TMI Blog1972 (12) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... abrics 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 November 19, 1966, issued by the Assistant Director (Chemicals), National Rest House, Ministry of Supply and Technical Development, Government of India, Calcutta and the letter dated March 30, 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 amibit of Entry 15 to Schedule A to the Act. 2. 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 December 19, 1967. The Deputy Commissioner inter alia held that in the process of manufacturing rubber beltings, rubber was actually superimposed on canvas after the weaving process of canvas clot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 ? 5. 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. 6. 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 No. 19 of the First Schedule to the Central Excises and Salt Act (hereinaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, and Section 15 came into force on October 1, 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 two-fold restriction was placed on the imposition of tax on the sales or purchases of declared goods under 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. 9. It was evident that on coming into force of Section 15 of the Central Sales Tax Act, the State would suffer some loss of revenue. It was, therefore, found expedient and desirable to compensate the States for the proportionate loss of sales tax incurred by them on the sales of declared goods inside the State as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Tax Laws (Special Exemptions) Act, 1957 which came into force on December 14, 1957. The preamble of the Exemption 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 hand-loom textiles and (iii) to exempt the sale 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 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 which was to come into force with effect from December 24, 1957 that is, subsequent to the enactment of the Bombay Exemption 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 described as Scheduled goods under Section 2(7) while the latter were described as designate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. 12. 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 assent of the Governor on September 25, 1959. Section 1 of the said Act came into force immediately and the remaining provisions of the said Act came into force on January 1, 1960. Sub-section (10) of Section 2 of the said Act defines declared good to mean declared goods as defined in the Central Sales Tax Act, 1956. Sub-section (1) of Section 5 of the said Act provides that notwithstanding anything contained in the Act, but subject to the conditions or exceptions, if any, set out against each of the goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 6, 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. 15. 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. 16. 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 manufacturing process of the article in question, as described by its manufacturers has been set out in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 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. 18. 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 beltings, 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 fabrics and a new commercial article came into existence which could not properly be described as Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 beltings is Cotton fabrics as defined by Item 19 in the First Schedule of the Central Excises and Salt Act. 21. 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 but together; structure; building, framework. 2. The style or plan of construction; texture. 3. any woven, knitted, or felted cloth. In Corpus Juris Secundum, Vol. 35, this is what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. Two things are required to be noted in this connection. In the first place, the word 'manufacture' is 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 its 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 the 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 common sense dictates, rubber beltings could not possibly be used for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oidered 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 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 for two reasons; first, that entry 3 in Schedule E specifically dealt with sarees em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 Additional Duties of Excise Act 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 Excise 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 exempted were mercerised or/and waterproofed, whether rotproofed or not (inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted May 2, 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 April 6, 1962, rubberised cotton fabrics were treated as covered by the said item. The subsequent additions or alternations in the Central Excises and Salt Act, which were made for the purposes 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., AIR 1931 P.C. 149 : It seems to be no less logical to hold that where certain provisions from an existing Act have 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 effectually 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 granting exemptions under the said Act after Item 19 of Schedule I of the said Act was incorp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person who claims exemption to establish it; a person who claims benefit of exemption must bring his case squarely and fairly within the provisions granting exemption. In the 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 argument founded on the legislative history cannot help the assessee in the present case. 28. We might observe that a similar argument was advanced before the Division Bench of this Court which decided Pravin Brothers' case - (1964) 15 STC 478 (Gujarat). The argument there urged was that while construing entry 15 in 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 additional duty of excise are not required to bear the burden of sales tax. Negativing this argument, this Court observ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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