9911796707
TMI Blog1975 (1) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... on fabrics and subject to the levy of excise duty. The Commercial Tax Officer accordingly disallowed the said claim for deduction and Included a sum of Rs. 1,44,198.13 within the petitioner's taxable turnover for the period in question and assessed tax thereupon. The petitioner-company being aggrieved by the said assessment order dated 8th June, 1966, preferred an appeal under section 20(1) of the Bengal Finance (Sales Tax) Act, 1941. The Assistant Commissioner, Commercial Taxes, Calcutta (South) Circle, dismissed the said appeal. The Assistant Commissioner upheld the views of the Commercial Tax Officer that the petitioner was not entitled to get exemption from payment of sales tax upon the sale proceeds of bed-spreads, bed-sheets, towels and napkins. According to the Assistant Commissioner, the said items were stitched materials and not "cotton fabrics" and, therefore, the petitioner could not claim benefit of exemption under rule 3(28) of the Sales Tax Rules. The petitioner-company In this writ petition has, inter alia, prayed that the above assessment order dated 8th June, 1966, and also the appellate order dated 19th March, 1968, be quashed, and the respondents be commanded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... items Nos. 1, 4, 19, 21, and 22 of the First Schedule to the Central Excises and Salt Act, 1944." The petitioner-company annexed to its writ petition a copy of the letter dated 26th July, 1965, addressed to the Superintendent, Central Excise, Delhi Division, Defence Colony, New Delhi. The petitioner-company requested the Superintendent, Central Excise, to confirm that the bedsheets, bed-spreads, towels, napkins which were stitched at the end inside the petitioner's mill premises were being cleared from the mills after paying excise duty, additional excise duty in lieu of sales tax and cess. The petitioner-company in the said letter stated that the said articles were cut from pieces in bona fide consumer lengths and the ends of such cut lengths made into bed-sheets, bed-spreads, towels, napkins, dusters. The Superintendent, Central Excise, New Delhi, by his letter dated 17th August, 1965, replied as follows: "It is certified that you have been as a special case permitted by the Board to cut the running pieces of cotton fabrics in the licensed premises and to stitch at both ends for the purpose of making bed-sheets, bed-spreads, cotton towels, cotton napkins and you pay basic dut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounterpanes and table-cloths have been included. Maxwell on Interpretation of Statutes, 12th Edition, at page 270, with reference to the "Construction Imposed by Statute" observes: "Sometimes, it is provided that a word shall 'mean' what the definition section says it shall mean; in this case, the word is restricted to the scope indicated in the definition section. Sometimes, however, the word 'include' is used in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural Import, but also those things which the interpretation clause declares that they shall include. In other words, the word in respect of which 'includes' is used bears both its extended statutory meaning and 'its ordinary, popular and natural sense' whenever that would be properly applicable." Thus, it may be legitimately contended that the legislature by providing that "cotton fabrics" within the meaning of entry 19 of the First Schedule of the Central Excises and Salt Act, 1944, would Include dhoties, sarees, bed-sheets, bed-spreads, etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransformation of material. In the case of embroidery work or execution of any other artistic work on "cotton fabrics" obviously something is added to the cotton fabrics so as to make new and distinctive materials. The Supreme Court in Tungabhadra Industries Ltd., Kurnool v. Commercial Tax Officer, Kurnool[1960] 11 S.T.C. 827 (S.C.); A.I.R. 1961 S.C. 412., considered the question whether hardened or hydrogenated groundnut oil (commonly called vanaspati) is still groundnut oil within the meaning of rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. The learned Judges of the Supreme Court in Tungabhadra Industries case[1960] 11 S.T.C. 827 at 833-835 (S.C.); A.I.R. 1961 S.C. 412, paras. 16-19. observed that even after such manufacturing process there was no change in the essential nature of the groundnut oil. Recently, the Supreme Court in Lt. Governor, Delhi v. Ganesh Flour Mills Co. Ltd.[1973] 31 S.T.C. 354 (S C.); A.I.R. 1973 S.C. 705., held that the tin sheets or tin plates used by vegetable oil dealers were materials intended for being used for packing of goods for sale. According to the Supreme Court, the fact that tin sheets and tin plates had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8., the assessee after purchasing takas of malmal and voil cloth and cutting them into five yards pieces and three yards pieces from them superimposed embroidery work on those pieces and sold the five yards pieces as sarees and three yards pieces as ladies' underwear. A Division Bench of the Gujarat High Court held that because of the embroidery work having been subsequently superimposed on the cloth and the same being not incidental or ancillary process to its manufacture, the cut pieces were not cotton fabrics. According to the Division Bench, stitched embroidery work was something which was an additional thing superimposed on an already manufactured cotton fabric, and it was that additional thing which was neither incidental nor ancillary to the completion of the process of its manufacture which brought it under entry 3 of Schedule E of the Bombay Sales Tax Act, 1959. Mr. Sen Gupta, the learned Advocate for the respondents, himself drew my attention to the recent decision of the Patna High Court In Sri Ram Hosiery Works v. State of Bihar(1). Untwalia, C.J. (as he then was), delivered the opinion of the Division Bench on the question whether hosiery banyans were exempt from the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted errors apparent on the face of records by not applying the correct legal tests. The Commercial Tax Officer did not record an finding whether the value of cotton fabrics manufactured in the petitioner's mill were Increased as a result of such cutting and stitching. It is true that the Assistant Commissioner, Commercial Taxes, had observed that as a result of fashioning and stitching the turn-ups and borders the bed-sheets, bed-spreads, towels and napkins changed their earlier character and value and could no longer be treated as cotton fabrics simpliciter. But neither the Commercial Tax Officer nor the Assistant Commissioner applied their mind to the definition of "cotton fabrics" in entry 19, which expressly included dhoties, sarees, chadars, bed-sheets, bed-spreads, etc., within the said expression. When the said entry No. 19 did not exclude stitched bed-sheets, bed-spreads, etc., there was no basis for holding that stitched materials although continued to retain the essential nature of the "cotton fabric" were liable to sales tax. I, however, make It clear that in case dyeing, printing or embroidery works are made on such bed-sheets, bed-spreads, towels, napkins, etc., the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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