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TMI Blog1991 (3) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... rcement) before whom the said application of the applicant was posted for hearing negatived the plea of the applicant and decided that the "bookbinding cloth" cannot enjoy the benefit of exemption under entry 37 in the First Schedule to the said Act. He, inter alia, held that the goods manufactured by the applicant were covered by the residuary entry, namely, entry 13 in Schedule III to the said Act, and was to be taxed accordingly. The contention of the applicant that it was entitled to the benefit of item No. 67 of the Government Notification issued under section 49 of the said Act was also negatived by the Deputy Commissioner of Sales Tax. 2.. Being aggrieved by the said order of the Deputy Commissioner of Sales Tax, the applicant carried the matter in appeal in the Gujarat Sales Tax Tribunal. The Tribunal, by its judgment and order, dated 10th October, 1979, held that the "bookbinding cloth" is not "cotton fabric" and it does not fall within the definition of "cotton fabric" because the cotton fabric after its manufacture has undergone a further process of dyeing, starching and calendering. The said process had converted the basic cotton fabric into a distinct commercial co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral 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 Salt 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. 5.. Item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944, as it stood after its amendment by the Act No. 6 of 1980 is as under: "19. Cotton fabrics: 'Cotton fabrics' means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chaddars, bedsheets, bed-spreads, counterpanes, table-cloths, embroidery in the piece, in strips or in motifs, and fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials and fabrics covered partially or fully with textile floc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration is as to whether the cotton fabric purchased by the applicant after being subjected to the process of dyeing, starching, drying and calendering would continue to remain as cotton fabric within the meaning of item No. 19 of the First Schedule to the Central Excises and Salt Act, and therefore, would continue to remain as cotton fabric under entry 37 of Schedule I to the said Act. 8.. To be a "cotton fabric" three conditions are required to be satisfied, i.e., (1) the article in question must be a fabric, (2) it must have been manufactured either wholly or partly from cotton, and (3) if it is a fabric made out of cotton mixed with other materials, cotton should predominate in weight or such fabric should contain more than 40 per cent by weight of cotton and 50 per cent or more by weight of non-cellulosic fibre or yarn or both. 9.. In the case before us, the third condition has no application and we will decide by reference to first two conditions as to whether bookbinding cloth is cotton fabric or not. 10.. In order that the "bookbinding cloth " may fall within the definition of "cotton fabric" the first condition which it shall have to satisfy is that it must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having undergone the process of dyeing, starching and calendering. Both the authorities proceeded on the finding that once the distinct commercial commodity comes into existence because of process carried out by the applicant such a product would cease to be cotton fabric and it would not fall within item No. 19. In our opinion this approach of the Deputy Commissioner of Sales Tax and the Tribunal is not legal and permissible in view of the definition of "cotton fabric" as given in item No. 19. In the first part of the definition, namely, to mean fabric manufactured either wholly or partly from cotton, bookbinding cloth can be said to be a fabric since it is admittedly made out of cotton. Assuming that the first part of the definition is not attracted the inclusive part of the definition is so wide so as to include fabric impregnated or coated or laminated with preparations of cellulose derivatives or other artificial plastic materials, and in fact, it is submitted before the Tribunal that the process of starching and calendering is a process that would squarely fall within the category of impregnation or coating with preparations of cellulose derivatives. The Tribunal did not answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 14.. The Division Bench of this Court in that case first referred to the definition of "cotton fabric" as contained in item 19 of the First Schedule to the Central Excises and Salt Act and then referred to the amendme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned 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 fabric 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinting, water-proofing, etc. This sub-clause (v) as reference to sub-item I of item 19 of the First Schedule which also came to be substituted by the amending Act and sub-clause (b) of sub-item I of item 19 clarifies that "cotton fabric" even if it is subjected to the process of bleaching, mercerising, dyeing, printing, etc., would continue to be "cotton fabric". Therefore, when the applicant purchased cotton fabric from the market and subjected the cotton fabric to the process of bleaching, mercerising, dyeing, starching, drying, calendering, he was in fact carrying on the manufacturing activity on such cotton fabric. The processes of bleaching, mercerising, dyeing, printing, etc., are the processes which even if applied would not take the cotton fabric out of the definition of "cotton fabric" firstly because of subitem I of item 19 of the First Schedule, and secondly because of introduction of sub-clause (v) in section 2(f) of the Excise Act. We are, therefore, of the opinion that what the applicant did after purchasing the cotton fabric from open market was to subject it to manufacturing process, namely, that of dyeing, starching and calendering, said processes are closely iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At this stage it is also required to be examined as to whether the fact that the bookbinding cloth which emerges after subjecting cotton fabric to the process of dyeing, starching and calendering would cease to be cotton fabric, firstly because a new commercial commodity comes into existence, and secondly because bookbinding cloth has a separate and specific use. Identical contention was raised before the Division Bench of this Court in the case of Pokardas Brothers v. State of Gujarat [1982] 51 STC 88. The Division Bench of this Court in that case took the view that if the definition in item 19 takes into its sweep the tarpaulin which is a water-proof cloth there is no scope for invoking the principles of user's test. The Division Bench of this Court observed as under: "The use to which tarpaulins are put to is, in our opinion, immaterial for deciding the question whether they can be classified as cotton fabrics or not since cotton fabrics are defined." In reaching this conclusion the Division Bench has also relied upon the decision of the Supreme Court in the case of Porritts Spencer (Asia) Ltd. v. State of Haryana reported in [1978] 42 STC 433. In that case the question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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