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TMI Blog1972 (12) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the assessee in the said proceedings was that the articles sold by it were "cotton fabrics" within the meaning of entry 15 of Schedule A to the Act and, as such, no tax was payable on the sales of the said articles. In support of its contention, the assessee furnished a true copy of the test certificate dated 19th November, 1966, issued by the Assistant Director (Chemical), National Test House, Ministry of Supplies and Technical Development, Government of India, Calcutta, and the letter dated 30th March, 1967, written by the Mercury Rubber Mills, New Delhi, who are the manufacturers of these rubber beltings. The assessee also relied upon certain previous decisions of the Deputy Commissioner of Sales Tax (Appeals), Gujarat State, in which two articles of identical nature marketed under different trade names were held to fall within the ambit of entry 15 of Schedule A to the Act. The Deputy Commissioner of Sales Tax (Headquarters), Gujarat State, before whom the said applications came up for hearing, negatived the contention of the assessee by two separate orders each dated 19th December, 1967. The Deputy Commissioner, inter alia, held that in the process of manufacturing rubb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consolidated reference and referred to this court the following two questions of law: "(1) Whether on the facts and in the circumstances of the case, the sales of Hind rubber beltings and Cooper rubber beltings are covered by entry 15 of Schedule A to the Bombay Sales Tax Act, 1959? (2) Whether the Tribunal was justified in holding that, on the facts and in the circumstances of the case, the appellants were not entitled to the benefit of sub-section (2) of section 52 of the Bombay Sales Tax Act, 1959?" At the hearing of this reference, counsel for the assessee has not pressed the second question for our decision and it is, therefore, not necessary to deal with and give our opinion on the said question. We shall confine the discussion only to the first question which has been elaborately argued before us on behalf of the assessee as well as of the revenue. The answer to the first question will depend upon the true construction of the expression "cotton fabrics" as appearing and defined in entry 15 of Schedule A. At the material time, the said entry read as under: "'Cotton fabrics' as defined in item 19 of the First Schedule to the Central Excises and Salt Act, 1944." Item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th January, 1957. Section 6 came into force on 1st July, 1957, and section 15 came into force on 1st October, 1958. By section 14 of the said Act, certain goods were declared to be of special importance in inter-State trade or commerce and by section 15 of the said Act, as originally enacted, a twofold restriction was placed on the imposition of tax on the sales or purchases of declared goods under the sales tax law of any State. The first restriction imposed by the Act was that the tax payable under the State law in respect of any sales or purchases of declared goods inside the State shall not exceed two per cent. of the sale price thereof and the second restriction was that such tax shall not be levied at more than one stage. It may be mentioned at this stage that "cotton fabrics" were not declared to be goods of special importance within the meaning of section 14 of the Central Sales Tax Act at the time of its original enactment. It was evident that on coming into force of section 15 of the Central Sales Tax Act, the States would suffer some loss of revenue. It was, therefore, found expedient and desirable to compensate the States for the proportionate loss of sales tax incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Sales Tax Act. In the meantime, the Bombay Legislature enacted the Bombay Sales Tax Laws (Special Exemptions) Act, 1957, which came into force on 14th December, 1957. The preamble of the Exemptions Act shows that the purpose of the Act was threefold. It was: (i) to exempt the sales or purchases of certain goods which became assessable to an additional duty of excise, (ii) to exempt the sales or purchases of certain handloom textiles, and (iii) to exempt the sales or purchases of "other goods" from the sales tax laws in force in the State of Bombay. The reference in the preamble of the said Act to the liability of certain goods to be assessed to an additional duty of excise is a reference to the additional duty which was proposed to be levied by the Additional Duties of Excise (Goods of Special Importance) Act, 1957, which was to come into force with effect from 24th December, 1957, that is, subsequent to the enactment of the Bombay Exemptions Act. The goods which earned exemption under the Bombay Act were divided into two categories: one category consisted of goods specified in Schedule I and the other category consisted of goods specified in Schedule II. The former were des ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, it imposed one more restriction and the said restriction was that where a tax was levied under the State law in respect of the sale or purchase inside the State of any declared goods and such goods were sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in the said State. Accordingly, sales tax levied under the State law on sale of any declared goods inside the State, became refundable, if such goods were sold in the course of inter-State trade or commerce, subject to certain conditions. The Bombay Sales Tax Act, 1959, which repealed the Bombay Sales Tax Act, 1953, and the Bombay Sales Tax Laws (Special Exemptions) Act, 1957, received the assent of the Governor on 25th September, 1959. Section 1 of the said Act came into force immediately and the remaining provisions of the said Act came into force on 1st January, 1960. Subsection (10) of section 2 of the said Act defines "declared goods" to mean declared goods as defined in the Central Sales Tax Act, 1956. Subsection (1) of section 5 of the said Act provides that notwithstanding anythin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dule A of the Bombay Sales Tax Act, 1959. The Government of Gujarat, therefore, issued a notification dated 6th April, 1962, in exercise of the powers conferred by sub-section (2) of section 5 of the said Act and substituted in place of original entry 15, a new entry 15. This new entry has already been set out in the earlier part of this judgment and the said new entry re-enacted the original entry in the same form except that the words "item No. 19" were substituted in place of the words "item No. 12" found in the original entry. The result of this amendment was that the definition of "cotton fabrics" as contained in item No. 19 of the First Schedule to the Central Excises and Salt Act is the definition which is required to be taken into consideration in construing the expression "cotton fabrics" for the purposes of the Bombay Sales Tax Act, 1959. Having set out the legislative history, we may now turn to the consideration of the question referred to us by the Tribunal, namely, whether rubber beltings marketed by the assessee can be said to be "cotton fabrics" within the meaning of entry 15 of Schedule A. In paragraph 3 of the statement of case submitted by the Tribunal, the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was over, there was a change in the form of canvas since it was converted into "something like rubber cloth" and did not retain its character as a cotton fabric. The Deputy Commissioner, therefore, negatived the contention of the assessee that rubber beltings were comprehended within the meaning of the expression "cotton fabrics" found in entry 15 of Schedule A. When the matter went before the Tribunal, it confirmed the decision of the Deputy Commissioner. The reasons which impelled the Tribunal to take the same view were: (i) that "primarily" cotton fabrics and not all articles having cotton content were intended to be covered by the expression "cotton fabrics", (ii) that even assuming that canvas, which was the main component of rubber beatings, was a product of cotton and, as such, a variety of cotton fabrics, it was not shown that rubber and cotton were used in the actual process of manufacture of canvas, (iii) that the process of coating canvas with rubber was also not a process incidental or ancillary to the completion of canvas as a manufactured product, and (iv) that since rubber was actually superimposed on canvas, the latter lost its identity, if any, as cotton fabric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t comprehended within the meaning of that expression for the purposes of the Act. We have in mind clause (d) of the definition which provides that a fabric manufactured on a handloom, even if it is manufactured wholly from cotton, is not covered by the definition. The principle which we must, therefore, apply in construing the expression "cotton fabrics" is not the one which is often applied in construing entries appearing in a fiscal statute, namely, as to what is the meaning of the expression "cotton fabrics" which people conversant with it would attribute to it. What is required to be seen is whether the article in question, namely, rubber belting is "cotton fabrics" as defined by item 19 in the First Schedule of the Central Excises and Salt Act. Now, as pointed out earlier, in order that rubber beltings may qualify to be termed as "cotton fabrics" within the meaning of the Act, the first condition which has to be satisfied is that they must be fabrics. In Webster's New Twentieth Century Dictionary, the following three meanings are given to the word "fabric": "(1) anything made of parts put together; structure; building framework, (2) the style or plan of construction; textu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... character as a cotton fabric after rubber is superimposed upon it by some process. Two things are required to be noted in this connection. In the first place, the word "manufacture" as defined in section 2(f) of the Central Excises and Salt Act includes any process incidental or ancillary to the completion of a manufactured product. The process of superimposition of rubber on canvas, which is a completely manufactured product, cannot be said to be a process incidental or ancillary to its manufacture and, therefore, rubber beltings cannot be said to be "cotton fabrics" within the meaning of item 19 read with section 2(f) of the Central Excises and Salt Act. Secondly, as a result of the superimposition of rubber on canvas it is converted into a wholly different commercial article for the purpose of making it marketable in the new form. Rubber beltings, when manufactured, would be different goods constituting a different commercial commodity and canvas cannot be said to continue to retain its identity as canvas after process of superimposition of rubber. Thirdly, there is nothing to show that rubber beltings can be put to the same use to which canvas can be put. In fact, as far as com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantially raised for decision in the reference was whether embroidered sarees and embroidered pieces meant for ladies' underwears were exempt from tax, being covered by entry 15 of Schedule A to the Act and, if not, whether the said two articles were covered respectively by entry 4 in Schedule D and entry 22 in Schedule E, or any other entry of the schedules to the Act. The Division Bench, which heard the reference, posed for its determination the question whether the fact that after the said pieces of five yards and three yards were cut from takas, embroidery by hand or machine was superimposed on them so as to make them embroidered sarees and underwear material and to sell them as such material took those articles out of entry 15 of Schedule A to the Act. The court held that the five yards and three yards pieces, even after they were cut from takas, would not cease to be cotton fabrics within the meaning of entry 15 of Schedule A and that the fact that they were so cut and were intended for a particular use would not make any difference. The court, however, found that once the five yards and three yards pieces were embroidered, they would not be covered by entry 15 of Schedule A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closely interrelated as to form a single system or code of legislation and were required to be interpreted and enforced as such. If the legislative history is borne in mind, proceeded the argument, it would appear that the object of granting exemption to cotton fabrics from liability to pay sales tax under the sales tax laws of the States was that the said goods were to bear additional duty of excise and a part of the net proceeds thereof was to be distributed amongst the States. The exemptions granted by section 5 of the Bombay Sales Tax Act were, therefore, intended to be co-extensive with the liability to bear additional duty of excise. What is treated as "cotton fabrics" for the purposes of the Central Excises and Salt Act and the Additional Duties of Excise Apt must also be treated as "cotton fabrics" for the purposes of the Bombay Sales Tax Act. We were then referred to a statutory notification issued by the Central Government under rule 8 of the Central Excises Rules, 1944, which exempted certain varieties of cotton fabrics falling under item 19 "from so much of duty as is in excess of the duty" specified in the said notification. Amongst the articles which were thus exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom time to time and the last of such amendment was made by the notification dated 26th May, 1967. It would, therefore, appear that there is nothing to show that when item 19 was incorporated by reference into the Bombay Sales Tax Act by the notification dated 6th April, 1962, rubberised cotton fabrics were treated as covered by the said item. The subsequent additions or alterations to the Central Excises and Salt Act, which were made for the purpose of granting exemptions, cannot be deemed to have been incorporated into the Bombay Sales Tax Act. As observed by the Privy Council in Secretary of State v. Hindustan Co-operative Insurance Society Ltd.A.I.R. 1931 P.C. 149.: "It seems to be no less logical to hold that where certain provisions from an existing Act have been incorporated into a subsequent Act, no addition to the former Act, which is not expressly made applicable to the subsequent Act, can be deemed to be incorporated in it, at all events if it is possible for the subsequent Act to function effectively without the addition." It is, therefore, clear that the notifications issued by the Central Government under the Central Excises and Salt Act for the purpose of grantin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or the Central Excises Rules. Thirdly, the law is well-settled that it is for a person who claims exemption to establish it; a person who claims the benefit of an exemption must bring his case squarely and fairly within the provisions granting exemption. In the present case, as pointed out above, on a true and proper construction of item 19 of Schedule I, rubber beltings do not fall within the said item and it would not be permissible to claim the benefit of exemption under the Bombay Sales Tax Act by having recourse to a statutory notification issued under some different Act for a different purpose. In our opinion, therefore, the arguments founded on the legislative history cannot help the assessee in the present case. We might observe that a similar argument was advanced before the Division Bench of this Court which decided Pravin Brothers' case[1964] 15 S.T.C. 478. The argument there urged was that while construing entry 15 in the Schedule A to the Act, the court should bear in mind the purpose and object of granting exemption to cotton fabrics from the levy of sales tax under the sales tax law of the State and must so construe the said entry that all articles which bear add ..... X X X X Extracts X X X X X X X X Extracts X X X X
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