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2014 (4) TMI 593 - SC - VAT and Sales TaxRate of tax on Surgical Cotton - Classification – Interpretation of Statute – Whether the manufacturing process is involved in the production of surgical cotton from cotton in terms of definition mentioned u/s 2(27) of the Act and whether the same commodity in the same entry would be liable for taxation twice specially when the Act suggests that cotton is a commodity of special importance and must be taxed only once u/s 15 of the CST Act - Double taxation - Held that:- The definition u/s 2(27) is an inclusive definition and encompass all processing of goods which would produce new commodity which is commercially different and distinctly identifiable from the original goods - The definition however excludes all such mechanisms of processing of goods which have been notified by the State Government to the said effect - Admittedly, no such exclusion in respect of the process in analysis for surgical cotton has been notified by the State Government - Thus, the process of transformation has to be tested on the anvil of proposition whether surgical cotton is processed such that it is commercially different and distinctly identifiable than cotton - Relying upon CRANE BETEL NUT POWDER WORKS Versus COMMR. OF CUS. & C. EX., TIRUPATHI [2007 (3) TMI 6 - SUPREME COURT OF INDIA] citing the earlier decision in Brakes India Ltd. v. Supdt. of Central Excise [1997 (3) TMI 120 - SUPREME COURT OF INDIA] wherein the process of drilling, trimming and chamfering was said to amount to “manufacture”, has reiterated that if by a process, a change is effected in a product and new characteristic is introduced which facilitates the utility of the new product for which it is meant, then the process is not a simple process, but a process incidental or ancillary to the completion of a manufactured product. After going through the various steps that are carried out by the assessee for getting surgical cotton from raw cotton, it can certainly be said that cotton has undergone a change into a new commercially identifiable commodity which has a different name, different character and different use - The process of transformation is not merely processing to improve quality or superficial attributes of the raw cotton - The cotton looses its original form and it marketed as a commercially different and distinct product - As rightly noticed by the High Court by relying upon the decision in EMPIRE INDUSTRIES LTD. Versus UNION OF INDIA [1985 (5) TMI 215 - SUPREME COURT OF INDIA] wherein this Court has explained the meaning of the expression 'manufacture" as when the result of the treatment, labour and manipulation a new commercial commodity has emerged which has a distinctive new character and use – This court is of considered opinion that surgical cotton is a separately identifiable and distinct commercial commodity manufactured out of raw cotton and therefore, ceases to be cotton under Entry 16 of the said notification – This Court cannot take any exception to the impugned judgment and order passed by the High court – Decided against Assessee. Scope of the term "Include" - Held that:- Judgment in South Gujarat Roofing Tiles Manufacturers Association and anr. v. State of Gujarat and anr. [1976 (10) TMI 147 - SUPREME COURT OF INDIA] and Karnataka Power Transmission Corpn. v. Ashok Iron Works (P) Ltd. [2009 (2) TMI 745 - SUPREME COURT OF INDIA] - The expression “include” is used as a word of extension and expansion to the meaning and import of the preceding words or expressions – When the word “includes” is used in the definition, the legislature does not intend to restrict the definition: it makes the definition enumerative but not exhaustive - The term defined will retain its ordinary meaning but its scope would be extended to bring within it matters, which in its ordinary meaning may or may not comprise. By introducing the word “including” immediately after detailing the definition of cotton, the legislature has expanded the meaning of the expression “cotton” for the purposes of the Act - While the natural import suggests and prescribes only unmanufactured cotton in all forms, the commodities “absorbent cotton wool I.P.” and “cotton waste” manufactured out of “cotton” are intentionally and purposefully included in the relevant entries alongwith cotton in its ordinary meaning – This Court is of the considered opinion that “surgical cotton/absorbent cotton wool I.P.” is also “cotton” for the purposes of the relevant entries in the notifications for assessment years 1993-94 to 1998-99 and therefore is liable to exemption from levy of tax under the Act - In light of the same, judgment and order passed by the High Court cannot be sustained - Judgment and order of the High Court is set aside – Decided in favour of Assessee.
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