Gujarat High Court
State Of Gujarat vs Newage Hose Manufacturing Co. on 22 March, 1991
Author: G.T. Nanavati
Bench: G.T. Nanavati
JUDGMENT S.D. Shah, J.
1. By this reference under section 69 of the Gujarat Sales Tax Act, 1969, hereinafter to be referred to as "the said Act", the Tribunal has referred the following question for our decision :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in its finding that 'rubberised cotton hose pipes' and 'rubberised cotton-cum-synthetic fibre hose pipes' produced and sold by the opponent-firm - Newage Hose Manufacturing Company, were comprised in the definition of 'cotton fabrics' as contained in item No. 19 in the First Schedule to the Central Excises and Salt Act, 1944 and, therefore, fell under entry 37 in Schedule I to the Gujarat Sales Tax Act, 1969, so that the sales thereof were free from all taxes leviable under the Gujarat Sales Tax Act, 1969."
2. Facts giving rise to the present reference, shortly stated, are as under :
(i) The opponent is a registered dealer carrying on business of manufacturing and selling (a) rubberised cotton hose pipes and (b) rubberised cotton-synthetic fibre hose pipes. The opponent applied to the Deputy Commissioner of Sales Tax under section 62 of the said Act for determination of question as to whether sales of those products would be liable to tax and, if so, what would be the rate of tax.
(ii) After hearing the parties, the Deputy Commissioner by his order, dated 11th April, 1979, held that the said two products manufactured and sold by the opponent would fall under residuary entry 13 in Schedule III to the said Act, and that their sales would be liable to tax at the rate specified in the said entry. It may be noted that before the Deputy Commissioner it was the case of the opponent that the said products would fall within entry 37 of Schedule I to the said Act so as to be exempted from the liability of sales tax.
(iii) Being aggrieved by the judgment and order of the Deputy Commissioner, the opponent carried the matter in appeal to the Tribunal and, the Tribunal after considering the amended definition of "cotton fabric" as contained in item 19 of the First Schedule to the Central Excises and Salt Act, and also after considering the amended definition of the word "manufacture" as contained in section 2(f) of the Central Excises and Salt Act came to conclusion that the products manufactured and sold by the opponent fell within the definition of "cotton fabric" as contained in item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944.
(iv) Not satisfied with the judgment and order of the Tribunal, the State moved an application under section 69 of the said Act seeking reference of question of law arising out of the judgment and order of the Tribunal. The Tribunal, accordingly, framed question of law reproduced hereinabove for our decision.
3. The question that arises for our consideration in this reference relates to interpretation of item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944. In Sales Tax Reference No. 14 of 1981 [Reported as Shah Textile Mills Pvt. Ltd. v. State of Gujarat [1992] 85 STC 515 (Guj)] we were called upon to decide as to whether "bookbinding cloth" would fall within the definition of "cotton fabric" as contained in item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944. Since the question referred to us in this reference involves interpretation of very item, for the reasons recorded in our judgment and order in Sales Tax Reference No. 14 of 1981, we are of the opinion that the definition of "cotton fabric" as contained in item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944 will apply to the products in question also.
4. However, it shall have to be noted that the process to which cotton fabric is subjected while manufacturing the products in question is the process of rubberising which is described by the opponent as under :
(a) The opponent manufactures at its own factory the fabric out of cotton yarn and another kind of fabric which is a mixture of cotton yarn and synthetic yarn which is necessary to prepare two varieties of hose pipes. It, thereafter, subjects them at its own factory to further process of rubberising, i.e., coating them with rubber, and thereafter, the opponent converts both varieties of rubberised hose pipes of which one is the cotton hose pipe and the other is the cotton synthetic fabric hose pipe.
5. It is the finding of fact of lower authorities that cotton hose pipe manufactured by the opponent was wholly made from fabric which was manufactured wholly from cotton and contained less than 40 per cent of rubber. In the second product the cotton content was about 70 per cent.
6. From the said process it becomes clear that the process as to which the cotton fabric is subjected by the opponent is the process which would fall within sub-clause (v) of clause (f) of section 2 of the Central Excises and Salt Act. The process of rubberising is a specific process referred to in the definition of "manufacture" given by section 2(f), sub-clause (v). The Tribunal, therefore, found that the products in question would fall within the meaning of "cotton fabric" mentioned in item No. 19 in the First Schedule to the Central Excises and Salt Act. In reading this section, the Tribunal referred to and relied upon the language and meaning of the word "cotton fabric" after its amendment by the Central Excises and Salt Act and Additional Duties of Excise (Amendment) Ordinance, 1978, being Ordinance No. 12 of 1970. Therefore, for the reasons extensively stated by us in our judgment in Sales Tax Reference No. 14 of 1981 [Reported as Shah Textile Mills Pvt. Ltd. v. State of Gujarat [1992] 85 STC 515 (Guj)], we hold that the Tribunal was right in holding that the "rubberised cotton hose pipes" and "rubberised cotton-cum-synthetic fibre hose pipes" produced and sold by the opponent would fall within the definition of "cotton fabric" as contained in item No. 19 in the First Schedule to the Central Excises and Salt Act.
7. We, therefore, answer the question in the affirmative, i.e., against the State and in favour of the opponent. There shall be not order as to costs.
8. Reference answered in the affirmative.