, or printing, or packing, or for drawing on, or for decorating, or covering the walls."

From the definition if we examine whether the telex paper rolls and teleprinter paper rolls can be used for writing, printing etc., the answer to this question will be in the affirmative. Even though these paper rolls are specifically meant for these, machines, they will not lose the character of paper which can be used for writing and printing. Therefore we hold that the teleprinter paper rolls and telex paper rolls fall under entry 125 as they are kinds of paper. The teleprinter and telex paper rolls cannot be called as articles of paper but paper in length rolled on a reel to make it convenient for use in teleprinter and telex machines. The learned advocate of the appellant contended that it is doubtful whether these articles fall under entry 125 or under section 5(1) and the benefit of doubt should be given to the tax payer. It is seen that the Madhya Pradesh High Court has held in the case of Laxmi Motor Stores vs. Commissioner of Sales tax, 47 STC 118, that when a commodity is covered by a specific entry and it is further possible to include within the purview of a general entry, then the said commodity is to be assessed under the specific entry. Therefore the lower authorities are right in levying the tax as per special entry No. 125 of Second schedule. Hence the appeals fail.

In the result both the appeals are dismissed.