( 1 ) THE assessee is a Private Limited Company carrying on business as manufacturer of cloth and was a registered dealer under the provisions of the Bombay Sales Tax Act 1953 On 13th December 1957 being the day appointed by the State Government in respect of cloth manufactured in mills or on power looms under sec. 2 (1) of the Bombay Sales Tax Laws (Special Exemptions) Act 1957 (hereinafter referred to as the Sales Tax Exemption Act) the assessee had stock of grey or unfinished cloth of the value of Rs. 2 13 676 The assessee converted this stock of grey or unfinished cloth into finished cloth by performing the process of bleaching dyeing and printing on it and sold such finished cloth in the market during the period 13th December 1957 to 31st March 1958. The assessee in its assessment to sales-tax for the assessment period 1st April 1957 to 31st March 1958 claimed that the sales of finished cloth effected by it as aforesaid were exempt from sales-tax by reason of sub-sec. (1) of sec. 4 of the Sales Tax Exemption Act inasmuch as finished cloth sold by it constituted scheduled goods within the meaning of that expression as defined in sec. 2 (7) of the Sales Tax Exemption Act and no sales-tax was therefore payable under the Bombay Sales Tax Act 1953 on the sale of such finished cloth effected on and after 13th December 1957 being the appointed day. The claim for exemption was however negatived by the Sales Tax Officer on the ground that the finished cloth sold by the assessee was covered by sub-sec. (2) of sec. 4 and the sales of finished cloth were therefore taxable under the provisions of the Bombay Sales Tax Act 1953 An appeal to the Assistant Commissioner of Sales Tax followed but the appeal was unsuccessful and so was the revision application preferred before the Deputy Commissioner of Sales Tax. The assessee thereupon approached the Tribunal but the Tribunal also took the same view and hence the present Reference.

( 2 ) THOUGH the questions referred to us are two in number they raise the same controversy namely whether the sales of finished cloth effected by the assessee are covered by sub-sec. (2) of sec 4 of the Sales Tax Exemption Act. The determination of this controversy obviously depends on the true interpretation of sub-sec. (2) of sec. 4 but in order to arrive at a proper meaning of that provision it is necessary to consider not only the language of that provision but also the context and setting in which that provision occurs and the object and purpose of the legislation. The genesis of the enactment of the Sales Tax Exemption Act is to be found in the decision of the Central Government to enact the Additional Duties of Excise (Goods of Special Importance) Act 1957 (hereinafter referred to as the Additional Duties of Excise Act ). The Central Government proposed to levy additional duties of excise on certain goods which it considered to be goods of special importance in inter-State trade or commerce and these taxes were to be levied in substitution of the salestaxes levied by the Union and the States on those goods for the object was not to increase the burden on the consumer but having regard to the special importance of those goods in inter-State trade or commerce to have uniform taxes on those goods in place of different sales-taxes levied by different States and for the loss of sales-tax the States were to be compensated by payment of a part of the net proceeds of these taxes levied and collected during the financial year. With a view to giving effect to this proposal the State Legislature passed the Sales Tax Exemption Act and that Act came into force on 14th December 1957. As the long title and the preamble show the Sales Tax Exemption Act was passed inter alia to exempt from sales-tax laws in force in the State of Bombay the sales or purchases of goods on which the Central Government proposed to levy additional duties of excise. These goods were divided into two categories; one category co