Bombay High Court
Punjab Business And Supply Co. Pvt Ltd vs State Of Maharashtra on 1 January, 1800
JUDGMENT
1. This is a dreference under S. 61(1) of the Bombay Sales Tax Act,1959(hereinafter referred to as "the said Act").
2. The facts giving rise to this reference are as follows : Theapplicants are a private limited company incorporated under the IndianCompanies Act, 1956 and deal in the purchase and sale of waste paper,paper cuttings, tailor cuttings, rags, chindies and so on. Theapplicants are registered as a dealer under the said Act as well as underthe Central Sales Tax Act, 1956 at Nagpur and Bombay. In respect of theperiod from 1-4-1960 to 31-3-1961 the Sales Tax Officer assessing theapplicant allowed the sales of the rags and chindies made by theapplicants as not taxable taking the view that the same were covered byEntry 15 of Schedule A to the said Act. The applicants filed an appealagainst the assessment order passed by the Sales Tax Officers inconnection with some other times. Thereafter, the Deputy Commissioner ofSales Tax issued a notice under S. 57 of the said Act and, after hearingthe applicants, on 13th August, 1967 passed an order disallowing theexpemtion granted by the Sales Tax Officer in respect of the sales ofrags and chindies and assessed the rags and chindies and assessed thesales of these goods at the rate specified in Entry 22 of Schedule E tothe said Act. The Deputy Commissioner came to the conclusion that therags and chindies sold by he applicants were covered by the residuaryEntry 22 of Schedule E to the said Act. The applicants filed an appealagainst the decision of the Deputy Commissioner of Sales Tax dbefore theSales Tax Tribunal. This appeal was heard along with some other appealson the same point filed by the applicants. After hearing the parties theTribunal confirmed the decision of the Deputy Commissioner of Sales Tax.
3. The following question, which arises from the decision of theTribunal, has been referred to us for determination :
"Whether the Tribunal was correct in law in holding that the rags andchindies are not covered by Entry 15 of Schedule A to the Bombay SalesTax Act, 1959?"
4. In order to appreciate the contentions raised before us, it will beuseful to set out some of the relevant provisions at this stage. Thedescription by the goods in Entry 15 of Schedule A to the said Act at therelevant time reads Item No.12 of the First Schedule to the CentralExcises and Salt Act, 1944. The relevant portion of Item No. 12 of theFirst Schedule to Central Excises and Salt Act, 1944, defines cottonfabrics thus :
`cotton fabrics' means all varieties of fabrics manufactured eitherwholly or partly from cotton, and include dhoties, sarees, chadars,bed-sheets, bed-spreads, counter-panes and table-cloths, but do notinclude any such fabric -
(a) if it contains 40 per cent or more by weight of wool;
(b) if it contains 60 per cent or more by weight of rayon or artificialsilk; or
(c) if manufactured on a handloom."
On 5th January 1957 the Central Government issued NotificationNo.S.R.O.21 in exercise of the powers coferred by sub-rule (1) of R.8 ofthe Central Excise Rules, 1944, inter alia, exempting from the whole ofthe duty leviabdle thereon under the Central Excises and Salt Act, 1944what has been referred to as "the Cotton Fabrics described below". ItemNo. 10 of these exempted items read-thus :
"Damaged dor sub-standard cotton fabrics which are classified as :
(a) `Chindies' - that is to say, cut pieces of cotton fabrics which are 0and less in length :
(b) `Rags' - that is to sayout pieces of cotton fabrics which are morethan 9 and less than 1 yard in length;
(c) `Fents' - that is to say cut or damaged piece of cotton fabrics(including cut of damaged pieces of dhotis or sarees) which are 1 yard ormore but not more than 3 yards in length"
It may be mentioned here that by a further Notification dated 1stOctober, 1960 bearing No.G.S.R. 1129, published in the Gazette of India,Part II-S.3(1) at page 1518, the measurements which are given above ininches have been converted into centimetres viz. the measurement of 9 hasbeen converted into 23 cms. and that of 1 yard into 92 cms.
5. The undisputed position in the reference before us is that if the ragsand chindies sold by the applicants are covered by Entry 15 of Schedule Ato the said Act, the same would be exempt from the payment of tax in viewof the provisions of S. 5 of the said Act read with the said entry,whereas if the same are dnot covered by the said entry, they would becovered by the residuary Entry 22 of Schedule B to the said Act and theaforesaid sales would be liable to tax at the rates prescribed in thatentry.
6. It may be mdentioned here that the First Schedule to the CentralExcises and Salt Act, 1944 was substituted by a new Schedule S. 2 of theCentral Excise (Conversion to Metric Units) Acts, 1960. This Act wasbrought into force from 1st October, 1960. As a resuslt of the saidsubstitution Item No. 12 of the First Schedule became Item No.19 of thesaid Schedule; and it is common ground that in view of the provisions ofS.8 of the General Clauses Act reference to the said Item No. 12 of theFirst Schedule Entry 15 of Schedule A to the said Act will have to beread from 1st October, 1960 as reference to Item No.19 of the FirstSchedule to the Central Excises and Salt Act, 1944. This, however, doesnot make any difference because Item No.19 is in the same terms as theaforesaid Item No. 12.
7. It is the contention of Mr. Shah, the learned advocate for theapplicants, that the rags and chindies sold by the applicants wereadmittedly pieces of cotton cloth, that is, cloth manufactured eitherwholly or partly from cotton and not containing 40% or more by weight ofwool or silk and not containing 60% or more by weight of rayon orartificial silk. It was urged by him that merely because the pieces ofcloth sold by the applicants were small and might not have been usefulfor stiching garments, this was no reason for the same not being includedwithin the definition of the term "cotton fabrics". It was, on the otherhand, submitted by Mr. Phadkar, the learned advocate for the respondent,that the rags and chindies sold by the applicants were of irregularshapes and forms so that the same could not normally be expected to beused for the purpose of preparing clothes. It was point out by Mr.Phadkar that the judgment of the Tribunal showed that the rags andchindies in which the applicants deal, are of three varieties viz. (1)mill variety, (2) tailor variety, and (3) other variety. It was pointedout by Mr. Phadkar that it is common ground that these rags and chindieswere purchased by the applicants for sale & paper mills for being used asraw material for the manufacture of paper and paper products. It issubmitted by Mr. Phadkar that in view of this, these rags and chindiescannot be regarded as cotton fabrics at all, and dhence they would failwithin the residuary Entry 22 of Schedule E to the said Act, there beingno specific entry relations to these goods. It was urged by him thatwhen pieces of cloth of irregular shares are purchased for a purposeother an being used for clothing or covering of furniture or any similaruse, these pieces of cloth cannot be regarded as cloth or cotton fabricsat all. We find it difficult to accept the a forementioned contentionsof Mr. Phadkar. The term `cotton fabrics' has been defined in Item 12and later in Item No.19 of the First Scheduled to the Central Excisesand Salt Act, 1944, and this definition includes within its ambit allvarieties of fabrics manufactured out of the material described in thesaid Item. The definition clarifies that dhoties, sarees, chandars,bed-sheets, bed- spreads counter-panes and table-cloths are included inthe ambit of the term "cotton fabrics". Now, the relevant dictionarymeaning of the word "fabric" is "manufactured cloth" (see Chamber'sTwentieth Century Dictionary, Revised Edition, Reprinted 1966, page 380). As far as the question of commerce or trade parlance is concerned, it istrue that the Tribunal has observed that in common parlance rags andchindies cannot be regarded as cotton fabrics. This observation,however, is not at all helpful in the present matter. In the firstplace, there was admittedly no evidence at all before the Tribunalregarding trade or common parlance. Secondly, and, this more important,the term "cotton fabrics" cannot be really regarded as a term current intrade or common parlance. This is indeed not disputed dbefore us. Inview of this what we have to consider is, whether these rags andchinddies sold by the applicants can be regarded as manufactured cloth. It is true that mills, when they manufacture cloth, do not manufacturethe same in the shape of rags or chindies. This, however, is not of muchsignificance as it cannot be dispsuted that when pieces cut out of thecloth manufactured by mills are sold, they certainly remain manufactured cloth. For example, shirt pieces and pant pieces cut from clothmanufactured by a mill would certainly be regarded as manufactured clothand cotton fabrics. Even as far as the mills are concerned, there wouldbe certain cut pieces of odd langths sold by the mills which wouldnecessarily be manufactured cloth. In view of this, merely because clothis sold in pieces and not in the form of takas or bales manufactured bythe mills, it does not cease to be manufactured cloth or cotton fabrics. It is true that the rags and chindies sold by the applicants must havebeen pieces of cldoth of irregular shapes and sizes. We fail to see,however, how for this reason they would cease to be manufactured cloth. We also fail to see how these rags and chindies cannot be regarded asmanufactured cloth, merely because the purchasers from the applicantswere putting them to use as raw material for making paper or paperproducts. If the argument of Mr. Phadkar, in this connection, were to beaccepted, it would result in the description of a commodity beinggoverned by the use to which it may be intended to be put up a purchaser,and this obviously cannot be. For example, it cannot be that, for thepurpose of the said Act or general taxation, a bottle containing sodawater is a bottle of aerated water, if the purchaser intends to drink thesoda, but it becomes a missile, if the purchaser intends to throw it in ariot. On a plain construction of the definition of the term "cottonfabrics" given in Item No. 12 and later in Item No.19 of the FirstSchedule to the Central Excises and Salt Act, 1944, we are of the viewthat the rags chindies sold by the applicants would be only coveredthereunder the hence the said items would fall in Entry 15 of Schedule Ato the said Act.
8. It may be noticed here that the view we have taken above finds somesupport from the Notification issued on 5th January, 1957, to which wehave already referred. The relevant words to the said Notification runas follows :
".......the Central Government hereby exempts the cotton fabricsdescribed below from the whole of the duty leviable thereon under theCentral Excises and Salt Act, 1944 (1 of 1944)."
Item No. 10 of the exempted items of damaged or sub-standard cottonfabrics which are classified as Chindies, Rags and Fents according totheir length. This shows that the authorities regarded that chindhis,rags and fents would be covered within the ambit of the term "cottonfabrics". The Tribunal has referred at great length to the fact that itwas not shown by the applicants that the rags and chindies sold by themwere of such sizes that they would be covered by the said Item No.10. This circumstance, however, in our view, is of no relevance at all,because even if the rags and chindies were not of the said sizes all thatit would mean is that they would not be exempt under the saidNotification from the levy of excise duty. This would, in no way, showthat the same ceased to be cotton fabrics. We may, in this connection,refer to a decision of the Madras High Court in Kishanchand Challaram v.Joint Commercial Tax Officer [(1968) 21 STC 367] where it has been heldthat, ordinarily, Courts when called upon to interpret the meaning of thewords used in the Schedules to the Sales sTax Acts, mainly rely upontheir popular or ordinary meaning. The meaning which the trade,Government officials and statutes attribute to those words must taken tobe the ordinary and popular meaning of the same. Mr. Phadkar relied onthe decision in Hind Engineering Co. v. Commr. of Sales Tax (1973, 31 STC 115): (Guj.) in support of the contention that a wider meaning could notbe given to the term "cotton fabrics" as used, in Entry 16 of Schedule Ato the said Act by reason of any Notification which might have beenissued by the Central Government under the Central Excises and Salt Act,1944 or the Rules made there under. In our view, this decision has noapplication to the case before us, because, as we have already pointedout, we have come to the conclusion that the rags and chindies sold bythe applicants are covered by the definition of the term "cotton fabrics"as given in Item No. 12 of the First Schedule to the Central Excises andSalt Act, 1944, on a plain and grammatical interpretation thereofirrespective of any Notification issued by the Central Government. Moreover, it is sought to be relied to enlarge the definition of theterm "cotton fabrics" as contained in the said Item No. 12, but theNotification has been relied on merely to show how the said term wasinterpreted or understood by the Government itself.
9. In the result, we answer the question referred to us in the negative. The respondent to pay to applicants the costs of this reference fixed atRs.300/-. The fee of Rs.100/- paid by the applicants to the applicants.