Holding

A later notification under Section 3‑A can be treated as a combined notification that withdraws the earlier exemption under Section 4 and imposes tax, so the later notification prevails.

Summary

The Commissioner of Sales Tax, U.P. appealed against the assessment of tax on patta, a cotton belting material, sold by Agra Belting Works. The State had earlier exempted "cotton fabrics of all varieties" from tax by a 1958 notification under Section 4 of the U.P. Sales Tax Act, 1948. A later 1973 notification under Section 3‑A imposed a 7% tax on "beltings of all kinds" without expressly withdrawing the earlier exemption. The High Court held that, in the absence of a withdrawal notice, the exemption continued and the tax could not be levied. The Supreme Court, by majority, reversed this view, holding that the power to vary the tax rate under Section 3‑A includes the implicit authority to withdraw a prior exemption, so the 1973 notification operates as a combined notice withdrawing the exemption and imposing tax. The dissenting judge upheld the High Court’s reasoning. Consequently, the appeal was allowed and the tax assessment was restored.

Issues considered

Whether a notification issued under Section 3‑A of the U.P. Sales Tax Act, 1948 can override an earlier exemption notification issued under Section 4 without an explicit withdrawal.
Whether the power to vary the rate of tax under Section 3‑A inherently includes the power to withdraw a class‑wide exemption granted under Section 4.
How conflicting notifications under the same statute should be interpreted and which provision prevails.

Legislation cited

U.P. Sales Tax Act, 1948s. 3, s. 3-A, s. 4

Subjects

sales taxexemptionnotificationSection 3-ASection 4tax rate variationinterpretation of statutesbeltingcotton fabric

Judgment

COMMISSIONER, SALES TAX, U.P. A
v.
AGRA BELTING WORKS, AGRA

APRIL 29, 1987

[R.S. PATHAK, C.J.I., RANGANATH MISRA B
AND B.C. RAY JJ.]

L U.P. Sales Tax Act, 1948-Section 3-A-lmposition of sales tax on
'be/tings of all kinds'-Effectof Notifications of 1958 and 1973.
't The State Government Issued a Notification on November 25, c
- 1958 in exercise of power vested nuder Section 4 of the U.P. Sales Tax
Act, 1948. This Notification exempted 'cotton fabrics of all varieties'
from sales tax. Under it, patta as an item of cotton fabric stood exemp-
ted from tax liability. Subsequently, another Notification was issued on
f_ .. December 1, 1973 nuder Section 3· A of the Act. This Notification
prescribed a rate of tax higher than that provided by Section 3 of the D
Act which contains the charging provision and prescribes a uniform
rate of tax on sales. Section 3-A empowers the State Government to
modify the rate of tax by Notification. This Notification of 1973 was
U..ued without withdrawing the earlier Notification of 1958.

The High Court, affirming the order of the Tribunal, held that In E
the absence of a Notification withdrawing the earlier Notification of
1958, sales tax wonld not be exlgible in tfrms of the Notification of 1973.

- ~
Allowing the Appeal,

HELD: (Per majority Pathak, CJI and Ranganatb Misra, J., F
--y Ray, J. dissenting)

1. The High Court was not justified in holding that in the absence
of a notification withdrawing the earlier Notification of 1958, sales tax
would not be exlgible in terms of the Notification of 1973. The order of
the Tribunal, which has been affirmed by the High Court, is set aside G
and the assessment restored. [96G I

~)..
2. The Notification of 1958 issued under Section 4 of the Act
exempted 'cotton fabrics of all varieties' from sales tax. The Notifica-
lion of 1973 under Section3·Aofthe Act prescribed sales tax of7% on
the sale ofbeltings of all kinds. There is no dispute that patta is a kind of H
93
94 SUPREME COURT REPORTS [1987] 3 S.C.R.

A belting material and, on being treated as cotton fabric, was exempted +
from sales tax. [95FG]

3. Section 3 is the charging provision; Section 3-A authorises vari-
ation of the rate of tax and Section 4 provides for exemption from the
tax. When after a Notification under Section 4 granting exemption from
B liability, a subsequent Notification under Section 3-A prescribes the rate
of tax, the intention is to withdraw the exemption and make the sale
liable to tax at the rate prescribeil in the Notification. [96B-D]

4. As the power both for the grant of exemption and the variation
of the rate of tax vests in the State Government and it is not the require-
ment of the Statute that a Notification of recall of exemption is a condi-
c tion precedent to imposing tax at any prescribed rate by a valid Notifi-
cation under Section 3-A, the second Notification can easily be treated as
a combined Notification-both for withdrawal of exemption and also
for providing higher tax. [96D-E]

D 5. The exemption was in regard to a class of goods and while the
exemption continues, a specific item has now been notified under Sec-
tion 3-Aofthe Act. [96FJ

(Per Ray, J_dissenting)

E 1. Cotton beltings fall within 'beltings of all kinds' as notified
under Section 4 of the Act, being exempt from the imposition of sales
tax. As there is a general exemption granted by the Notifications issued --J,_
in 1957 and 1958 exempting 'cotton fabrics of all kinds', it is not possi-
ble to hold, in any view of the matter, that it will be excisable to sales tax
on the basis of the Notification dated December 1, 1973 under Section
F 3-A of the said Act, by the Government. [98F; G-H]

2. So long as the general exemption granted under Section 4 with
regard to 'cotton fabrics of all kinds' continues, no sales tax can be
imposed on beltings of all kinds which fall within the 'cotton fabrics of
all kinds' and the general exemption under Section 4 will prevail over
G the Notification made under Section 3-A of the Sales Tax Act. [99GH]

3. It is not possible to subscribe to the view that since the Notifica-
tion under Section 3-A has been made subsequent to the Notification
issued under Section 4 of the Act, the subsequent Notification under
Section 3-A will prevail over the general exemption granted under Sec-
H tion 4 of the Act. [99H; JOOA]
COMMR. SALES TAX, U.P. v. AGRA BELTING {MISRA, J.] 95

+ Porritts & Spencer Asia Ltd. v. State of Haryana, [1978) 42 A
S.T.C. 433 (SC); State of Tamil Nadu v. Navinchandra & Company,
(1981] (48) S.T.C. ll8 (Madras); Delhi Cloth and General Mills Co.
Ltd. v. State of Rajasthan and Others, [1980) 4 S.C.C. 71; Commis-
sioner of Sales Tax v. Mis Dayal Singh Kulfi Wala, Lucknow, [1980)
U.P.T.C. 360 and Commissioner of Sales Tax v. Rita Ice Cream Co.,
Gorakhpur, [1981] U.P.T.C.1239, referred to. B

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1134
j (NT) of 1987.

From the Judgment and Order dated 2.3.1984 of the Allahabad
High Court in Sales Tax Revision No. 146 of 1983.
c
Prithvi Raj, Ashok K. Srivastava for the Appellant.
)-
S.T. Desai, K.B. Rohtagi, S.K. Dhingra, Baldev Atreya and
Shashank Shekhar for the Respondent.
D
The following Judgments of the Court were delivered

RANGANATH MISRA, J. Special leave granted. Delay of six
days is cpndoned. The short question for consideration in this appeal
at the instance of the Revenue is whether the High Court was justified

- in holding that in the absence of a notification withdrawing the earlier E
notification dated 25.11.1958 made in exercise of power vested under
section 4 o1 the U.P. Sales Tax Act, 1948, Sales Tax would not be
exigible in terms of the notification dated 1. 12. 1973 issued under sec-
tion 3A of that Act.

The notification of 1958 exempted 'cotton fabrics of all varieties' F
from sales tax. It is not disputed tha, under it sale of patta, the goods
in question on being treated as cotton fabric was exempted from sales
tax. The notification of 1973 made under section 3A of the Act pres-
cribed sales tax of seven per cent on the sale of beltings of all kinds.
There is no dispute now that patta is a kind of belting material.
G
Section 3 of the Act contains the charging provision and pres-
cribes a uniform rate of tax on sales. Section 3A empowers the State
Government to modify the rate of tax by notification. The notification
of 1973 in fact prescribes a rate of tax higher than provided by section
3. In 1958, under the notification referred to above, patta as an item of
cotton fabric stood exempted from tax liability. The High Court has H
96 SUPREME COURT REPORTS [1987] 3 S.C.R.

referred to some of its earlier decisions and has concluded thus:
A
"Thus the consistent view of this court throughout has been that
by issuing a separate notification under section 3A, the earlier
exemption granted under section 4 of the Act cannot be nega-
tived. If the State wanted to tax 'beltings of all kinds', it has to
B amend the general notification issued under section 4 by deleting
cotton fabric belts from the notification issued under section 4 of
the Act."

As has been pointed out above, section 3 is the charging provi-
sion; section 3A authorises variation of the rate of tax and section 4
provides for exemption from tax. All the three sections are parts of the
c taxing scheme incorporated in the Act and the power both under sec-
tions 3A as also under section 4 is exercisable by the State Government
only. When after a notification under section 4 granting exemption
from liability, a subsequent notification under section 3A prescribes
the rate of tax, it is beyond doubt that the intention is to withdraw the
D exemption and make the sale liable, to tax at the rate prescribed in the
notification. As the power both for the grant of exemption and the
variation of the rate of tax vests in the State Government and it is not the
requirement of the statute that a notification of recall of exemption is a
condition precedent to imposing tax at any prescribed rate by a valid
notification under section 3A, we see no force in the contention of the
E assessee which has been upheld by the High Court. In fact, the second
notification can easily be treated as a combined notification-both for
withdrawal of exemption a'ld also for providing higher tax. When
power for both the operations vests in the State and the intention to
levy the tax is clear we see no justification for not giving effect to the
2nd notification. We would like to point out that the exemption was in y·
F regard to a class of goods and while the exemption continues a specific
item has now been notified under section 3A of the Act.

The appeal is allowed. The order of the Tribunal which has been
affirmed by the High Court is set aside and the assessment is restored.
Parties are directed to bear their respective costs throughout.
G
B.C. Ray, J. I have had the privilege of going through the judg-
ment rendered by my learned brother but I am unable to concur with
the reasonings recorded by my learned brother in his judgment so far
as it relates to the scope and effect of the notification dated 1.12.1973
made under Section 3A of the U .P. Sales Tax Act, 1948 by providing
H for imposition of sales tax on "beltings of all kinds" for the reasons
given hereunder:-
COMMR. SALES TAX. U.P. v. AGRA llELTING (MISRA. J.] 97

Un<ler Section 4 of the U .P. Sales Tax Act, 1948 the Govern- A
ment issued two notifications No. S.T. 4486/x dated 14.12.1957 and
No. 4064/x-960(4)/58 dated 25.11.1958 whereby "cotton fabrics of all
kinds" were exempted from the imposition of sales tax under the Act.
Thereafter on 1st of December 1973 a notification was issued by the
Government under Section 3-A of the said Act which introduces in the
Schedule in Item No. 8 "beltings of all kinds" for imposition of sales B
tax. The sole question arising in this appeal is whether beltings of all -
kinds are excisable to sales tax by virtue of the notification dated
1.12.1973 even though they fall within "cotton fabrics of all kinds"
which are exempted from tax by virtue of the notifications dated
14.12.1957 and 25.11.1958. Similar qnestion arose in the case of Por-
ritts & Spencer Asia Ltd. v. State of Haryana, [1978] 42 S.T.C. 433 C
(SC) before this Court for consideration. It was held by this Conrt that
the words "all variel!es of cotton, woollen or silken textiles". In item 30
)._ "•

of Schedule B to the Punjab General Sales Tax Act must be inter-
preted according to its popular sense, meaning "that sense which
people conversant with the subject matter with which the statute is
dealing would attribute to it." This Court further observed "whatever 0
be the mode of weaving employed, woven fabric would be "textiles".
What is necessary is no more than weaving of yarn and weaving would
mean binding or putting together by some process so as to form a
fabric. Moreover a textile need not be of any particular size or strength
or weight. It may be in small pieces or in big rolls: It may be weak or
strong, light or heavy, bleached or dyed, according to the requirement E
of the purchaser. The use to which it may be put is also immaterial and
does not bear in its character as a textile. It may be used for making
wearing apparel, or it may be used as a covering or bed-sheet or it may
be used as tapestry or upholstery or as duster for clearing or as towel
fm drying the body. A textile may have diverse uses and it is not the use
which determines its character as textile." F

It was also held that the textile has only one meaning namely a
woven tabric and that is the meaning which it bears in ordinary par-
lance. The Court therefore held that dryer felts are textiles as these
were made of yarn and the process employed was that of weaving
according to warp and woof pattern. It therefore falls within the mean- G
ing of textiles and so exempted from tax.

Similar question arose in the case of State of Tamil Nadu v.
Navinchandra & Company, [1981] (48) S.T.C. 118 (Madras) where
exemption was claimed on the basis of a notification under Section 4 of
the Tamil Nadu General Sales Tax Act 1959 in respect of hair-belting H
98 SUPREME COURT REPORTS (1987) 3 S.C.R.

A and cotton-belting as falling within item No. 4 of the Third Schedule
of the said Act. This item No. 4 reads as follows:-

"All varieties of textiles (other than durries, carpets, druggets
and pure silk cloth) made wholly or partly of cotton, staple fibre,
rayon, artificial silk or wool including handkerchiefs, towels, napkins,
B dusters, cotton velvets and velvetten, tapes, niwars and laces and
hosiery cloth in lengths."

It was held that textiles having a wider meaning than fabrics cotton-
belting and hair-belting were included in the expression cotton fabrics
and as such they are exempted from taxation falling within Item No. 4
C of the Third Schedule as it stood prior to its amendment.

It is pertinent to mention in this connection that in the case of
Delhi cloth and General Mills Co. Ltd. v. State of Rajasthan and
Others, (1980) (4) S.C.C. 71 the question arose whether rayon tyre
cord fabric manufactured by the appellate company included within
D item No. 18 inserted in the Schedule by the Rajasthan Taxation Laws
(Amendment) Act, 1964 and rayon or artificial silk fabrics extended to
exemption under Section 4(1) of the Rajasthan Sales Tax Act which ·-~
provides for exemption of sales tax of goods specified in the Schedule.
It has been held that the product falls within the exempted item rayon
or artificial silk fabrics in item No. 18 of the Schedule inserted by
E Section 4 of the said Act. This judgment was rendered by this Court to
which one of us was a party.

In the instant case the question ansmg for consideration is
whether patta covered by "cotton fabrics of all varieties" is excisable
to sales tax under the notification dated !. 12. 1973 namely "beltings of
F all kinds". In view of the decisions referred to hereinbefore cotton
beltings fall within the textiles of all varieties as notified under Section
4 of the said Act being exempt from the imposition of sales tax. The
question that falls for consideration is what is the effect of the notifica-
tion issued under Section 3-A of the said Act on 1. 12.1973 mentioned
in the Schedule "beltings of all kinds". There is no dispute nor any
G challenge that these beltings are cotton beltings falling within cotton
fabrics of all kinds and as there is a general exemption granted by the
notification issued in 1957 and 1958 exempting 'cotton fabrics of all
kinds', it is not possible "'hold in any view of the matter that it will be
excisable to sales tax on the basis of the notification dated 1.12.1973
under Section 3-A of the said Act, by the Government.
H
The next question for consideration is what is the effect of a
COMMR. SALES TAX. U.P. v. AGRA BELTING [MISRA. J.] 99

WJ. notification under Section 3-A including an item in the Schedule for
imposition of sales tax though there is a general exemption from sales
A
tax under Section 4 of the Sales Tax Act. It has been held in the case of
Commissioner of Sales Tax v. Mis Dayal Singh Kulfi Wala, Lucknow,
[1980] U.P.T.C. 360 as follows:-

"A fiscal statute like the one before me has to be interpreted B
J- strictly. lf there is any ambiguity or doubt it should be resolved in
favour of the subject. There is no equity about tax. The taxing liability
-y must be express and absolute. In the present case, the specification of
the goods for purpose of section 3-A is one thing, but whether or not
such goods would be exempted from tax is the power conferred upon
the State Government under section 4 of the Act. So Jong the exemp-
tion continues, the dealer can certainly urge and with jurtisification c
i_ that the mere specification of goods under section 3-A or declaring the
point of sales at such turnover liable to tax would not take away the
exemption from payment of tax which the goods enjoyed by virtue of
the exercise of power by the State Government under Section 4 of the
Act. The operating fields of the two sections namely sections 3-A by D
itself cannot override the power under section 4. On the other hand, if
>- certain goods hav'e been classified for purposes of by the State Govern-
ment, if such goods had been exempted from sales, the Department
cannot contend that the exemption should not be construed in favour
of the assessee."
E
In this case the question arose whether the general exemption

t
granted under Section 4 of the Act in respect of milk and milk prbducts
is sufficient to exempt kulfi and Jassi in respect of which a separate
notification was issued under Section 3-A for imposition of tax.

A similar question also arose in the case of Commissioner of
F
Sales Tax v. Rita Ice Cream Co., Gorakhpur, [1981] U.P.T.C. 1239
and it was held that so long as the general exemption under Section 4
continues a particular item notified under Section 3-A of the Sales Tax
Act cannot be taxed.

On a conspectus of all these decisions aforesaid, the only irresis-
-~ tible inference follows that so Jong as the general el\emption granted G J
' under Section 4 with regard to <;otton fabrics of all kinds continues no
sales tax can be imposed on beltings of all kinds which fall within the
cotton fabrics of all kinds and the general exemption under section 4
will prevail o+er the notification made under section 3-A of the Sales
Tax Act. I am unable to subscribe to the view that since the notification
under section 3-A of the U.P. Sales Tax Act has been made subse- H
100 SUPREME COURT REPORTS (1987] 3 S.C.R.

A quent to the notification issued under Section 4 of the said Act, the
subsequent notification under Section 3-A will prevail over the general
exemption granted under Section 4 of the said Act. In my considered
opinion the reasonings and conclusions arrived at by the High Court
are unexceptionable.
B The appeal is accordingly dismissed and the judgment and order
of the High Court of Allahabad is hereby affirmed.

N.P.V. Appeal allowed.

''