Patna High Court
Sri Ram Hosiery Works vs The State Of Bihar on 17 July, 1974
Equivalent citations: [1974]34STC320(PAT)
Author: Nand Lall Untwalia
Bench: Nand Lall Untwalia
JUDGMENT Nand Lall Untwalia, C.J.
1. On being asked to state a case, the Commercial Taxes Tribunal, Bihar, Patna, has done it under Section 33(3) of the Bihar Saks Tax Act, 1959 (hereinafter called the Act), and referred the following question of law for determination by this Court:
Whether, on the facts and circumstances of the case, the hosiery banyans were exempt from the levy of sales tax under item 23 of Schedule III of Notification No. STGL-AR-107/59--9134-F. T. dated 1st July, 1959, as amended from time to time by the Governmen t of Bihar, under Section 4 of the Bihar Sales Tax Act, 1959 ?
2. The assessee is a dealer, which manufactures hosiery goods (ganji) from hosiery cloth and sells hosiery goods. It also deals in hosiery cloth. The assessing officer exempted the sale of hosiery cloth to the tune of Rs. 11,672.92 from the imposition of sales tax, as sale of hosiery cloth was exempted from sales tax under a certain notification to be referred to hereinafter in this judgment. He, however, imposed sales tax on the sale of hosiery goods, namely, banyans. The contention on behalf of the assessee was that under the notification dated 1st July, 1959, sale of hosiery banyans was also exempt from sales tax, This contention was repelled by the appellate authority as also by the Deputy Commissioner of Commercial Taxes in revision. The assessee filed a second revision before the Commercial Taxes Tribunal. Agreeing with the departmental authorities, the Tribunal has upheld the imposition of sales tax on the sale of hosiery banyans. Hence this reference.
3. Notification No. STGL-AR-107/59--9134-F. T. dated 1st July, 1959, was Issued by the Governor of Bihar in exercise of his powers under Section 4(3)(a) of the Act. He was pleased to exempt the goods specified in the second column of Schedule III annexed to the notification from the levy of both "general sales tax" and "special sales tax". Item No. 23 of Schedule III reads as follows:
Cotton fabrics, rayon or artificial silk fabrics, woollen fabrics, sugar and tobacco, as defined in the Additional Duties of Excise (Goods of Special Importance) Act, 1957, and handloom cloth excluding pure mill cloth.
Another notification dated 5th August, 1959, was issued by the Governor of Bihar adding certain items to Schedule III of the old notification. This notification was given a retrospective effect and it came into force from 1st July, 1959, the day on which the first notification came into force. Item 27 added to Schedule III enumerates various items, such as, handkerchiefs, towels, napkins, etc. The tenth sub-item of item 27 is "hosiery cloth sold in lengths". The notification dated 19th October, 1966, which was made to come into operation with effect from 1st October, 1966, was issued adding to the Third Schedule item 32, which reads:
Cotton, silk and cotton-silk mixed hosiery goods.
On the face of the three notifications, therefore, it. would be noticed that in express language "hosiery cloth sold in lengths'" was excluded from the levy of sales tax with effect from 1st July, 1959, by including such article in item 27 of Schedule III, and cotton hosiery goods were also excluded with effect from 1st October, 1966, The period of assessment in question is 1964-65. On the face of these three notifications, therefore, it would be noticed that hosiery goods, namely, banyans, were not excluded from the levy of sales tax in the year 1964-65.
4. But the argument put forward on behalf of the assessee is that the expression "cotton fabrics", as defined in the Additional Duties of Excise Act, 1957, includes hosiery cloth as also hosiery goods made out of cotton yarn. It was, therefore, submitted that though the express exclusion of hosiery goods was by a different notification which came into force from 1st October, 1966, by necessary implication the sale of such goods was exempt from the levy of sales tax from 1st July, 1959. On the other hand, it was submitted on behalf of the revenue that the expression "cotton fabrics" was used in a narrow sense in item 23 of Schedule III of the notification dated 1st July, 1959; it did not embrace within its ambit hosiery cloth or hosiery goods and, therefore, they were expressly excluded by subsequent notifications.
5. Section 2(c) of the Additional Duties of Excise Act, 1957, defines the expression "cotton fabrics" to have the meaning assigned to it in item 19 of the First Schedule of the Central Excises and Salt Act, 1944. We have therefore to go to item 19 of Schedule I of the 1944 Act. In the said entry it is mentioned:
'Cotton fabrics' mean all varieties of fabrics manufactured either wholly or partly from cotton, and include dhoties, sarees, chadars, bed-sheets, bed spreads, counterpanes and table-cloths, but do not include any such fabric:
(a) if it contains 40 per cent or more by weight of wool ?
(b) if it contains 40 per cent or more by weight of silk; or
(c) if it contains 60 per cent or more by weight of rayon or artificial silk....
The 1957 Act was meant to impose additional excise duty on certain goods. Under the Central Excise Rules, 1944, power has been given to the authorities concerned to exempt certain goods from the levy of certain duties. In exercise of that power a notification was issued in the year 1955 by the Central Government exempting cotton fabrics described in that notification from the whole of duty leviable thereon under the Central Excises and Salt Act, 1944. Item 1 of this notification is "hosiery". It would thus be seen that although the expression "cotton fabrics" in item 19 of Schedule I of the Central Excises and Salt Act, 1944, in its inclusive definition did not include hosiery but included dhoties, sarees, chadars, bed-sheets, etc., in the notification issued in the year 1955, hosiery was treated as one of the items of cotton fabrics. But the State Government, while issuing the notification dated 1st July, 1959, did not treat the expression "cotton fabrics" to include "hosiery". And that is clear from the fact that by a subsequent notification issued about a month later, which was made retrospective from 1st July, 1959, hosiery cloth sold in length was an express item of exclusion from the levy of sales tax. To all intents and purposes, therefore, the notifications issued in the year 1959, both of which were made to come into force from 1st July, 1959, can be treated as part and parcel of the same notification. Treating them so, one has to accept that the sub-items enumerated in item 27 of Schedule III were not included in the general expression "cotton fabrics". If in a statutory rule or statutory notification there are two expressions used, one in general terms and the other in special words, by a rule of interpretation, it has got to be held that the special words were not meant to be included in the general expression. If hosiery cloth sold in length could not be taken to have been included in the expression "cotton fabrics", it is plain that hosiery goods would surely not be so. They were for the first time by an express language excluded from the levy of sales tax in the year 1966.
6. I now processd to consider the meaning of the expression "cotton fabrics", apart from the meaning given to it by the State Government when they issued the other two notifications, one in the year 1959 and the other in the year 1966. "Cotton fabrics", as defined in item 19 of Schedule I of the Central Excises and Salt Act, 1944, mean all varieties of fabrics manufactured from cotton. The word "fabric", according to the Concise Oxford Dictionary, means "woven materials", "texture", "often textile fabric". It would thus be noticed that "cotton fabrics" would mean cotton cloth which is generally woven. I am not sure whether a knitted piece of cotton cloth will be covered by the expression "cotton fabrics" or not. The words occurring in item 19 after the word "include", namely, dhoties, sarees, chadars, etc., go to indicate as to what is meant by cotton fabrics. It means cotton cloth, and although dhoties, sarees, chadars, etc., could be included in the expression "cotton cloth" because of borders being there or some stitching being there, one could say that they have ceased to be a piece of cotton cloth and, therefore, the word "include" makes them go within the ambit of the expression "cotton fabrics". If the legislature thought to include dhoties, sarees, chadars, etc., by an express language in the expression "cotton fabrics" and if they meant to include hosiery cloth or hosiery goods in it, they would have surely described them as being inclusive in the definition. Dhoties, sarees, chadars, etc., in common parlance and description are nearer to the expression "cotton cloth" than knitted hosiery cloth meant for manufacture of hosiery goods. If the nearer goods were sought to be included expressly, then the remote ones could not be left out from enumeration after the word "include" if the legislature thought them to include in the expression "cotton fabrics". To my mind, therefore, the expression "cotton fabrics" by itself as mentioned in item 19 of Schedule I of the Central Excises and Salt Act will not include hosiery goods. Even without stretching the imagination one could say that even knitted cotton cloth, like hosiery cloth, is included in the expression "cotton fabrics". But in the context of what is mentioned in item 19 itself, after the word "include" and in the context of what has been done by the State Government by issuance of another notification in the year 1959, I am constrained to hold that even hosiery cloth was not meant to be included in the expression "cotton fabrics". Of course, the notification issued by the Central Government in exercise of its power under Rule 8 of the Central Excise Rules, 1944, included hosiery in the description of "cotton fabrics". But such inclusion under a different notification issued for a different purpose cannot be pressed into service for understanding the meaning of the expression "cotton fabrics" mentioned in item 23 of the notification dated 1st July, 1959. Handkerchiefs, towels, napkins, dusters, etc., in a broader sense could be cotton fabrics, but because some more processing has to be done in order to present a piece of cotton textile in the shape of handkerchiefs, towels, etc., they were expressly mentioned in item 27 added to Schedule III of the notification dated 1st July, 1959. As I have said above that shows that the expression "cotton fabrics" was used in a narrow sense in the original notification.
7. There is no case directly on the point. Some cases were cited at the Bar in order to help us to determine the matter in issue in this case and some are noticed in the order of the Commercial Taxes Tribunal. I shall briefly refer to them. In Ishwardas Kapoor and Sons v. Member, Board of Revenue, Bengal [1946] 1 S.T.C. 153, the Calcutta High Court held that handloom-woven cloth subjected to needle work performed by hand or machine, after it came out of the loom, could not be regarded as handloom-woven cloth within the meaning of item No. 16 of the schedule of the Bengal Finance (Sales Tax) Act, 1941. This decision, although referred to by the Tribunal, is distinguishable and does not help us much. In Sharfaji Rao v. Commissioner of Sales Tax [1953] 4 S.T.C. 6, the Hyderabad High Court held that ready-made garments made of cloth were different from cotton cloth. Obviously, it would be so. In Lakshmiratan Cotton Mills Co. Ltd. v. Sales Tax Officer, Sector II, Kanpur [1962] 13 S.T.C. 1031, the Allahabad High Court pointed out the difference between the terms "cloth" and "clothes". The former is what comes straight from the weaving or textile factory and the latter are articles after "cloth" has been converted by cutting and stitching and something has been done to "cloth" either by human or machine agency to make that "cloth" into a garment or wearing apparel. From "hosiery cloth" are manufactured banyans. Therefore, banyans will be surely different from hosiery cloth, and that is one of the reasons why I have said above that even if hosiery cloth would be included in the expression "cotton fabrics", banyans which are made from hosiery cloth cannot be so. A Bench of the Gujarat High Court in Pravin Bros. v. State of Gujarat [1964] 15 S.T.C. 478 held that embroidered sarees and embroidered pieces intended for ladies' underwear made from malmal and voil cloth would not fall under entry 15 of Schedule A or entry 4 of Schedule D of the Statute in question, as it could not be treated as cotton fabric. It was something other than cotton fabric simpliciter. This decision lends some support to the view expressed by me above and can be pressed into service in favour of the revenue. The learned Counsel for the assessee relied upon another decision of the same Bench of the Gujarat High Court at page 586 of the same volume, that is, 15 Sales Tax Cases (Vaiswaner Trading Co. v. State of Gujarat). In this case, it was held that where pieces of rolled steel sections are joined together by riveting, they still retain the same form in which rolled steel sections are directly produced by the rolling mills within the meaning of entry 4 in Schedule AA of the Bombay Sales Tax Act, 1953. Sometimes it is difficult to decide such questions and each case has got to be decided with reference to the use of a particular term in the context of the statute, the rule, or the notification. Similarly, the decision of the Supreme Court in State of Madhya Bharat v. Hiralal [1966] 17 S.T.C. 313 (S.C.) is of no help to the assessee, as it was held that the processing was done for convenience of sale only. The raw materials were only re-rolled to give them attractive forms. A mere change of form did not rob them of the character of iron and steel for the purposes of levy of tax. It should be noticed in the instant case that the dealer used to sell hosiery cloth as also banyans after manufacturing them from the hosiery cloth. The two were different articles. As I have said, firstly, it is doubtful whether hosiery cloth itself could come within the expression "cotton fabrics". Even if it be so, hosiery banyans could not be equated with hosiery cloth.
8. Learned Counsel for the assessee placed reliance on three more decisions, namely, Commissioner of Sales Tax, Madhya Pradesh, Indore v. Mahajan Bros. [1963] 14 S.T.C. 808, Government of Madras v. Madurai Braided Cord and Tape Producers Co-operative Industrial Society [1968] 22 S.T.C. 470 and Commissioner of Sales Tax, U.P. v. Ashok Elastic Works [1971] 28 S.T.C. 743. In the case of Commissioner of Sales Tax, Madhya Pradesh v. Mahajan Bros. [1963] 14 S.T.C. 808 the Madhya Pradesh High Court held that hosiery goods were not ready-made garments. It was pointed out that there was a clear distinction in the English language between "garment" and "hosiery". It was emphasised at page 811 : "Again, a garment is made of cloth, whereas hosiery goods are made not of cloth but are knitted out of woollen or silken or cotton or linen threads." If, in the narrow sense, the expression "cotton fabrics" was used in item 23 to mean cotton cloth, then the words extracted above would show that hosiery goods could not be cotton fabrics. In the case of Government of Madras v. Madurai Braided Cord and Tape Producers Co-operative Industrial Society [1968] 22 S.T.C. 470, the Madras High Court held that braided cords are not laces but a variety of textile within the meaning of entry 4 of the Third Schedule to the Madras General Sales Tax Act, 1959. The same dictionary meaning of the word "fabric" from the Concise Oxford Dictionary was relied upon to show that braided cords are cotton fabrics. But, in my opinion, hosiery goods are not so. The Allahabad High Court has taken the view in the case of Commissioner of Sales Tax, U.P. v. Ashok Elastic Works [1971] 28 S.T.C. 743 that dori and fita are cotton fabrics. "Cotton fabrics of all varieties" were meant to be included in the expression. The two articles, it was not disputed, were manufactured out of cotton yarn. Mere addition of elastic materials, the nature of which was not specified in the statement of the case, could not alter its nature. In my opinion, hosiery goods cannot be equated with the articles, dori and fita, which were under consideration in the Allahabad case [1971] 28 S.T.C. 743.
9. For the reasons stated above, the question of law under reference has got to be answered in the negative in favour of the department and against the assessee. I accordingly hold that, on the facts and in the circumstances of the case, the hosiery banyans were not exempt from the levy of sales tax under item 23 of Schedule III of the notification dated 1st July, 1959, for the period in question. The assessee must pay the costs of this reference. Hearing fee is assessed at Rs. 100 only.
S.K. Jha, J.
I agree.