SHELAT, C.J. -
(1.) THESE are two references, one at the instance of the assessees and the other at the instance of the State of Gujarat, arising out of a reference made to the Deputy Commissioner by the petitioners, Messrs Pravin Brothers, under section 52(e) of the Bombay Sales Tax Act, 1959. Since they involve the same facts, and arise out of the same order, they can be disposed of by a common judgment.
(2.) THE petitioners in reference No. 8 of 1963 were at the material time dealers in embroidered cloth. On 1st December, 1960, they sold two embroidered sarees, each of five yards in length, for Rs. 12 and Rs. 10-8-0 respectively and they also sold a piece of embroidered cloth of three yards in length at the rate of Rs. 3-10-0 per yard. It is an admitted fact that the five yards pieces were cut from malmal and voil takas ands embroidery work was thereafter superimposed on them. THE embroidered piece of three yards also was similarly prepared. THE five yards pieces were intended to be used as sarees and the three yards pieces were meant for preparing ladies' underwear. THE Deputy Commissioner held that sarees would be covered by entry 3(i) of Schedule E to the Act, as the said entry specifically refers to sarees which are embroidered. As regards the embroidered three yards piece was concerned, he held that there being no entry covering that item, the embroidered piece of cloth fell under entry 22 of Schedule E to the Act. On the matter being taken to the Tribunal in appeal the Tribunal confirmed the order of the Deputy Commissioner in so far as the sarees were concerned, but differed from the Deputy Commissioner in regard to the three yards embroidered piece meant for ladies' underwear, and held that that piece was covered by entry 4 of Schedule D to the Act, as contended by the petitioners. Both the parties being dissatisfied with the aforesaid judgment and order of the Tribunal, they applied for a reference to this Court and the Tribunal has referred to us the following questions for our answers :- "(1) Whether on the facts and in the circumstances of the case the sales of embroidered pieces of cloth of 5 yards and 3 yards effected under the applicants' bill No. 290 dated 1st December, 1960, are exempt from tax under section 5(i) of the Bombay Sales Tax Act, 1959, as covered by entry 15 of Schedule A to the Act ? (2) If not, whether the sales of the 5 yards pieces sold as embroidered sarees are covered by entry 4 in Schedule D to the Act and taxable at the rates shown against that entry ? and (3) Whether on proper construction of entry 4 in Schedule D to the Bombay Sales Tax Act, 1959, the sale of embroidered piece of cloth made by original applicants M/s. Pravin Bros. under the bill No. 290 dated 1st December, 1960, is covered by the said entry or whether the same is covered by entry 22 in Schedule E to the Act or any other entry of the Schedules annexed to the Act ?"
It would appear that the course of business followed by the petitioners was that they used to purchase takas of malmal and voil cloth and in order to prepare sarees from out of them, they used to cut out five yards pieces out of those task and have embroidery work superimposed upon those pieces and then sell them as embroidered sarees. Similarly, they used to have three yards pieces cut out from those takas and have those pieces thereafter embroidered and then sell such embroidered pieces for ladies' underwear. On these facts, the Deputy Commissioner was of the view (1) that the saree pieces fell under entry 3(i) of Schedule E and not under entry 15 of Schedule A or, in the alternative, entry 4 of Schedule D, as contended by the petitioners, and (2) that the embroidered three yards pieces intended for ladies' underwear would not fall under entry 15 of Schedule A or entry 4 of Schedule D, but would fall under entry 15 of Schedule A or entry 4 of Schedule D, but would fall under entry 22 of Schedule E to the Act. According to the Deputy Commissioner, what was sold by the petitioners was not cotton fabrics as defined by entry 15 to Schedule A to the Act, or item 19 of Schedule I to the Central Excises and Salt Act, 1944, but embroidered sarees for which there is a specific entry, namely, entry 3(i) in Schedule E to the Act. As regards the three yards piece, he was also of the view that what was old was not cotton fabric as defined in item 19 in the First Schedule to the Central Excises and Salt Act, 1944, but an embroidered piece meant for the specific purpose of ladies' underwear and, therefore, not a piece which was a cotton fabric but an embroidered piece for which, there being no specific entry, it fell under the residuary entry, being entry 22 of Schedule E.
The Sales Tax Tribunal, agreeing with the Deputy Commissioner, held that under section 2(d) of the Central Excises and Salt Act, 1944, goods specified in the First Schedule to that Act were excisable goods and under section 3 thereof, such excisable goods were declared to be liable to excise duty. The reasoning adopted by the Tribunal was that in order that an article should be called a cotton fabric as defined by item 19 in the First Schedule of that Act, it must be an excisable article and must be subject to the levy of the excise duty. The Tribunal, therefore, held that since the sarees and the aforesaid piece in question were not excisable goods, they could not be termed cotton fabrics within the meaning of item 19 of the First Schedule to that Act and, therefore, would not fall under entry 15 of Schedule A to the present Act.
(3.) THIS reasoning, in our view, is not correct. It is clear from entry 15 of Schedule A to the Bombay Sales Tax Act, 1959, that the goods which fall under that entry are inter alia cotton fabrics as defined in item 19 of the First Schedule of the Central Excises Act and not the goods which are excisable goods thereunder or upon which excise duty is leviable under section 3 of that Act. What is, therefore, to be seen is whether the goods in question are cotton fabrics as defined by item 19 in the First Schedule of the Central Excises Act. According to item 19 in the First Schedule to the Central Excises Act, "cotton fabrics" mean all varieties of fabrics manufactured either wholly or partly from cotton, and include dhotis, sarees, chadars, etc., but do not include any such fabric if it contains 40 per cent. or more by weight of wool, if it contains 40 per cent. or more by weight of silk, if it contains 60 per cent. or more by weight of rayon or artificial silk, or if manufactured on a handloom. It will be noticed that under item 19 in this Schedule, only those articles are cotton fabrics which are manufactured either wholly or partly from cotton. The word "manufactured" under section 2(f) of the Act includes any process incidental or ancillary to the completion of a manufactured product. On the basis of this definition as also the language used in item 19 in the First Schedule to the Central Excises Act, the Tribunal came to the conclusion that since embroidery was superimposed after the takas from which the pieces were cut were completely manufactured, it was not a process which was either incidental or ancillary to their manufactured and, therefore, the sarees, after they were embroidered, were not cotton fabrics, as defined in item 19, but something else. The Tribunal was laos of the view that section 14 of the Central Sales Tax Act would not apply to the sarees in question, as was contended before it, as that section designated certain goods only as declared goods and amongst them are cotton fabrics as defined in item 19 of the First Schedule to the Central Excises Act, and, therefore, such goods would not get the benefit of section 15 of that Act, as the goods therein mentioned and which are liable to only a rate of two per cent. and not a higher duty, are cotton fabrics as defined in item 19. The Tribunal further held that entry 4 of Schedule D of the Sales Tax Act also would not apply to sarees as that entry refers to ready-made garments and other articles prepared from cotton, woollen and art silk textile fabrics sold at a price exceeding Rs. 5 per article or suit. THIS entry, according to the Tribunal, was a general entry, and entry 3(i) in Schedule E being a specific entry applicable to embroidered sarees, it would be the latter entry which would apply. As regards the three yards piece, the Tribunal was of the view that the Deputy Commissioner was not right, and held that though such a piece was not a garment, it was an article prepared from cotton fabric intended for ladies' underwear and, therefore, entry 4 of Schedule D would apply to such an article.
Entry 15 of Schedule A to the Sales Tax Act, 1959, relied upon by Mr. Mody for the petitioners, runs in the following terms :- "Cotton fabrics as defined in item No. 12 (now item No. 19) to the First Schedule to the Central Excises and Salt Act, 1944.";