State of Andhra Pradesh vs Synthetic Fibre and Fabrics

Jeevan Reddy, J.—These three tax revision cases were heard together since they raise common questions for consideration. T.R.C. Nos. 191 of 1985 and 50 of 1985 arise from a common order in Tribunal Appeal Nos. 459, 460 and 461 of 1981, dated November 23, 1982. (While T.R.C. No. 191 of 1985 arises from T.A. No. 459 of 1981, T.R.C. No. 50 of 1985 arises from T.A. No. 460 of 1981). The only question which arose for consideration in these two appeals before the Tribunal was whether "plastic straps" are taxable as "plastic articles" under entry 113 of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957, or as "general goods" u/s 5(1) of the Act. The Tribunal held, applying the functional test, that they cannot be treated as "plastic articles" and, therefore, must be taxed as "general goods". T.R.C. No. 59 of 1985 arises from Tribunal Appeal No. 213 of 1983, and the question in this tax revision case is whether "plastic rope", "plastic packing strips", and "synthetic yarn" must be taxed as "plastic articles" under entry 113 of the First Schedule, or should they be taxed as "general goods" u/s 5(1) of the Act. On this occasion the Tribunal did not consider the question on its own, but purported to follow and apply the earlier decisions of the Tribunal. So far as "plastic packing strips" is concerned, it held that the said point is concluded against the Revenue by the decision of the Tribunal in T.A. Nos. 459, 460 and 461 of 1981, dated November 23, 1982, which decision is the subject-matter of T.R.C. Nos. 191 of 1985 and 50 of 1985. So far as "synthetic yarn" is concerned, the Tribunal purported to follow its earlier decision in T.A. No. 213 of 1983 (the number of the appeal is evidently wrong, because T.A. No. 213 of 1983 is the very appeal, the decision wherein is the subject-matter of this T.R.C.), for the assessment year 1979-80, holding that "synthetic yarn" is exigible to tax at 3 per cent under entry 76 of the First Schedule to the Act, and that it is neither taxable as "general goods" u/s 5(1) nor as "plastic articles" under entry 113 of the First Schedule. The Tribunal says that this decision was rendered following a yet earlier decision of the Tribunal in T.A. No. 959 of 1979, etc., dated March 31, 1982, where "synthetic yarn" was held taxable under entry 76 of the First Schedule. So far as "plastic rope" is concerned, the Tribunal relied upon its decision in T.A. No. 959 of 1979, etc., dated March 31, 1982, wherein it is said to have been held that "plastic rope" is exigible to multi-point tax u/s 5(1) of the Act, as "general goods".

The State challenges the opinion and conclusion of the Tribunal in respect of all the three goods in these tax revision cases. It could not, however, be ascertained whether the decision of the Tribunal dated March 31, 1982 in T.A. No. 959 of 1979, etc., has been the subject-matter of any tax revision case in this Court, and if so, what was the result ? We shall, therefore, proceed to consider the matter on merits.

We shall first take up for consideration "plastic packing strips" or "plastic straps", as they are called. These goods are common to all the three tax revision cases before us. It is a plastic strap meant for packing goods. It serves the same purpose as is served by cotton/silk strap/ribbon, and country twine made of jute, which is popularly referred to as "suthli" in Hindi. Such straps are also made of nylon or other artificial material. Until recently these straps were made of either cotton or silk, but now they are also made out of plastic or nylon. The question is whether these straps made of plastic should be taxed as "plastic articles" within the meaning of entry 113 of the First Schedule (which reads "plastic sheets and articles", and taxed at 9 paise in the rupee at the first point of sale in the State), or should they be taxed as "general goods" u/s 5(1) of the Act ? There is no entry in any of the Schedules to the Act relating to straps/strips, whether made of plastic, nylon, cotton, or silk, nor is there any entry relating to "country twine", all of which are used for packing or packaging goods. The Tribunal has taken the view - which view is supported by the learned counsel for the dealers before us - that these straps/strips are used as packing material, and that in the commercial world it is referred to and understood only as packing material, and not as a plastic article. Applying the functional test, or utility test, as it is called, and also the common parlance test, the Tribunal held that this plastic strap which is sold in reels or bundles, cannot be brought within the meaning of "plastic articles" and can, therefore, be taxed only as "general goods" u/s 5(1) of the Act (multi-point tax). Learned counsel for the dealers/assessees placed strong reliance upon a recent decision of the Supreme Court in Atul Glass Industries (P.) Ltd. v. Collector of Central Excise [1986] 63 STC 322 - a case arising under the Central Excises and Salt Act, 1944 - where, the learned counsel says, applying the functional test, it was held that mirrors and wind screens, rear screens, and door screens manufactured for motor vehicles, do not and cannot fall within the entry "glass or glasswares", within the meaning of item 23A(4) of Schedule I to the Central Excises and Salt Act. It was held that while "glass mirrors" fall within the residuary item, i.e., item 68, wind screens, rear screens and door screens manufactured from sheet glass for fitting in motor vehicles must be treated as motor vehicle parts, and they fell under item 34A until the amendment of the said item by the Finance Act, 1979. Inasmuch as the Finance Act, 1979 restricted item 34A to certain commodities specified therein, it was held, these goods which are not specified in that item, must fall under the residuary item, i.e., item 68, thereafter.

It is true that functional test is a very relevant test, but it cannot be applied blindly and mechanically in each case. It is only one of the tests to be applied. The application of test may also vary from situation to situation. We may better illustrate it with reference to the goods concerned herein. If there had been another entry in the First Schedule, or in other Schedules to the Andhra Pradesh General Sales Tax Act relating to "straps/strips used for packing", then there will be little doubt that plastic strips/straps concerned herein would more appropriately fall under such entry, and will not be taxed as "plastic articles" under entry 113. It would be a straight case where functional test would apply. But, in the present case, there is no entry relating to "straps/strips used for packing". The question herein is whether it should be taxed as "plastic articles" under entry 113, or as "general goods" u/s 5(1) of the Act. Now, undoubtedly, strap concerned herein is made of plastic and, therefore, it is a plastic article. The question then arises whether, in such a case, the functional test should be applied and it must be held that plastic strap/strip is not a "plastic article" within the meaning of entry 113. If we go on applying the functional test, there will be no article made of plastic left to fall under entry 113, because every article made of plastic has some or other functional use or utility, as it may be called. The Tribunal has opined that goods like plastic tubs, plastic balls, and plastic pen-stands, etc., would fall within "plastic articles", but not plastic strap/strip. We are at a loss to understand the distinction. Each of the three articles mentioned by the Tribunal as falling under "plastic articles" has also a function or utility. Just as plastic strap is a strap used for packing, plastic tub is a tub used for bathing or storing water. Plastic balls also are balls, and plastic pen-stands also are pen-stands. All these goods, tubs, balls, pen-stands, strap/strip were previously made of metals or cotton/silk/jute, as the case may be. With the advance of technology, several goods which were formerly made of cotton, etc., are now being made of plastic or nylon. To take an example, plastic is used for manufacturing buckets. Formerly buckets were made either of aluminium, or brass or other metals. What we are trying to say is that by applying the functional test mechanically, there will be no article left which would fall within the scope of the expression "plastic articles" in entry 113. This is not to decry the significance of the functional test, but only to emphasize that it is only one of the tests to be applied in such matters, and cannot be applied blindly or mechanically. It is only one of the aids in the matter of interpretation of such entries, and cannot be applied to the exclusion of all other aids, circumstances and considerations. Indeed, this is the approach adopted by the Supreme Court in the case cited. Moreover, the effort should be to give full meaning to the entries in the Schedules to the Act, and not to exclude goods, on one or the other reasoning, from these entries and place them in the category of "general goods" attracting multiple-point tax u/s 5(1) of the Act.

In this context, we wish to reiterate what was said by the Supreme Court as far back as 1963 in the matter of classification of goods (vide : The Collector of Customs, Madras Vs. K. Ganga Setty, . No doubt that was a decision under the Sea Customs Act, 1878, but the ratio of the decision applies equally to the classification of goods under the Sales Tax Act as well. A Constitution Bench of the court observed :

"It is primarily for the Import Control authorities to determine the head or entry under which any particular commodity fell; but that if, in doing so, these authorities adopted a construction which no reasonable person could adopt, i.e., if the construction was perverse, then it was a case in which the court was competent to interfere. In other words, if there were two constructions which an entry could reasonably bear, and one of them which was in favour of Revenue was adopted, the Court has no jurisdiction to interfere merely because the other interpretation favourable to the subject appeals to the court as the better one to adopt."

In Commissioner of Sales Tax, Madhya Pradesh Vs. Jaswant Singh Charan Singh, , the Supreme Court observed, in a case arising under the Madhya Pradesh General Sales Tax Act, that the entries in the Schedules to sales tax enactments should be given a popular meaning, and not scientific or technical meaning. On a review of several decisions, the court observed :

"The result emerging from these decisions is that while construing the word ''coal'' in entry 1 of Part III of Schedule II, the test that would be applied is what would be the meaning which persons dealing with coal and consumers purchasing it as fuel would give to that word. A sales tax statute, being one levying a tax on goods, must, in the absence of a technical term or a term of science or art, be presumed to have used an ordinary term as coal according to the meaning ascribed to it in common parlance."

The same view was reiterated in Dunlop India Ltd. v. Union of India AIR 1977 SC 597. In this case it was reiterated that where the reason given by the authorities for classification of an article under a particular item is foreign to such determination, the court would interfere. The purpose of this exercise is merely to emphasize that functional test is not the only test to be applied in determining whether a particular article falls within a particular entry, and that it cannot be applied to the exclusion of all other tests, aids, and considerations. We also do not agree that in Atul Glass Industries (Pvt.) Ltd. Vs. Collector of Central Excise, functional test alone was applied. The test of commercial parlance was also applied and conclusion arrived at.

Now coming to the goods concerned herein, since the Tribunal has said that it has been consistently taking a particular view, we do not think it appropriate to take a different view in these particular revisions.

The T.R.Cs. accordingly fail and are dismissed. No costs. Advocate''s fee Rs. 400 consolidated.

Petitions dismissed.