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1975 Supreme(Cal) 22
High Court Of Calcutta
CHITTATOSH MUKHERJEE
DELHI CLOTH AND GENERAL MILLS CO.LTD. - Appellant
Versus
COMMERCIAL TAX OFFICER, CENTRAL SECTION - Respondent
Civil Rule 219 (W) Of 1971
Decided On : 01/22/1975
D.PAL, P.K.SENGUPTA, PARITOSH MUKHERJI, S.N.Datta
Stitched bed-sheets, bed-spreads, towels, and napkins are "cotton fabrics" within the meaning of Entry 19 of Schedule I of the Central Excises and Salt Act, 1944, and are therefore exempt from sales tax under Section 5 (2) (a) (vi) of the Bengal Finance (Sales Tax) Act, 1941, read with Rule 3 (28) of the Sales Tax Rules.
Headnote:
SALES TAX - Exemption - Cotton fabrics - Stitched bed-sheets, bed-spreads, towels and napkins - Whether exempt from sales tax - Bengal Finance (Sales Tax) Act, 1941 (Ben. Act VI of 1941), Sec. 5 (2) (a) (vi), Rule 3 (28) - Central Excises and Salt Act, 1944 (1 of 1944), First Schedule, Entry 19.
Fact of the Case:
The petitioner, a manufacturer of various textile goods, claimed exemption from sales tax on the sale of stitched bed-sheets, bed-spreads, towels, and napkins under Section 5 (2) (a) (vi) of the Bengal Finance (Sales Tax) Act, 1941, read with Rule 3 (28) of the Sales Tax Rules. The Commercial Tax Officer and the Assistant Commissioner, Commercial Taxes, rejected the claim, holding that the stitched items were not "cotton fabrics" within the meaning of Entry 19 of Schedule I of the Central Excises and Salt Act, 1944.
Finding of the Court:
The court held that the stitched bed-sheets, bed-spreads, towels, and napkins were "cotton fabrics" within the meaning of Entry 19 of Schedule I of the Central Excises and Salt Act, 1944, and were therefore exempt from sales tax under Section 5 (2) (a) (vi) of the Bengal Finance (Sales Tax) Act, 1941, read with Rule 3 (28) of the Sales Tax Rules.
Issues: Whether stitched bed-sheets, bed-spreads, towels, and napkins are "cotton fabrics" within the meaning of Entry 19 of Schedule I of the Central Excises and Salt Act, 1944.
Ratio Decidendi: The court applied the following legal principles in reaching its decision: * The definition of "cotton fabrics" in Entry 19 of Schedule I of the Central Excises and Salt Act, 1944, includes dhoties, sarees, chadars, bed-sheets, bed-spreads, counterpanes, and table-cloths. * The word "include" in a statutory definition is used to enlarge the meaning of the words or phrases occurring in the body of the statute, and the words or phrases must be construed as comprehending not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. * The mere fact that a material undergoes a process does not change its essential nature and character, and the test is whether by such processing the material undergoes a change in its essential nature and character and whether a new product is thereby manufactured.
Final Decision: The court allowed the petition, quashed the impugned assessment order and appellate order, and issued a writ of mandamus commanding the respondents to forbear from making any assessment for sales tax in respect of the petitioner's sale of bed-sheets, bed-spreads, cotton towels, and cotton napkins for the four quarters ending on 30th June, 1963.
( 1 ) THE petitioner-company is a manufacturer of various kinds of textile goods. Its 1factories are situated at Delhi. It sells articles manufactured in its factories in different places in West Bengal and it is a registered dealer under the Bengal Finance (Sales Tax) Act, 1941.
( 2 ) THE Commercial Tax-Officer, Central Section, West Bengal, made an assessment order for the four quarters ending 30th June, 1962, in respect of the petitioner's business [vide annexure D to the petition ). The Commercial Tax Officer by his assessment order disallowed the claim of the petitioner for exemption from payment of tax under Section 5 (2) (a) (vi) of the Bengal Finance (Sales Tax) Act read with Rule 3 (28) of the Sales Tax Rules in respect of sales of stitched bed-sheets and stitched towels amounting to Rs. 1,44,198. 13. The Commercial Tax Officer refused to accept the contention of the petitioner-company that the above items were cotton fabrics and subject to the levy of excise duty. The Commercial Tax Officer accordingly disallowed the said claim for deduction and included a sum of Rs. 1,44,198. 13 within the petitioner's taxable turnover for the period in question and assessed tax thereupon.
( 3 ) THE petitioner-company being aggrieved by the said assessment order dated 8th June, 1966, preferred an appeal under Section 20 (1) of the Bengal Finance (Sales Tax) Act, 1941. The Assistant Commissioner, Commercial Taxes, Calcutta (South) Circle, dismissed the said appeal. The Assistant Commissioner upheld the views of the Commercial Tax Officer that the petitioner was not entitled to get exemption from payment of sales tax upon the sale proceeds of bed-spreads, bed-sheets, towels and napkins. According to the Assistant Commissioner, the said items were stitched materials and not "cotton fabrics" and, therefore, the petitioner could not claim benefit of exemption under Rule 3 (28) of the Sales Tax Rules.
( 4 ) THE petitioner-company in this writ petition has, inter alia, prayed that the above assessment order dated 8th June, 1966, and also the appellate order dated 19th March, 1968, be quashed, and the respondents be commanded to forbear from demanding and realizing sales tax on the basis of the said impugned assessment order. According to the petitioner-company both the Commercial Tax Officer and the Assistant Commissioner committed errors apparent on the face of records in holding that the bed-sheets, bed-spreads, towels and napkins manufactured in the petitioner's mill and sold during the period in question were not "cotton fabrics" within the meaning of entry No. 19 of Schedule I of the Central Excises and Salt Act, 1944. The said items of sale were exempted under Section 5 (2) (a) (vi) of the Bengal Finance (Sales Tax) Act read with Rule 3 (28) of the Bengal Sales Tax Rules. Sales tax under the Bengal Finance (Sales Tax) Act, 1941, is payable by dealer on his taxable turnover at the rates specified under Sub-section (1) of Section 5 of the said Act. Sub-section (2) of Section 5 specifies the items for sale which are to be deducted from the gross turnover for the purpose of determining the taxable turnover. Clause (vi) of Sub-section (2) of Section 5 is "such, other sales as may be prescribed". Rule 3 of the Bengal Sales Tax Rules enumerates the different kinds of sales which are exempted from payment of sales tax. Clause 28 (a) reads "sales of cotton fabrics, rayon or artificial silk fabrics, woollen fabrics and tobacco other than cigarettes". The following explanation appears below to Clause 28 : in this clause, the expressions 'cotton fabrics', 'rayon or artificial silk fabrics', 'woollen fabrics' and 'tobacco' respectively, have the same meaning as in items 10, 22, 21 and 4 of the First Schedule to the Central Excises and Salt Act, 1944 (1 of 1944 ).
( 5 ) THE Additional Duties of Excise (Goods of Special Importance) Act, 1957, had been enacted to provide : for the levy and collection of additional dutie
