Commissioner Of Sales Tax, Gujarat v. Sumatilal Popatlal & Co.

1. This is a reference under section 34(1) of the Bombay Sales Tax Act, 1959, at the instance of the Commissioner of Sales Tax, Ahmedabad. The opponents are dealers in hessian and have a place of business at Ahmedabad. The opponents effected a sale of hessian to Messrs Bihari Mills Ltd., Ahmedabad, under their bill dated 12th July, 1958. On 11th August, 1958, the opponents made an application under section 27 of the Bombay Sales Tax Act, 1953, and requested the Additional Collector of Sales Tax, Northern Division, Ahmedabad, to determine the question whether the said sale of hessian was exempt from tax under the Bombay Sales Tax Act, 1953. In the said application, it was stated that the hessian sold by them was not lying with them on 12th December, 1957, and that it did not form part of any other dealer's non-dutiable stock of hessian. In the statement of the case, it has been mentioned that it was not lying with them on 15th December, 1959. It is agreed by both the parties before us that the correct date is 12th December, 1957, and not 15th December, 1959, as stated in the statement of the case. The Additional Collector of Sales Tax, by his order dated 19th August, 1959, held that tax was payable on this sale of hessian at the rate of two naye paise in the rupee by way of sales tax and two naye paise in the rupee by way of general sales tax under the Bombay Sales Tax Act, 1953. The matter was carried further before the Sales Tax Tribunal. The Sales Tax Tribunal, by a majority judgment, held that the aforesaid sale was exempt from payment of sales tax and general sales tax. The matter has now come up before us for the determination of the following question :-

"Whether on a proper construction 'hessian' is covered by entry 1 of Schedule I of the Bombay Sales Tax Laws (Special Exemptions) Act, 1957, and whether the sale of hessian which is the subject of the reference is taxable under the Bombay Sales Tax Act, 1953 ?"

2. The Bombay Sales Tax Laws (Special Exemptions) Act, 1957, by section 4 provides inter alia as under :-

"Notwithstanding anything contained in relevant sales tax law or any rules, notifications or orders made or issued thereunder, no tax shall be payable under the relevant sales tax law on the sale or purchase of any scheduled goods effected on and after the appointed day."

3. The "appointed day" is the 13th of December, 1957. The expression "scheduled goods" has been defined by section 2(7) of the Act to mean "the goods specified in Schedule I". When we turn to Schedule I, the following amongst other goods have been specified therein :-

"All varieties of cloth, manufactured in mills or on powerlooms excluding pure silk cloth."

4. The result of the aforesaid provisions is that all varieties of cloth manufactured in mills excluding pure silk cloth, are exempt from sales tax. The question that falls for consideration is whether hessian could be regarded as cloth manufactured in mills. It is not disputed that hessian is manufactured in mills. The only question debated before us is whether hessian could be regarded as a variety of cloth within the meaning of Schedule I to the Bombay Sales Tax Laws (Special Exemptions) Act, 1957, (hereinafter for brevity's sake referred to as the "exempting Act"). Our attention has been drawn to the dictionary meaning of the word "cloth". In Webster's New International Dictionary, Second Edition (1959), the word "cloth" has been stated to mean "a. A pliable fabric woven, felted or knitted from any filament; commonly fabric of woven cotton, woollen, silk, rayon or linen fibre, used for garments etc.; b. A particular kind of fabric distinguished by a simple weave in which the warp and weft threads pass over and under each other alternately; c. A piece of fabric of a kind, size, texture adapted for washing, wiping or polishing something specified; as, shoe cloth, window cloth." In the Shorter Oxford English Dictionary, Third Edition (1959), the word "cloth" is shown to bear the following meanings : "A fabric woven, felted or otherwise formed, of filaments, as of wool, hair, silk, the fibres of hemp, flex, cotton, asbestos, spun glass, wire." In the Oxford English Dictionary, it is shown to mean "A piece of pliable woven or felted stuff, suitable for wrapping or winding round, spreading or folding over, drying wiping or other purpose; a swaddling or winding cloth, wrap, covering, veil, curtain, handkerchief, towel, etc.". In the Webster's New 20th Century Dictionary, it is shown to mean "A woven knitted or pressed fabric of fibrous material, as wool, hair, cotton, flex, hemp, synthetic fibres etc., used for garments or other covering and for various other purposes, as household furnishings ........". The word "hessian" has been shown in Webster's new International Dictionary, Second Edition (1959) to mean "A coarse sacking of hemp or hemp and jute". In the Shorter Oxford English Dictionary, Third Edition, (1959), it is stated to mean "A strong coarse cloth, used for packing bales". In the Webster's New Dictionary, Second Edition, it is shown to mean "A coarse sacking of hemp or jute". In view of the meaning which the word "cloth" and "hessian" bear, having regard to what is stated in varies dictionaries, hessian is liable to be regarded as cloth prepared from fibres of hemp or jute and could be said to be cloth. The question that we have to consider is whether the term "cloth" has been used in Schedule I in a limited sense which would exclude hessian.

5. It has been strongly urged before us that the word "cloth" should be given a limited meaning and should not be held to cover "hessian" having regard to the object with which the exempting Act was enacted. The exempting Act was enacted, as stated in the preamble of the Act, to exempt the sales or purchases of certain goods which became assessable to an additional duty of excise and of certain handloom textiles and other goods from the sales tax laws in force in the State of Bombay. In the Preamble of the Act, it has been stated as under :-

"Whereas the Central Government proposes to levy an additional duty of excise on certain goods; and whereas it is expedient to exempt the sales and purchases of such goods and of certain handloom textiles and other goods from the sales tax laws in force in the State of Bombay and to make provision for matters connected therewith and for certain other purposes hereinafter appearing, it is hereby enacted etc., etc."

6. The exempting Act came into force on 14th December, 1957. The reference in the exempting Act to the proposed levy of an additional duty of excise on certain goods by the Central Government is a reference to the levy of additional duty of excise which subsequent to the enactment of the exempting Act came to be levied by the Additional Duties of Excise (Goods of Special Importance) Act, 58 of 1957, which came into force on 24th December, 1957. The object of act 58 of 1957 as stated in the Bill which preceded the said Act, was

"to impose additional duties of excise in replacement of the sales taxes levied by the Union and the States on sugar, tobacco and mill-made textiles and to distribute the net proceeds of these taxes, except the proceeds attributable to Union territories, to the States"

"There shall be levied and collected in respect of the following goods, namely sugar, tobacco, cotton fabrics, rayon or artificial silk fabrics and woollen fabrics produced or manufactured in India and on all such goods lying in stock within the precincts of any factory, warehouse or other premises where the said goods were manufactured, stored or produced, or in any premises appurtenant thereto, duties of excise at the rate or rates specified in the First Schedule to this Act."

7. The first Schedule refers amongst fabrics only to cotton fabrics, rayon or artificial silk fabrics and woollen fabrics. By section 4 of the Act, it is provided as under :-

"During each financial year, there shall be paid out of the Consolidated Fund of India to the States in accordance with the Second Schedule such sums, representing a part of the net proceeds of the additional duties levied and collected during that financial year, as are specified in that Schedule"

8. When we turn to the Second Schedule, Part III, it is there laid down that if during a particular financial year, there is levied and collected in any State specified in the Table (which includes Bombay) a tax on the sale or purchase of cotton fabrics, rayon or artificial silk fabrics or woollen fabrics by or under any law of that State, no sums shall be payable to that State under clause 6(b) thereof in respect of that financial year, unless the Central Government by special order otherwise direct. The exempting Act was passed inter alia for the purpose of securing payment out of the Consolidated Fund of India under the provisions of section 4 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Under the provisions of the aforesaid Central Act, additional excise duty was not levied in respect of hessian and it is urged that in the context of the circumstances under which the exempting Act was enacted, the term "cloth" should be given a limited meaning, namely, that it should be confined to cotton fabrics, rayon or artificial silk fabrics and woollen fabrics. There would have been some substance in this contention if the exempting Act had been enacted solely for the purpose of receiving any amounts from the Consolidated Fund under the provisions of law which came to be enacted by the Central Government. The Preamble to the exempting Act itself shows that the purpose of the Act was threefold. It was (1) to exempt the sales and purchases of certain goods which became assessable to an additional duty of excise, (2) to exempt the sales or purchases of certain handloom textiles, and (3) to exempt the sales or purchases of "other goods". When one turns to Schedule I of the exempting Act item 1 therein covers "all varieties of cloth manufactured in mills or on power-looms, excluding pure silk cloth". The wording is wide enough to cover cloth other than the cloth which would be subject to additional duty of excise. Under the circumstances it would not be proper to limit the meaning of the word "cloth" as appearing in Schedule I to the said Act, so as to exclude hessian when the Legislature expressly uses the words "all varieties of cloth".

9. A reference has been made to the provisions of the Bombay Sales Tax Act, 1953, in this connection. It is urged that the provisions in the exempting Act must be read in the light of the provisions contained in the original taxing enactment. Section 8 of the Bombay Sales Tax Act, 1953, provides as follows :-

"Subject to the provisions of section 7, there shall be levied a sales tax on the turnover of sales of goods specified in column (1) of Schedule B at the rate, if any, specified against them in column (2) of the said Schedule ........."

10. When we turn to the provisions of Schedule B, we have amongst others the following entries :-

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11. It is urged that the expression "cloth" as appearing in entry 31 does not cover hessian. Entry 24-A which covers hessian was inserted by Government notification of 25th August, 1956, with effect from 1st September, 1956. It is urged that prior to the insertion of that entry, sales and purchases of hessian were taxed by the Sales Tax Authorities under the residuary item 80 and not under item 31. That however does not conclude the matter. The dictionary meaning of the word "cloth", as we have stated above, is wide enough to cover hessian and the sales and purchases therein could have been taxed under entry 31 before the specific entry 24-A covering hessian was inserted. The words "all varieties of cloth manufactured in mills or on power-looms excluding pure silk cloth" are wide enough to cover goods answering that description under any of the entries in Schedule B. Under the circumstances, we have to fall back upon the general meaning of the term cloth. As observed by the Supreme Court in the case in Ramavatar Budhaiprasad v. The Assistant Sales Tax Officer, Akola and Another ([1961] 12 S.T.C. 286), where the Supreme Court had to consider the meaning of the word "vegetables" as appearing in item 6 of Schedule II of the C.P. and Berar Sales Tax Act, 1947, "this word must be construed not in any technical sense ....... but as understood in common parlance. It has not been defined in the Act and being a word of everyday use, it must be construed in its popular sense, meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'". So construed, the word "cloth", as used in Schedule I to the exempting Act, would cover hessian, i.e., cloth manufactured from fibres of hemp or jute.

12. In the result, our answer to the question is that hessian is covered by entry 1 of Schedule I of the Bombay Sales Tax Laws (Special Exemptions) Act, 1957, and the sale of hessian which is the subject of the reference is not taxable under the Bombay Sales Tax Act, 1953. The Commissioner of Sales Tax will pay to the opponents the costs of the reference.

13. Reference answered accordingly.