The sale of ginned cotton and cotton-seeds obtained from unginned cotton constitutes the sale of the entire goods purchased by the petitioners, and therefore, the purchase price of the unginned cotton should be deducted from the taxable turnover.

S.S.Dulat, J.

1. These two petitions under Article 226 of the Constitution involve the same question of law. The controversy is not about the law which is applicable-not even very much about the meaning of that law-but mostly about the manner of its application in two cases. Each of the petitioners is a company registered as a dealer under the Punjab General Sales Tax Act, 1948 . They both deal in cotton, purchase large quantities of unginned cotton, gin it and then dispose of the proceeds consisting of ginned cotton and cotton-seeds. The Punjab General Sales Tax Act imposes a purchase tax on goods specified in Schedule C of the Act and that Schedule mentions cotton, both ginned and unginned, and also oil-seeds which naturally include cotton-seeds. The Act provides-and quite properly if I may say so-that in respect of goods subjected to the purchase tax no sales tax will be levied. Further, the Act provides that if goods subjected to the purchase tax are sold to a registered dealer within a certain time or exported out of India or sold in the course of inter-State trade then the purchase price of the goods sold will be excluded from the taxable turnover or, to quote the words of the statute, the "taxable turnover" of a dealer is arrived at "after deducting therefrom his turnover during that period on-

the purchase of goods" which are sold not later than six months after the close of the year, to a registered dealer, or in the course of inter-State trade or commerce, or in the course of export out of the territory of India.

2. Each of the petitioners claimed at the time of assessment (for the year 1960-61 in the case of Patel Cotton Company v. State of Punjab, and 1961-62 in the other case R. Mohta v. The State of Punjab and Ors.) that out of the unginned cotton which each had purchased and in respect of which each had become liable to pay purchase tax, certain quantities of ginned cotton as well as cotton-seeds obtained after ginning had been sold to registered dealers within the prescribed period or sold in the course of inter-State trade or exported out of India, and that the purchase price of those quantities of ginned cotton and cotton-seeds should be deducted from the turnover. The Assessing Authority did not accept that claim. In the case of Patel Cotton Co. the Assessing Authority permitted a deduction of the sale price (as against the purchase price) of the ginned cotton sold to registered dealers and also the sale price of the ginned cotton exported out of India or sold in the course of inter-State trade but wholly declined to make any allowance for similar sales of cotton seeds. In the case of Mohta, the assessing Authority deducted the purchase price of unginned cotton equal to the weight of the ginned cotton sold to registered dealers but refused to take notice of the sale of cotton seeds to registered dealers.

3. The petitioners main submission is that the sale of cotton-seeds was the sale of the goods purchased by them in respect of which purchase tax was payable and since the sales were made to registered dealers or in the course of inter-State trade the taxable turnover should have been determined after deducting the purchase price of the goods sold from the gross turnover. It is common ground, apart from being common knowledge, that unginned cotton, as it is sold in the market, contains in it not only pure cotton but also cotton-seeds, and by weight the proportion approximately is one-third pure cotton and two-thirds cotton-seeds. If, therefore, to take a convenient illustration, a person buys three maunds of unginned cotton and then puts it through the process of ginning, he has on his hands one maund of ginned cotton and two maunds of cotton-seeds. The question is that if he proceeds to sell the entire quantity of ginned cotton and cotton-seeds thus obtained, to a registered dealer, has he or has he not sold the entire goods purchased by him in the form of unginned cotton, to a registered dealer ? Vi