COMMISSIONER OF SALES TAX MAHARASHTRA STATE BOMBAY Vs. FAIRDEAL CORPORATION LTD
LAWS(BOM)-1962-4-9
HIGH COURT OF BOMBAY
Decided on April 26,1962

COMMISSIONER OF SALES TAX, MAHARASHTRA STATE, BOMBAY Appellant
VERSUS
FAIRDEAL CORPORATION LTD. Respondents


Referred Judgements :-

TRAMBAKLAL RATILAL V. THE STATE OF BOMBAY [REFERRED TO]
KAILASH NATH VS. STATE OF UTTAR PRADESH [REFERRED TO]





JUDGEMENT

V.S.Desai, J. - (1.)The questions raised in the present reference at the instance of the Commissioner of Sales Tax are as follows :- "1. Whether the cotton which was subjected to process of cleaning, boiling, bleaching and drying and carding, remained as cotton after the above process ? and 2.Whether the sale of the said goods known as absorbent cotton wool falls within item 1 of Schedule B to the Bombay Sales Tax Act, 1953, as amended by Bombay Act 10 of 1954, or whether the same is liable to tax under the residuary entry covered by item 80 of the said Schedule ?"
(2.)The respondents are dealers and were at all material times registered under the Bombay Sales Tax Act, 1953. During the period from 1st April, 1954, to 31st March, 1955, the respondents had effected sales of absorbent cotton wool of the value of Rs. 2,23,475-6-2. In their assessment for the said period, these sales were held by the Sales Tax Officer as taxable under item 80 of Schedule B to the Bombay Sales Tax Act, 1953, and not under item 1 of the said Schedule as contended by the respondents. The Assistant Collector of Sales Tax in appeal upheld this view of the Sales Tax Officer, and the Additional Collector of Sales Tax also confirmed it in the revision application which was filed before him. The respondents then filed a revision application before the Sales Tax Tribunal. The Tribunal upheld the respondents' contention that the sales were taxable under item 1 and not under item 80. It accordingly allowed the revision application, and set aside the assessment levied by the Sales Tax Authorities on the basis that the sales were taxable under item 80 of Schedule B. At the instance of the Commissioner of Sales Tax, it then drew up a statement of the case, and referred to this Court the two questions which we have already set out. The main dispute to be decided is whether absorbent cotton wool is taxable under item No. 1 or under item No. 80 of Schedule B to the Act of 1953, as the entry stood at the material time. The questions framed by the Tribunal are for the purpose of facilitating an answer to the said dispute between the parties, but the questions do not appear to be properly framed. We will like to reframe the two questions framed by the Tribunal into a single question, namely :
"Whether the goods known as absorbent cotton wool sold by the respondents during the relevant period were raw cotton (ginned) falling within item No. 1 of Schedule B to the Bombay Sales Tax Act, 1953, as amended by Bombay Act 10 of 1954, or whether the same was liable to tax under the residuary entry covered by item No. 80 of the said Schedule ?"

(3.)Item 1 of Schedule B, as it stood at the material time, read as follows : "Raw cotton (whether ginned or unginned)". Item No. 80 was "all goods other than those specified from time to time in Schedule A and in the preceding entries". It is undisputed that the absorbent cotton wool, which the respondents have sold, is prepared by them by cleaning, boiling, bleaching, drying and carding the ginned cotton, and it is sold as surgical cotton. It is the respondents' contention that although for the preparation of the article, which they have sold as absorbent cotton wool, they have subjected ginned cotton to certain processes, these processes have not changed entirely the form or substance of the material, and the article prepared by them consists of nothing but cotton in its natural form, and is therefore "raw ginned cotton" within the meaning of item No. 1 of Schedule B. It was urged on behalf of the respondents that "cotton wool" was described in Webster's Condensed Dictionary as cotton in its raw state". Cotton wool, therefore, which the respondents have sold as "absorbent cotton wool" has not ceased to be raw cotton. This contention has been accepted by the Tribunal. In its view, the processes which the ginned cotton has undergone in the preparation of the absorbent cotton wool have not changed it so as to cease to be raw cotton within the meaning of item No. 1 of Schedule B. In taking that view, it referred to the cases of Trambaklal Ratilal v. The State of Bombay ([1956] S.T.C. 258) and Kailash Nath and Another v. The State of U.P. and Others ([1957] 8 S.T.C. 358). It also observed that the view that it was taking received some support from the various amendments which have occurred in the item at different times. It pointed out that formerly the entry as it stood in the Schedule was merely "cotton (whether ginned or unginned)" and was obviously wide enough to include absorbent cotton wool, and the entry as it was amended subsequently was "cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste." According to the Tribunal, the present entry also is wide enough to include absorbent cotton wool as falling within its ambit. Since the entry, as it stood both prior and subsequent to the material period, was wide enough to include absorbent cotton wool, it was hardly likely that only during the intermediate period for which the entry stood as "raw cotton (whether ginned or unginned)", absorbent cotton wool was intended to be excluded from its ambit. The Tribunal accordingly held in favour of the respondents.


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