1994 (3) TMI 364 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of "surgical cotton" for tax purposes.
2. Whether "surgical cotton" falls under "cotton of all kinds" or "pharmaceutical preparation".
3. Effect of deletion of "manufactured or unmanufactured" from the tax entry on "cotton".
4. Applicability of specific versus general tax entries.

Issue-Wise Detailed Analysis:

1. Classification of "surgical cotton" for tax purposes:
The primary issue in the case was to determine the appropriate tax entry for "surgical cotton" or "absorbent cotton". The petitioner argued that "surgical cotton" should be classified under the entry for "cotton of all kinds" taxable at 4%, while the Revenue contended that it should fall under the residuary clause at 10%.

2. Whether "surgical cotton" falls under "cotton of all kinds" or "pharmaceutical preparation":
The Tribunal initially held that "surgical cotton" did not fall under the entry for "cotton" but under "pharmaceutical preparations" taxable at 6%. The court examined the dictionary definitions of "cotton" and concluded that "cotton" includes fibrous substances used in various forms, including manufactured states like "surgical cotton". The court noted that the term "cotton" in the notification was intended to have a broad meaning, encompassing all forms of cotton, whether manufactured or not.

3. Effect of deletion of "manufactured or unmanufactured" from the tax entry on "cotton":
The court examined the legislative intent behind the deletion of the words "manufactured or unmanufactured" from the tax entry on "cotton". It concluded that the deletion was not intended to change the scope of the entry but to remove surplusage. The court held that "cotton" in its broad sense includes "surgical cotton" even after the deletion of these words.

4. Applicability of specific versus general tax entries:
The court also considered whether "surgical cotton" should be classified under the specific entry for "pharmaceutical preparation". It concluded that "surgical cotton" does not fit the definition of "pharmaceutical preparation", which pertains to medicinal drugs. The court referred to the Allahabad High Court's decision in Commissioner of Sales Tax v. Indo Pharma Agencies, which held that "surgical cotton" is not a pharmaceutical preparation. The court emphasized that "surgical cotton" is used for surgical dressing and not as a medicinal drug.

Conclusion:
The court held that "surgical cotton" falls under the entry for "cotton of all kinds" taxable at 4% and not under "pharmaceutical preparation" or the residuary clause. The revision petition was allowed, and the assessment order was modified accordingly. There was no order as to costs. The judgment emphasized the broad interpretation of "cotton" to include all forms, whether manufactured or unmanufactured, and clarified that "surgical cotton" is not a pharmaceutical preparation.