Indian Kanoon - Search engine for Indian Law

"37. Cotton fabrics as defined in item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944."

It is clear from the said entry that the Legislature has not separately defined "cotton fabric" for the purpose of the said Act, but it has referred to the definition of "cotton fabric" as given in item No. 19 of the First Schedule to the Central Excises and Sale Act, 1944. It is, thus, clear that this is a incidence of referential legislation and in that the Legislature has adopted by reference the definition of "cotton fabric" as given in the Central Excises and Salt Act, 1944, for the purpose of defining the said article in the Gujarat Sales Tax Act.

13. The learned advocate for the applicant relied upon the decision of this Court in the case of Pokardas & Brothers v. State of Gujarat reported in [1982] 51 STC 88. In that case the question that arose before the Division Bench of this Court was as to whether tarpaulin was "cotton fabric" falling under entry 37 of Schedule I to the Gujarat Sales Tax Act, 1969 and, therefore, not liable to tax. The sales tax authorities held that the tarpaulin was not prepared from cotton fabric or textile fabric and that they would be covered by entry 13 of Schedule III to the said Act. However, the Division Bench of this Court was called upon to apply the enlarged definition of "cotton fabric" as inserted in the Excise Act in first instance by Ordinance No. 12 of 1979 which came into force by 24th November, 1979 and was followed by Act No. 6 of 1980 with retrospective effect from 1st March, 1955. It was contended before the Division Bench that in view of the fact that the definition was a piece of referential legislation, the legislative mandate must be carried out by substituting amended definition in the statute book and the definition of "cotton fabric" should be read as if amendment was there on the statute book with effect from 1st March, 1955. Any attempt therefore to read the exemption provision (cotton fabric) de hors the intimately connected provision of the Excise Act may possibly result in rendering the exemption provision wholly ineffective and unworkable. Therefore, since the referential legislation contained in entry 37 of Schedule I to the Gujarat Act is supplemental to the Excise Act, the amendments made in the original incorporated provision must necessarily project and must be read as a part of the referential legislation contained in entry 37. The Division Bench of this Court therefore held that the Gujarat State Legislature before passing the Gujarat Sales Tax Act, applied its mind and decided that "cotton fabric" should have the same meaning as assigned to it in the Central Excise Act having regard to the purpose and object underlying the impost of excise duty as well as sales tax on such important commodities like, cotton fabrics. In the second place, the Legislature prescribed a policy and provided a definition which should be in consonance with the definition of "cotton fabrics" as understood in the Excise Act.

15. We are concerned with the amending Act only in so far as the definition of "cotton fabric" in item No. 19 of the First Schedule to the Excise Act has been enlarged by amending section 2(f) of the said Act. It is this part of the amending Act which has been relied upon by the advocate appearing for the applicant for urging that "bookbinding cloth" would fall within the meaning of "cotton fabric" as contained in the first part of the definition as stated hereinabove. The first part of the definition, in fact, defines "cotton fabric" to mean "all varieties of fabrics manufactured either wholly or partly from cotton". By amending the said item 19 and adding sub-item I, the Legislature has attempted to further clarify the meaning of "cotton fabric". Clause (a) of sub-item I of item 19 refers to cotton fabrics not subjected to any process and clause (b) thereof refers to cotton fabrics subjected to processes of bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any two or more of these processes. By this wider definition, cotton fabric which is subjected to any of those processes or any two or more processes would continue to be cotton fabric. This clarification by substitution of sub-item I of item 19 is required to be read with introduction of sub-clause (v) after sub-clause (iv) in section 2(f) of the Central Excises and Salt Act. It is thus clear that because first part of the definition of "cotton fabric" refers to all varieties of fabrics manufactured either wholly or partly from cotton the Legislature by substituting sub-item I of item 19 clarified that even if cotton fabric is subjected to any of the processes referred to in clause (b) of sub-item I of item 19 the commodity would continue to be classified as "cotton fabric". This has necessitated the amendment in the definition of the word "manufacture" and by introducing sub-clause (v) in section 2(f) of the Excise Act, the Legislature introduced all those processes to fall within the definition of "manufacture". Thus, it is clear that even when cotton fabric is subjected to processes like to bleaching, mercerising, dyeing, printing, etc., it would remain cotton fabric for the purpose of Excise Act. The learned advocated appearing for the applicant therefore submits since entry 37 of Schedule I to the Gujarat Act is piece of referential legislation for all intents and purposes definition of "cotton fabric" in item No. 19 of Schedule I to Excise Act must be read accordingly and it should be deemed to have been part of the Gujarat Sales Tax Act. While effecting amendment in item 19 of Schedule I to the Central Excises Act the Legislature has given retrospective effect and, therefore, its was submitted that for the purpose of entry 37 of Schedule I to the Gujarat Act the said amendment shall have retrospective effect. We are of the opinion that if as a necessary sequel to amending Act the legislative amendment is to read the definition of term, namely, "cotton fabric" with effect from March 1, 1955, we must read the definition accordingly and decide as if the amended definition was on the statute book for all intents and purposes from March 1, 1955.

17. In the case of State of Kerala v. Attesee (Agro Industrial Trading Corporation) reported in [1989] 72 STC 1, the Supreme Court was called upon the decide the question as to whether the "PVC" cloth" which was being manufactured by Attesee before the Supreme Court was "cotton fabric" within the meaning of the said term as defined by the Kerala General Sales Tax Act, 1963. It may be noted that item No. 7 of the Kerala General Sales Tax Act defined "cotton fabric" as defined in item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944. The questions which arose before the Supreme Court were : (1) What is the effect of the mention of the definition of "cotton fabric" given in the 1944 Act in the Schedule to the 1963 Act ? and (2) Does it attract only the said definition as on April 1, 1963, or also the subsequent amendments thereto ? The Supreme Court made reference to the principles of interpretation of an enactment which, for purposes of convenience, refers to or incorporates a provision of another statute. The court drew distinction between referential legislation which merely contains a "reference to or citation of" a provision of another statute. In the case of referential legislation the court held that the provisions of second statute along with all its amendments and variations from time to time should be read into the first statute, and accordingly, the court applied the amended definition of "cotton fabric" and held that the "PVC cloth" would be "cotton fabric" within the meaning of the said term. The court in the said case relied upon the exclusive definition and held that the "fabrics impregnated or coated with preparation of cellulose derivatives would also be cotton fabrics". The court held that the "PVC cloth" would clearly fall within this amended definition of "cotton fabric" so as to be entitled to exemption from sales tax.