Holding

Rayon tyre cord fabric is a textile fabric covered by Item 22 and therefore qualifies as a "rayon fabric" exempt under Item 18, and the exemption was unconditional for the assessment years, leading to the quashing of the sales‑tax assessments.

Summary

The appellant, Delhi Cloth and General Mills Co., manufactured "rayon tyre cord fabric" and claimed exemption from sales tax under Item 18 of the Rajasthan Sales Tax Act, which referenced "rayon fabrics" as defined in the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and Item 22 of the Central Excise and Salt Act, 1944. The Rajasthan authorities assessed sales tax for the years 1969‑70 to 1972‑73, rejecting the exemption and later holding the product was not a fabric. The Supreme Court examined whether the product fell within the statutory definition of "fabric" and "rayon fabric" and whether the exemption was conditioned on payment of additional excise duty. It concluded that the tyre cord fabric is a textile fabric covered by Item 22, that the exemption was unconditional for the years in question, and that the matter was a question of law, not fact. Consequently, the sales‑tax assessments were quashed.

Issues considered

Whether "rayon tyre cord fabric" qualifies as a "rayon fabric" under Item 22 of the First Schedule to the Central Excise and Salt Act, 1944, and thus falls within Item 18 of the Rajasthan Sales Tax Act Schedule.
Whether exemption from sales tax under Item 18 was conditional upon payment of additional excise duty under the Additional Duties of Excise (Goods of Special Importance) Act, 1957.
Whether the question is a matter of fact for the tax authorities or a question of law for the Court, permitting Supreme Court intervention despite Section 15 of the Rajasthan Sales Tax Act.

Legislation cited

Additional Duties of Excise (Goods of Special Importance) Act, 1957s. 2(c), s. 3
Central Excise and Salt Act, 1944s. First Schedule Item 22
Rajasthan General Sales Tax Act, 1954s. 4(1), s. 4(2)
Rajasthan Sales Tax Act, 1954s. Item 18 (Schedule)
Rajasthan Taxation Laws (Amendment) Act, 1973

Subjects

sales tax exemptiondefinition of fabricrayon tyre cord fabricadditional excise dutyinterpretation of statutesRajasthan Sales Tax ActCentral ExciseSupreme Courttax law

Judgment

DELHI CLOTH AND GENERAL MILLS CO. LTD. A
v.
STATE OF RAJASTHAN AND ORS.
May 8, 1980
[N: L. UNTWALIA AND R. S. PATHAK, JJ.]
•
Exemption from Sales Tax under the Central Sales Tax Act,-"Rayou Tyre
Cord Fabric'', whether covered by ite1n 18 of the Schedule to the Rajasthan
Sales Tax Act, 1954, so as to qualify for exemption under the Central Sales
1·ax Act,-ltem 18 of the Schedule to the Rajasthan Sales Tax Act, 1954,-
Whether assessment and payment of_ excise duties under the Additional Duties
of .Excise (GOods of Special Importance) Act, 1957, a preconditl'on for claim-
ing exe1nption under the Rajasthan Sales Tax Act and therefore under the
c
Central Sales Tax Act.
Interference by Supreme Court under Art. 136 of the Constitution, whether
hatred by Section 15 of the Rajasthan Sales Tax Act.

Section 4(2) of the Rajasthan General Sales Tax Act, 1954 empowern the
State' Government, by notification in the Official Gazette, to ·exempt from tax D
the sale of any goods or class of goods on such conditions as may be1 specified
in the notification. By a notification dated 1st July, 1958, the RajasthaTI'.
Government unconditionally exeir.pted all varieties of, textiles made wholly or
partly of rayon from !st July, 1958. S. 4(1) of the Rajasthan Sales Tax Act,
1954 provides for exemption from Sales Tax of the goods specified in thci
Schedule to that Act provided the conditions mentioned in the Schedule are·
satisfied. Item 18, inserted in the Schedule by ther Rajasthan Taxation Laws.
(Amendment) Act, 1964, included "rayon fabrics" as defined in the Additional
Duties of Excise (Goods of Special Importance) Act, 1957. On this, the noti-
fication dated 1st July 1958 was. withdrawn as redundant. When Item 18 was
inserted in the Schedule, no conditions were specified therein as a qualification
for the exemption. The unconditional exemption from sales tax granted on the
sale of rayon fabrics, that is to say, without the condition that additional eXcise
duty was paid by the manufacturer, woo withdrawn by a notification dated 5th
F
March, 1973 made by the Rajasthan State Government und<>r s. 4(2) of the
Rajasthan Sales Tax Act. The notification provided that in the case of un·
processed rayon and a·rtificial silk fabrics the exemption; from sales1 tax would
apply only if the additional duty is leviable on them under the Additional
Duties of Excise (Goods of Special Importance) Act, !957 and such goods had
not specifically been exempted from the said duty and the dealers. thereof fur-
G
nished proof to the satisfaction of the assessing authority that such duty had
been paid,

Item 18 of the Schedule to the Rajasthan Sales Tax exempts from Sales Tax
and purchase tax "all. cotton fabrics rayon or artiJicial silk fabrics, woollen
fabrics as defined in the Additional Duties of Excise (Goods of Special Impor-
tance) Act, 1957 (Central Act 58 of 1957)".
ff
Section 2(c) of the Additional Duties of Excise (GOOds of Special
·l' Importance) Act, !956 declares that the e.xpression "rayon or artificial •ilk
l
' (1109)
111 0 SUPREME COURT REPORTS (1980] 3 S.C.R.

A fabrics" shall have the meaning assigned to it in Item 22 of the First Schedule
to the c·entral Excise and Salt, .'-\ct, 1944, which reads :

"Rayon or artificial silk fabrics" means a1l varieties of fabrics
manufactured either wholly or partly' from rayon or artificial silk and
includes e111broidery in the piece, in strips or in metifs and Fabrics
impregnated or co:ited with preparations of cellulose derivatives or of
B other artificial plastic materials .... "
...
The appellant owns an industrial unit, Shriram Rayons, situ..'1'ted at Kota in
the Sto'.lte of Rajasthan. It maiWf.actures a product· described as "Rayon Tyre
(~ord Fabric''. Rayon fibre is spun into rayon and twist~d into cord. The cords
are arranged lengthwise, and are commonly described as the "warp". They are
packed 25 to the inch. By a process of weaving, cotton thread are wefted
c through a loom across the cords. The wefts are thinner and fewer than the
cords, being not more than two to five per inch. The cord component com-
prises the major content of the product. The unprocessed rayon tyre cord
fabric so produced is sold in the form of rolls in the market. After initial
chemical treatment it is put through a process of rubberizing in the tyr~ manu-
facturing plant. The· rayon tyre cord fabric is used as a re-inforcing base in the
manufacture of tyres. It is a product generally intended for industrial use.
D The rayon tyre cord employed as a component in the manufacture of ·rayon
tyre cord fabric is also sold directly as such.. It is sold packed or cones, some-
what like yarn is sold. Tyre cord is purchased; direct1y by some tyre manufac-
turers, who by applying the same process of putting in the wefts. convert it
into a tyre cord fabric for uSe in the tyre.

The appellant was assessed to sales ta•x by the, Commerci~ Tax Officer
E for ,the years 1969-70 and 1970-71 on the turnover of rayon tyre cord fabric.
The plea that the product fell within the item 8 of the Schedule to th~
Rajasthan Sales Tax Act and therefore was exempt from sales tax; was not
accepted. The matter came up for adjudication upto the Supreme Court. By
its judgment dated 3rd May 1976 reported in 38 S.T.C. 113 (Delhi Cloth and
General Mills Co. Ltd. and Ors. v. B. R. Gupta and Ors.), the Court observed
that the controversy "requires careful consideration of the technical processes
F of manufacturing, of the composition of the 'tyre cord fabric', and an evalua-
tion of opinions of experts on the subject, to be .able to decide the question
satisfactorily'', as well as "som~ examination of commercial usoge and termi- /
nology or the language·of the market in goods of this type'", and that the.
matter was one for determination by the t~xing authorities.

The Deputy Commissioner (Appeals) was ineanwhile seized of not only
G the two appeals pertaining to the assessment years 1969-70 and 1970-71 but
also appeals against the assessment order for 1971-72 and a provisional assess-
ment for the first six months of the assessment year 1972-73. \Vhen the nppeals
\Vere taken up by the Deputy Commissioner (Appeals) volurninous evidence,
both· oral and documentary, was led before him. The appeals were, neverthe-
less, dismissed. Thereafter, the, appellant applied in revision to the Board of
Revenue for Rajasthan, but again met with no success. The Board expressed
H the view that the product Wa$ not a fabric and <lismissed the revision! petitions
by their order dated 6th October, 1977. The present appeal<; are directed
against that order.
DELHI CLOTH MILLS v. RAJASTHAN 1111

Allowing the appeals, the. Court. A
HELD : 1. In detern1ining the meaning or connotation of \\'Ords and expres--
sions describing an article or commodity the turnover of which is taxed in a
sales tax enactment, if there is one principle fairly well-settled it is that the
words or expressions must be construed in the sense in which they are under-
stood in the trade, by the· dealer and the consumer. It is they who are con-
cerned with it, and it is the sense in which they understand it that consti- B
t'utes the definitive index of the legislative intention when the statute was
enacted. As sales tax the liability falls on the seller, who in his turn passes
it on to the consumer; -as purchase ta-x, the liability falls directly on the
purchaser. [1115 A-CJ

Porritts and Spencer (Asia) Ltd. v: State of Haryana [1978] 42 S.T.C. 433;
followed.
c
2. On a comprehensive consideration of the materials, it is clear that by
and large a tyre cord fabric is regarded as a textile fabric. The peculiar feature
that the tyre cord constitutes the dominating element indicating the use to
which the fabric is put and the close concentration in which it is packed in
contrast to the light density with which the weft thread is woven does not
detract from the conclusion that what we have is a textile fabric. It is wholly
immaterial, that once tyre cord fabric has, in the hands of the tyre manufac- D
turer, undergone the process of rubberizing and is embedded in the tyre body
the significance of the weft thread is greatly reduced. It may also be thati in
the more· m~ern process of manufacturing tyres what is used is cabled rayon
With hawser twists with the cords assembled in parallel order and rubberized
without the intermediate process of weaving on a loom. The material on the
record, however, indicates that the product manufactured by the appellant does
not faJl in-that category. It is a woven fabric in which the intermediate process E
of weaving the weft thread across the warp cord is an integral stage of manu·
facture. When the purchaser buys the product, it is the entire integrated woven
fabric which he buys, it is not merely the tyre cord by itself. If'tyre cord was
a11 that he desired, he would purchase that commodity, which is readily
available, and not tyre cord fabric. Item 22 of the First Schedule to the
Central Excises and Salt 'Act speaks of "a11 varieties of fabfics", language
wide enough to include the rayon tyre cord fabric manufactured by the nppel· F
\
!ant. [1117 E-H, 1118 A]

3. Item 22 of the· First schedule to the· Centr3.l Excise and Salt Act does
comprehend "industrial fabrics" as well as the item refers to "all varieties of
fabrics''. Further Item 22(3) speaks of fabrics impregnated or coated with
p-1tparations of cellulose derivatives or of other artificial plastic materials
which would include rubberized cloth, tarpaulin cloth, P.V.C. cloth, water
proo:£ cloth and tent cloth. A whole 7ange of fabric is. included. [1118 B-C] G

4. It is futile to suggest that the tyre plays a less substantial role than other
popular commodities in modern life. The tyre' manufacturing industry is of
growing importance and bas an increasingly important role to play in every-
day Jife. ~That is evident from the overwhelming expansion . of automobile
traffic prompted by the complex needs of a constantly enlarging economy.
The daily life of the average citizen is prof9undly effected by tlie automobile, H
be it passenger bus or a goods truck or the ubiquitous scooter. Tyres are
needed for all. In ntral areas tyres are no\v coming into use for bullock carts.
1112 SUPREME COURT REPORTS [1980] 3 S.C.R.

A And, therefore, it is but a short st'ep to recognising the status of what goes
into the manufacture of a tyre-the rayon tyre cord fabric as "goods of special
importance". It may be that unlike the cotton, silk, woollen and rayon fabrics
used as wearing apparel or furnishing material the rayon tyre cord fabric is
not directly employed for the satisfaction of a domestic need. Nonetheless, as
an integral and vital constituent of an automobile tyre it is intimately involved
in the diurnal activity of human life. [1118 E-0]
B
· 5. Whether Parliament understood the word "fabric" to include tyre cord
fabric must ~ gathered from all the relevant material and with reference. to
tests and criteria accepted in law rather on the basis of a single notification,
like the circular dated 11th February 1957 issued by the Revenue Board Ja.ying
down th~ tyre and fabric could not be described as "fabric". [1119 A-B]
6. In respect of the assessment years 1969-70, 1970-71, 1971-72 and the
c first six months 0;f 1972-73, the turnover of rayon tyre and fo.bric was clearly
exempt from sales tax under the Rajasthan Sales Tax Act and there wµ.s no
condition in that Act untill 4th March 1973 that the exemption was dependent
on payment of additional excise duty under the provisions of Additional Duties
of Excise (Goods of Special Importance) Act, 1957. Since from 5th March,
1973 only the exemption from tax under the Rajasthan Sales Tax Act was
available only if additional excise duty was leviable, a de3.Ier \'¥\ls entitled to
D exemption from sales tax upto 4th March. 1973 without the requirement of
payment of the additional excise duty. [1120 B-C, E-F]
7. The question in the instant' case- is not one of fact. It is a qui-"stion i
'
which concerns the construction of Item 22 of the Schedule to the Additional
Duties of Excise (Goods of Special Importance) Act, 1957. If the rayon tyre
cord fabric manufactured by the appellant is covered by that item it is exempt
from sales tax a"nd there is no jurisdiction in the sales tax authorities to assess
E the appellant on its turnover. The question is one of substantial importance,
and having regard to the circumstances there is good reason for entertaining
the appeals and deciding them on the merits. The Supreme Court is entitled to
entertain appeals directly, not withstanding, that a reference is. open against the
impugned orders before the High Court under Section 15 of the Rajasthan Sales
Tax Act. [1120 G-H, 1021 A-Cl
F
CivIL APPELLATE JURISDICTION : Civil 'Appeals Nos. 2453-2456
of 1977. /

Appeals by Special Leave from the Judgment and Ord~ dated the ~
6th October, 1977 passed by the Board of Revenue for Raja;than: at
Ajmer, in revisions for the years 1969-70 1970-71, 1971-72 and
G 1972-73.
F. S. Nariman and H. K. Puri for the Appellant.
Lal Narain Sinha, and S . .C. Bhandari, Soh,bag Mal Jain and P. P.
Singh for the Respondents.

H
The Judgment of the Court was delivere<l by
PATHAK, J. The question raised in these appeals is whether the
I
"Rayon Tyre Cord Fabric" manufactured by the appe11ant is a rayon
»£Lffi CLOTH MILLS v. RAJASTHAN (Pathak, I.) 1113

fabric covered by item 18 of the Schedule to the Rajasthan Sales Tax A
Act; 1954, and therefore .uempt from sales tax under the Central
Sllles Tu: Act.
>- The appellant owns an industrial unit, Shriram Rayons, situated

..
• at Kota in the State of Rajasthan. It manufactures a product describ-
ed as "Rayon Tyre C-0rd Fabric." The appellant claims that the pro-
duct falls within item 18 of the Schedule to the Rajasthan Sales Tax
B

• Act which exempts from sales tax and purchase tax : -

• " "All cotton fabrics, rayon or artificial silk fabrics,

;: woollen fabrics as defined in the Additional Duties of Ex-
cise (Goods of Special Importance) Act, 1957 (Central
Act 58 of 1957) ."
Section 2 (c) of the Additional Duties of Excise (Goods of Special
C

Importance) Act, 1957 declares that the expression "rayon or artifi·
cial silk fabrics" shall have the meaning assigned to it in Item 22 of
the First Schedule to the Central Excise and Salt Act, 1944. Item

I
22 reads:- D
"Rayon or artificial silk fabrics" means all varieties of
fabrics manufactured either wholly or partly from rayon or
artificial silk and includes embroidery in the piece, in strips
or in motifs and fabrics impregnated or coated with prepa-
rations of cellulose derivatives or of other artificial plastic
E
materials, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..... " '
The appellant was assessed to sales tax by the Commercial Tax
Officer for the years 1969-70 and 1970-71 on the turnover of rayon
tyre cord fabric. The plea that the product was exempt from sales
tax was not accepted. Two writ petitions were filed by the appellant
tn the Rajasthan High Court against the assessments while appeals F
were also filed before the Deputy Commissioner (Appeals). The
Raiasthan High Court dismissed the writ petitions on the ground that
disputed questions of fact were involved in the controversy and re-
course should be had to the remedy by way of appeal. Against the
order of the High Court the appellant obtained from the Supreme
G
Court special leave to appeal under Article 13 6 of the Constitution.
Meanwhile, the Commercial Tax Officer made a provisional assess-
ment on the turnover of rayon tyre cord fabric for the period 1971-
72. Against the assessment the appellant filed a writ petition dir~tly
in this Court under Article 32 of the Constitution. The two appeals
and the writ petition were dismissed by this Court on 3rd May, 1976.(') H
(I) The judgment is reported in De/Iii Cloth & General Mills Co. Ltd. and Others
v, B. R. Gupta and Other. .38 S. T. C. 113.
ll-'fi!O SCl/80
+'.'::'

1114 sUPREMJl COURt REPOilts [1980] j s.qR.

A The Court observed that the controversy "requires careful considera-
tion of the technical processes of manufacturing, of the composition
of the 'tyre cord fabric,' and an evaluation of opinions of experts on
the subject, to be able to decide the question satisfactorily," as well as
"some examfuation of commercial usage and tenninology or the lan-
guage of the market in goods of this type." It upheld the view taken
B by the High Court that !he matter wa~ one for determination by the
taxing authorities.
The Dep~ty Commissioner (Appeals) was meanwhile seirled of not
only the two appeals pertaining to the assessment years 1969-70 and
1970-71 but also appeals against the assessment order fot 1971-72
and a provisional assessment for the first six months of the assessment
c year 1972-73. WI:ien the appeals, were taken up by the Deputy Com-
missioner (Appeals) voluminous evidence, both oral and documentary,
was led befo~e him; The appeals were, nevertheless, dismissed.
Thereafter, the appellant applied in revision to the Board of Revenue
for Rajasthan, but again met with no success. The Board expressed
the view that the product was not a fabric and dismissed the revision
D
pe!itions by their order dated 6th October, 1977. The present appeals
are directed against that order.
- Some undisputed facts co9cerning the product manufactured by
the appellant may be set out. Rayon fibre is spun into rayon and
twisted i!llto cord. The cords are arranged lengthwise, and are com-
E monly described as the "warp". They are packed 25 to the inch,
By a process of weaving, cotton threads are wefte<l through a loom
across the cordS. The wefts are thinner ilnd lewer than the cords,
being not more than two to five per inch. The cord component C(\Jll-
prises the major content of the product. The unprocessed 'rayon 'tyre
~ord fabric •so produced is sold in the form of rolls in the market.
F After initial chemical treatment it is put through a process of rubberi~ /

zing iin the tyre manufacturing plant. The rayon tyre cord fabric is
used as a re-inforcing base in the manufacture of tyres. It is a pro-
duct generally intended for industrial use. The rayon tyre cord emp-
loyed as a component in the manufacture of rayon tyre cord fabric
is also sold directly as such. It is sold packed on cones, somewhat
G like yarn is sold. Tyre cord is purchased directly by some tyre manu-
facturers, who by applying the same process, of putting in ·the wefts,
convert it into a tyre cord fabric for use in the tyre.
In holding that the rayon tyre cord fabric is not a fabric, the
Board bas noted that the tyre body or carcass consists of a series of
layers of cord fabric in the form of plies buried in rubber, and that
H the significant factor in the tyre cord fabric is represented by the tyre
cord. The properties and characteristics of the fibre constitutini: the
' .

DELHI CLOTH MILLS v. RAl<\STHAN (Pathak, J.) 1115

tyre cord, it is said, determines the tyre performance. The weft in the A
. fabric, it is pointed out, merely play~ the subsidia~y role of holding the
cord in place before the process of tyre manufacturing is commenced.

Now, in determining thei meaning or connotation of word$ and ex-
• pressrons describing an article or commoditj' the turnover of which is
taxed in a sales tax enactment, if there ·i~ one principle fai!ly well- B
settled it is that the words or expressions must be construed in the sense
•
~-
in which they a.re understood in the trade, by the dealer and the con-
sumer. It is they who are concemi;d with it, and it is t!Je sense in
which they understand it that constitutes the definitive index of the
legislative intention when the statute was enacted. As sales tax the
liability falls on the seller, who i:n his tum passes it on to the consumer. c
As purc}lase tax, the liability falls directly on the purchaser. A long
train of authorities supports that view, and we need refer only to the
recent Judgment of this Court in Porritts and Spencer (A~ia) Ltd.,
v. State of Haryana,(') in which reference has been made to some of
them. · ·
D
In the record before us, a wide range of material has been incor-
porated for determining liow those who manufacture and deal in fab-
rics and, in particular, tyre cord fabric, understand them. . And so,
a brief reference to that material is appropriate at this point.

What is a fabric? The "Mercury" Dictionary of Textile Terms E
defines "fabric" as a term which covers "all textiles no matter how
constructed, how manufactured, or the nature of the material from
which made," and the expression "textile" is described as "any pro-
duct manufactured from fibres through twisting, interlacing, bonding,
looping, or any other means, in such a manner that the flexibility,
strength, and other characteristic properties of the individual fibres are F
not suppressed~" The Man-Made Textile Encyclopaedia (1959) de-
fines fabric as ''.a collective term applied to cloth no matter how cons-
tructed or manufactured and regardless of the kind of fibre from which
made. In structure it is planar produced by interlacing yams, fibres
\ or filaments. Textile fabrics .include the following vaiieties, bonding,
felted; knitted, braided and woven." The Fairchild's Dictionary of G
Textiles (1959) ~a:ys that fabric is ."a cloth .that is woven or knit,
braided, netted, with any textile fibre ...... : ... ", and "textile" is
said to refer to "a broad cliissification of any material that can be
worked into fabric, such as fibres and yarns including woven and
knitted fabric, felt, netted fabric, lace and croched goods." In "Tex-
tile Terms and Definitions" (1960) the word cloth. is defined as "a H
(!) (1978) 42 S. T. C. 433 .

. > .
::-~·~~;\i:\i;"
1116 SUPREMi COURT REPORTS (1980] 3 s.c.tt

A generic term embraci!llg all textile fabrics and laminar felts" and '1ex•
tile" is applied in its modern sense" to "any manufacture from fibreS,
filaments, or yarns, natural or artificia~ obtmned by interlacing." The
1967 Annual ~ok of ASTM Standards defines clotb as "any textile ~
fabric but .specially one designed for apparel domestic or industrial

B
use," and textile fabric as "a planar Structure consisting of interlaced
yarns or fibres." The 1973 Annual Book of ASTM Standards repro-
..""
duces those definitions. .,,
We may now examine whether a tyre cord fabric has been Ulldl!i'· '
stood as a fabric. A publication IS: 4910 (Part Vl)-1970, put out by

-~
the Indian Standards Institution, defines a "tyre cord fabric" as "a
C fabric consisting of tyre cord warp with widely spaced weft threads".
Another publication IS: 1324-1966 of the same institution gives tbe
definition of tyre cord fabrics as "fabrics which. comprise the main
carcass of pneumatic tyres constructed predominantly of warp cords
. (cabled yarns) with light wefts. The latter merely serve to hold the
cords together for processing". The "Mercury" Dictionary of Textile
D Terms defines cord tyre fabric as a "cloth made with strong corded
sheets for the warp with as little weft as possible. . . . . . the warp takes
all the strain ....... ". The Fairchild's Dictionary of Textiles de<:ll!res
that a tyre cord fabric is not a true fabric today, but originally a square
woven fabric was employed in making the pneumatic automobile tyre.
"The modern tyre fabric is not woven or knitted, but consists of cabled
E yarns with hawser twists formerly mostly cotton, now usually of high
tenacity viscose rayon or nylon. These cords are arranged in parallel
order and rubberized." The tyre cord fabric manufactured by the
appellant admittedly consists of warp and weft and therefore this defi-
nition, which.does not refer to an interlaced strncture, wou1li nof apply.
On the contrary, the further definition in the same publication appears
to be more pertinent. It says : "When these tyre cords were first made
they were assembled as a warp on a loom and held in place until rub-
berized by an occasional fine single filling yarn, and it is pr<>J>ably due
to this that the term "fabric" has remained in use". Some doubt is
created by the definitions included in Linton's Modern Textile Diction-
G ary and River's Dictionary of Texu1e Terms. But tyre cord fabric
is clearly described as a fabric by the 1973 Annual Book of AS'I'M
Standards the Textile Terms and Definitions (1960), and in India by
the Indian Standard Glossary of Textile Terms Relating to Man-Made
Fibre & Fabric Industry. The Man-Made Textile Encyclopaedia in its
chapter on Industrial Fabrics gives a structural description of tyre
H fabrics and refers to the series of layers of cord fabric buried in rubber
in the tyre body or carcass. The Wellingtion Sears Hand Book of
Industrial Textile' describes in some detail the process of manufactur-
_, +

DJ!LHI' CLOTH MILLS v. RAJASTHAN (Pathak, !.) 1117 ..
mg tyre card fabrics. It states that "the tyre cords are woven into a A
'fabric' with a very fine cotton or rayon filling yarn, just strong enough
to hold the cords together during subsequent handling."
Now Jet us see how the Government of India itself, in its various
departments, looks at tyre cord fabrics. The Revised Indian Trade
Cl~atioo (1965) published by the Central Government in the De-
partment of Commercial Intelligence and. Statistics lists Viscose. tyre
fabric (Code 653 .6125) under the classification Group 653-"Textile
• Fabrics, Woven (not inchiding narrow or special fabrics), other than
' cotton and jute fabrics." The Ministry of Foreign Trade Resolution
dated 27th February, 1971 refers separately to rayon tyre yarn, cord
. J and fabric, and speaks of tyre cord units producing both twisted cords c
-,...__ and' woven fabric. And the Indian Customs Tariff Guide (1 Ith Edi-
, tion)shows as item 53 in the Tariff Schedule : "Rayon tyre fabrics, a
loosely :woven material with, rextremely thin cotton threads running
breadthwise and introduced merely for keeping the artificial silk threads
running lengthwise in position." The item is repeated in th!l same terms
in the Tariff Schedule to the Indian Customs Tariff Guide (13th Edi- D
tion). The Table appended to the Customs and P,;ntral Excise Duties
Drawback Rules lists "Viscose tyre cord fabric" (2621) under Serial
No. ~6 "Textile Fabrics and Hosiery".
On a comprehensive consideration of the material before us, there
is no. escape from the conclusion that by a,nd large a tyre cord fabric
;»--- is regarded as a textile fabric. The peculiar feature that the tyre cord E
constitutes the dominating element indicating the use to which the
fabric is put and the close concentration in which it is packed in cont-
mst to the light density with which the weft thread is woven does not
detract from the conclusion that what we have is a textile fabric. We
are concerned with the product manqfactured and sold by the appellant.
F
It is wholly immaterial that once tyre cord fabric has, iii the hancjs of
). . the tyre manufacturer, undergone the process of rubberizing and is
'I! embedded in the tyre body the significance. of the weft thread is greatly
reduced. It may also be that in the more modem process: of manufactur-
ing tyres what is used is cabled rayon with hawser twists with the cords
assembled- in parallel order and rubberized without the intermediate
G
pr~s of weaving on a loom. The material on the record, however,
md1cates that the product manufactured by the appellant aoes not fall
....... in that category. It is a wqven fabric in which the intermediate process
of weaving the weft thread across the warp cord is an integral stage of
manufacture. When the purchaser buys the product, it is the entire
iill~ted woven fabric which he buys, it is not merely the tyre cord H
-u---,
by .lt&elf. If tyre cord was all that he desired, he would purchase that
c,ommpdity, wmch is readily available, aq\] pot tyre cord fabric. We

i" ~

, ....,,'""""~
1118 SUPREME COURT REPORTS [1980] 3 S.C.R.

A may also p<iint out that Item 22 of the First Schedule to the P'ntral
Excises and Salt Act speaks of "all varieties of fabrics", language wide
enough to include the rayon tyre cord fabric manufactured by the
appellant.
It was contended by Shri L. N. Sinha, for the respondents, that
B industrial fabrics are not envisaged within the expression "rayon
fabric" in Item 22 of the First Schedule to the Central Excise and Salt
Act. As we have already pointed out, the item refers to "all varieties
of fabrics" and it will be noticed that Item 22(3) speaks of fabrics im-
pregnated or coated with preparations of cellulose derivatives or of other
artificial plastic materials which; we are told, would include rubberized
c cloth, tarpaulin cloth, P.V.C. cloth, water proof cloth and tent cloth.
A whole range of fabric is included.
It is then urged by Shri Sinha that wh~n the Additional Duties of
Excise (Goods of Special Importance\ Act, 1957 was enacted Parlia-
ment could not have intended the expression "rayon fabric" to include
D rayon tyre cord fabric. It is pointed out that the Statement of Objects
and Reasons pertinent 'to the Act refers to mill-made textiles, and the
submission is that the item in the First Schedule to that Act refers to
fabric which affects the -common man, which finds place in a popular I
J\
' "
market and is intended for popular use, and does not refer to a com-
modity which caters to the needs of a special category of consumers
E and is devoted to a particular use only. Now, the tyre manufacturing
industry is of growing importance and has an increasingly important
role to play in everyday life. That is evident from the overwhelming
expansion of automobile traffic prompted by the complex needs of a
constantly enlarging economy. The daily lifo of the average citizen is
profoundly effected by the automobile, be it passenger bus or a goods
F truck or the ubiquitous scooter. Tyres are needed for all. In rural
areas tyres are now corning into use for bullock carts. It is futile to
suggest that the tyre plays a less substantial role than other popular
commodities in modem life. And, therefore, it is but a short step to
recognising the status of what goes into the manufacture of a tyre--the
rayon tvre cord fabric as "goods of ·special importance". It may be
G
that unlike the cotton, silk, woollen and rayon fabrics used as weanng ·
apparel or furnishing material the rayon tyre cord fabric is not directly
employed for the satisl'action of a domestic need. Nonetheless, as an
integral and vital constituent of an automobile tyre it is intimately in-
volved in the diurnal a<;tivity of hnman life.
H We are then told that when the Additional Duties of Exclse (Goods
of Special Importance) Act, 1957 was enacted there was in existence
a Circular dat~d 11th February, 1957 issued by the Revenue Board
''

D!LHf CLOTH MILLS V. RAJASTHAN (Pathak,!.) 1119

Ia:yini' doWn thiit tyre cord fabric could not be described as a "fabric" A
within the meaning ot the Central Excise Ttariff. It is said that when
that was the popular conception of tyre cord fabrics it could not have
been envisaged as a fabric when the statute was enacted. To our
mind, the view taken by the Revenue Board cannot be regarded as
• resolving the question before us. Whether Parliament understood
the word "fabric" to include tyre cord fabric must be gathered from
B
all the relevant material and with reference to ·tests and criteria accep-
..., ted m Jaw rather on the basis of a single notification .
We may now turn to the contention of Shri Sinha that the benefit
· of exemption from sales tax is available to the appellant only if he has
paid the additional duty of excise on the. product. It is pointed out c
ihat the appellant has not been assessed to additional excise duly under
the Additional Duties of Excise (Goods of Specilll Importance) Act,
1957 and ig, therefore, not entitled to exemption from sales tax under
the C.entral Sales Tax Act.
The Additional Duties of Excise (Goods of Special Importance) D
Act, 1957 came into force on 24th December, 1957. Sub-section
(1) read with sub-section (2) of s.3 of the Act provide for the levy
and collection of an additional excise duly, over and above the excise
duty chargeabls ·under the Central Excises and Sal( Act,.} 944 on
certain goods at the rate specified in the Schedule to that Act. Rayon
fabrics are mentioned in the Schedule to the Additional Duties of Ex- E
cise (Goods of Special Importance) Act, and are classified by refer-
ence to Item 22 in the Fil'St Schedule to the Central Excises and Salt
Act.
In the present appe3Is, we iire concerned with a claim to exemption
from sales tax, and in order to consider the contention of the Reyenue F
that no such exemption was available to the appellant because 10, bad
not paid any additiooal excise duty on rayon tyre cord fabric it is
necessary to determine whether indeed the exemption from sales tax
was subject to the condition of payment of additional excise <futy.
'
S.4(2) of the Rajasthan Sales Tax Act, 1954 empowers the State G
Government, by notification in the Official Gazette, to exempt from
tax the sale of any goods or class of, goods on such conditions as may
he specified in the notification. By a notification dated lSt July, 1958,
the Rajasthan Government unconditionally exempted all varieties of
textiles mide wholly or partly of rayon frC\111 1st July, 1958. S.4(1)
of the Rajasthap Sales Tax Act, 1954 provides for exemption from H.
sillci tax of the goods specified in the Schedule to that Act provided
tbt conditions 111~ntio1Jed in the Sched11I~ are satisfi~d. Item 18, in~
:R . : : ,_,

1120 (1900} 3 s.c.R.

A serted in the Schedule by the Rajasthlm Tamtion Laws·(Amendment}
Act, 1964, included "rayon fabrics" as defined in the Additional Dut-
ies of Excise (Goods of 1Special Importance) Act, 1957. Ou this,
the notification dated 1st July, 1958 was withdrawn as reduncfant.
Now when Item 18 was inserted in the Schedule, no conditions were
specified therein as aqualification for the exemption. Therefore, in
B respect of thy-assessment years with whi<:h these appeals are concerned, •
the turnover of rayon tyre cord fabric was clearly exempt from sales
•tax under the Rajasthan Sales Tax Act, and there was no condition in
that Act that the exemption was dependent on payment of additional
excise duty. That being so, there was an unconditional exemption
c from central sales tax also.
The unconditional exemption from sales tax grant~d on the sale
of rayon fabrics, that is to say, without the condition that additional
excise duty was paid by the manufacturer, was withdrawn by a noti:
fication dated 5th March, 1973 made by the Rajasthan State Govern-
ment under S.4(2) of the Rajasthan Sales Tax Act. The notification
D
provided tl)at in the case of unprocessed rayon and artificial silk fab-
rics the exemption from sales tax would apply only if the additional
duty is leviable on them under the Additional Duties of Excise -(Goods
of Special Importance) Act, 1957 and such goods had not specifi-
cally been exempted from the said duty and the dealers thereof fur-
E nished proof to the satisfaction of the assessing authority ti!at such
duty had been paid. Therefore, as from 5th March, 1973 the exem-
ption from tax under the Rajasthan Sales Tax Act was available only
if additional excise duty was leviable and the dealer had esiablished
that he had paid such duty. About the same time, the Rajasthan
Taxation Laws (Amendment) Act, 1973 deleted Item 18 in the
F Schedule to the Rajasthan Sales Tax Act with effect from Sth March,
1973. It is evident, therefore, that a dealer was entitled to exemp-
tion from sales tax up to 4th March, 1973 without the requirement
of payment of the additional excise duty. The conclusion is inescap-
able that even if the appellant did riot pay additional excise duty, he
was exempt from sales tax on the turnover of rayon tyre cord fubric
G for the assessment years under consideration.
Fmally, it is urged by Shri Sinha that the question whether the
rayon tyre cord fabric falls within the expression "rayon fabrics" is
a question of fuct and the assessing authority, the appellate authority
ru1d the revenue Board are all agreed tllat it cannot be classified as
B a rayon fabric and, therefore, this Court should not interfere in
these appeals. It is also pointed out that under s. 15 of the Rajas-
tb11n Sales T11x Act a 'proc;eeding by way of reference is available to
DELHI CLOTH MILLS v. RA.JASTHAN (Pathak,/.) itU

the appellant and this C0urt. t'llCn if it were. to cans,idm tbe$: appeals
on the merits, should exercise no wider jurisdiction than that available
to it if it had entertained a reference. We are unable to agree that
the question is one of fact. It is a question which concerns the
consideration of Item 22 of the Schedule to the Additional Duties of
Excise (Goods of Special Iqiport\Ulce) Act, 1957. If, the. rayon
• tyre cord fabric manufactured by the appellant is recov~rea by that B
item it is exempt from sales tax and there is no jurisdiction in the
sales tax authorities to assess the appellant on its turnover. The
•f question is ol)e of substantial importance, and having regard to the
circwnstances there is good reason for entertaining the appeals and

j_ deciding ·them on the merits.
In the result the appeals are allowed, the assessments in respect
of the turnover of rayon tyre cord fabric manufactured by the appel-
c

lant relating to the assessment years 1969-70, 1970-71, 197f-72
and the first six months of 1972-73 are quashed. In the circumstances
there is no order as to cost.
D

S.R..
... Appeal allowed.

"
I

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