P. N. BHAGWATI, J. M. SHELAT, J.

( 1 ) THE short question that arises on this Reference is whether L type Industrial Centrifugal Humidifiers complete with electric motors of 3/4 H. P. and starters fall within Entry 15 of Schedule C of the Bombay Sales Tax Act 1959. The applicants made an application to the Deputy Commissioner of Sales Tax under sec. 52 of the Act to determine the rate of tax payable on the sale of humidifiers. The contention of the applicants was that humidifiers are machinery used in the manufacture of cloth and are therefore covered by Entry 15 of Schedule C. This contention was however negatived by the Deputy Commissioner of Sales Tax. The Deputy Commissioner of Sales Tax described the role of humidifiers in the textile industry in the following words:"the humidifiers are used by the textile mills. The purpose of this is to maintain the humidity of a particular room where the process of spinning etc. is done. This humidity helps to increase the length and strength of yarn. According to the learned representative without humidifiers it is not possible for any of the textile mills run according to the modern technique to run their mills. In order to give a clear idea of the use of the humidifiers the learned representative furnished me with an extract from the textile and allied Industries Research Organisation and a pamphlet giving the details regarding the use of the humidifiers. From the materials placed before me it appears that the humidifiers are used in various departments of textile industry for improving the quality of the production in general. It also appears that the modern textile industry cannot do without such humidifiers"and thus accepted the position that humidifiers are necessary for the production of cloth in that by maintaining a particular humidity in the room in which the manufacturing process is being carried on they help to increase the length and strength of yarn and that modern textile industry cannot do without humidifiers. But in his view this function of humidifiers did not directly connect humidifiers with the manufacturing process and humidifiers were therefore not machinery used in the manufacture of cloth and were consequently not covered by entry 15 of Schedule C. He observed that humidifiers were run by electric motors and were therefore electrical goods and not being machinery used in the manufacture of cloth they fell within entry 20 of Schedule C. He accordingly held that the sale of humidifiers was liable to be taxed under Entry 20 and not under Entry 15 of Schedule C.

( 2 ) FROM this decision of the Deputy Commissioner of Sales Tax the applicants preferred an appeal to the Tribunal. The Tribunal also accepted the position that humidifiers are used by cotton textile mills to control the humidity of the atmosphere and to maintain a certain humidity in the mills which is necessary for improving the quality of yarn and preventing waste of yarn and that they are absolutely essential to the modern textile industry. The Tribunal however held that this circumstance did not bring humidifiers within Entry 15 of Schedule C. The Tribunal observed that in order to bring an item of machinery within Entry 15 of Schedule C it was necessary to show that it was used in the actual process of manufacture of cloth and that humidifiers though essential to the modern textile industry were not used in the actual process of manufacture of cloth and were therefore not covered by Entry 15 of Schedule C. The Tribunal then proceeded to consider whether humidifiers were electrical goods and since they are worked by electric motors the Tribunal held that they were electrical goods and were accordingly within Entry 20 of Schedule C. The Tribunal taking this view confirmed the decision of the Deputy Commissioner of Sales Tax. This view of the Tribunal is now challenged before us on this Reference.

( 3 ) THE decision of the question whether humidifiers fall within Entry 15 or Entry 20 of Schedule C depen

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