1. This is a reference under S. 61(1) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the said Act').
2. The facts giving rise to this reference are as follows : The application are a private limited company incorporated under the Indian Companies Act, 1956 and deal in the purchase and sale of waste paper,paper cuttings, tailor cuttings, rags, chindhis and so on. The applicants are registered as a dealer under the said Act as well as under the Central Sales Tax Act, 1956 at Nagpur and Bombay. In respect of the period from 1-4-1960 to 31-3-1961 the Sales Tax Officer assessing the applicant allowed the sales of the rages and chindhis made by the applicants as not taxable taking the view that the same were covered by entry 15 of Schedule A to the said Act. The applicants filed an appeal against the assessment order passed by the Sales-tax Officer in connection with some other items. Thereafter, the Deputy Commissioner of Sales-tax issued a notice under S. 57 of the said Act and, after hearing the applicants, on 14th August 1967 passed an order disallowing the exemption granted by the Sales Tax Officer in respect of the sales of rags and chindhis and assessed the sale of these goods at the rate specified in entry 22 of Schedule E to the said Act. The Deputy Commissioner came to the conclusion that the rags and chindhis sold by the applicants were covered by the residuary entry 22 of Schedule E to the said Act. The applicants filed an appeal against the decision of the Deputy Commissioner of Sales Tax before the Sales Tax Tribunal. This appeal was heard along with some other appeals on the same point filed by the applicants. After hearing the parties the Tribunal confirmed the decision of the Deputy Commissioner of Sales Tax.
3. The following question, which arises from the decision of the Tribunal has been referred to us for determination :
'Whether the Tribunal was correct in law in holding that the Rags and Chindhis are not covered by entry 15 of Schedule A to the Bombay Sales Tax Act, 1959 ?'
4. In order to appreciate the contentions raised before us, it will be useful to set out some of the relevant provisions at this stage. The description of the goods in entry 15 of Schedule A to the said Act at the relevant time read thus 'Cotton fabrics as defined in item No. 12 of the First Schedule to the Central Excises and Salt, Act, 1944'. The relevant portion of Item No. 12 of the First Schedule to Central Excises and salt Act, 1944, defines cotton fabrics thus :
'cotton fabrics' mean all varieties of fabrics manufactured either wholly or partly from cotton, and include dhoties, sarees, chadars. bed-sheets, bedspreads, counter-panes and table-cloths, but do not include any such fabric -
(a) if it contains 40 per cent. or more by weight of wool;
(b) if it contains 60 per cent. or more by weight of rayon or artificial silk; or
(c) if manufactured on a handloom.'
On 5th January 1957 the Central Government issued Notification No. S. R. O. 21 in exercise of the powers conferred by sub-rule (I) of Rule 8 of the Central Excise Rules, 1944, inter alia, exempting from the whole of the duty leviable thereon under the Central Excises and Salt Act, 1944 what has been referred to as the Cotton Fabrics described below'. Item No. 10 of these exempted items read thus :
'Damaged or sub-standard cotton fabrics which are classified as :
(a) 'Chindhis' that is to say, cut pieces of cotton fabrics which are 9' and less in length;
(b) 'Rags' that is to say, cut pieces of cotton fabrics which are more than 9' but less than 1 yard in length;
(c) 'Fents' that is to say, cut or damaged pieces of cotton fabrics (including cut or damaged pieces of dhoti or sarees) which are 1 yard or more but not more than 3 yards in length.'
It may be mentioned here that by a further Notification dated 1st October 1960 bearing No. G.S.R. 1129, published in the Gazette of India, Part II-S. 3(I) at page 1518, the measurements which are given above in inches have been converted into centimetres viz. the measurement of 9' has been converted into 23 cms. and that of 1 yard into 92 cms.
5. The undisputed position in the reference before us is that if the rags and chindhis sold by the applicants are covered by entry 15 of Schedule A to the said Act, the same would be exempt from the payment of tax in view of the provisions of S. 5 of the said Act read with the said entry, whereas if the same are not covered by the said entry, they would be covered by the residuary entry 22 of Schedule E to the said Act and the aforesaid sales would be liable to tax at the rates prescribed in that entry.
6. It may be mentioned here that the First Schedule to the Central Excises and Salt Act, 1944 was substituted by a new Schedule by S. 2 of the Central Excise (Conversion to Metric Units), 1960. This Act was brought into force from 1st October 1960. As a result of the said substitution Item No. 12 of the First Schedule became Item No. 19 of the said Schedule and it is common ground that in view of the provisions of S. 8 of the General Clauses Act reference to the said Item No. 12 of the First Schedule to the Central Excises and Salt Act in Entry 15 of Schedule A to the said Act will have to be read from 1st October 1960 as reference to Item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944. This, however, does not make any difference because Item No. 19 is in the same terms as the aforesaid Item No. 12.
7. It is the contention of Mr. Shah, the learned advocate for the applicants, that the rags and chindhis sold by the applicants were admittedly pieces of cotton cloth, that is, cloth manufactured either wholly or partly from cotton and not containing 40% or more by weight of wool or silk and not containing 60% or more by weights of rayon or artificial silk. It was urged by him that merely because the pieces of cloth sold by the applicants were small and might not have been useful for stitching garments this was no reason for the same not being included within the definition of the term 'cotton fabrics'. It was, on the other hand, submitted by Mr. Phadkar the learned advocate for the respondent, that the rags and chindhis sold by the applicants were of irregular shapes and forms so that the same could not normally be expected to be used for the purpose of preparing clothes. It was pointed, out by Mr. Phadkar that the rags and chindhis, in which the applicants deal, are of three varieties viz. (I) mill variety, (2) tailor variety and (3) other variety. It was pointed out by Mr. Phadkar that it is common ground that these rags and chindhis were purchased by the applicants for sale to paper mills for being used as raw materials for the manufacture of paper and paper products. It is submitted by Mr. Phadkar that in view of this, these rags and chindhis cannot be regarded as cotton fabrics at all, and hence they would fall within the residuary entry 22 of Schedule E to the said Act, there being no specific entry relating to these goods. It was urged by him that when pieces of cloth of irregular shapes are purchased for a purpose other than being used for clothing or covering of furniture or any similar use, these pieces of cloth cannot be regarded as cloth or cotton fabric at all. We find it difficult to accept the aforementioned contentions of Mr. Phadkar. The term 'cotton fabrics' has been defined in Item No. 12 and later in Item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944, and this definition includes within it ambit all varieties of fabrics manufactured out of the material described in the said Item. The definition clarifies that dhotis, sarees, chadars, bed-sheets, bedspreads, counter-panes and table-cloths are included in the ambit of the term 'cotton fabrics'. Now, the relevant dictionary meaning of the word 'fabric' is 'manufactured cloth' (see Chamber's Twentieth Century Dictionary, Revised Edition, Reprinted 1966, page 380). As far as the question of common or trade parlance is concerned, it is true that the Tribunal has observed that in common parlance rags and chindhis cannot be regarded as cotton fabrics. This observation, however, is not at all helpful in the present matter. In the first place, there was admittedly no evidence at all before the Tribunal regarding trade or common parlance. Secondly, and this is more important, the term 'cotton fabrics' cannot be really regarded as a term current in trade or common parlance. This is indeed not disputed before us. In view of this, what we have to consider is whether these rags and chindhis sold by the applicants can be regarded as manufactured cloth. It is true that mills, when they manufacture cloth, do not manufacture the same in the shape of rags or chindhis. This, however, is not of much significance as it cannot be disputed that when pieces cut out of the cloth manufactured by mills are sold, they certainly remain manufactured cloth. For example, shirt pieces and pant pieces cut from cloth manufactured by a mill would certainly be regarded as manufactured cloth and cotton fabrics. Even as far as the mills are concerned, there would be certain cut pieces, odd lengths sold by the mills which would necessarily be manufactured cloth. In view of this, merely because cloth is sold in pieces and not in the form of takes or bales manufactured by the mills, it does not cease to be manufactured cloth or cotton fabric. It is true that the rags and chindhis sold by the applicants must have been pieces of cloth of irregular shapes and sizes. We fail to see, however, how for this reason they would cease to be manufactured cloth. We also fail to see how these rags and chindhis cannot be regarded as manufactured cloth, merely because the purchasers from the applicants were putting them to use as raw material for making paper or paper products. If the argument of Mr. Phadkar, in this connection, were to be accepted, it would result in the description of a commodity being governed by the use to which it may he intended to by a purchaser, and this obviously cannot be. For example, it cannot be that for the purpose of the said Act or general taxation, a bottle containing soda water is a bottle of aerated water, if the purchaser intends to drink the soda, but it becomes a missile, if the purchaser intends to throw it in a riot. On a plain construction of the definition of the term 'cotton fabrics given in Item No. 12 and later in Item No. 19 of the First Schedule to the Central Excises and Salt Act, 1944, we are of the view that the rags and chindhis sold by the applicants would be covered thereunder and hence the said items would fall in entry 15 of Schedule A to the said Act.
8. It may be noticed here that the view we have taken above finds some support from the Notification issued on 5th January 1957, to which we have already referred. The relevant words of the said Notification run as follows :
'..... the Central Government hereby exempts the cotton fabrics described below from the whole of the duty leviable thereon under the Central Excises and Salt Act 1944 (I) of 1944 :'
Item No. 10 of the exempted items comprises of damaged or sub-standard cotton fabrics which are classified as Chindhis, Rags and Fents according to their length. This shows that the authorities regarded that chindhis, rags and fents would be covered within the ambit of the term 'cotton fabrics'. The Tribunal has referred at great length to the fact that is was not shown by the applicants that the rags and chindhis sold by them were of such sizes that they would be covered by the said Item No. 10. This circumstance, however, in out view, is of no relevance at all, because even if the rags and chindhis were not of the said sizes all that it would mean is that they would not be exempt under the said Notification from the levy of excise duty. This would, in no way, show that the same ceased to be cotton fabrics. We may, in this connection refer to a decision of the Madras High Court in Kishinchand Chellaram vs. Joint Commercial Tax Officer where it has been held that ordinarily, Courts, when called upon to interpret the meaning of the words used in the Schedules to the Sales Tax Acts, mainly rely upon their popular or ordinary meaning The meaning which the trade, Government officials and statutes attribute to those words must be taken to be the ordinary and popular meaning of the same. Mr. Phadkar relied on the decision in Hind Engineering Company vs. Commissioner of Sales Tax in support of the contention that a wider meaning could not be given to the term 'cotton fabrics' as used in entry 15 of Sch. A to the said Act by reason of any Notification which might have been issued by the Central Government under the Central Excises and Salt Act, 1944 or the Rules made thereunder. In our view, this decision has no application to the case before us because, as we have already pointed out, we have come to the conclusion that the rags and chindhis sold by the applicants are covered by the definition of the term 'cotton fabrics' as given in Item No. 12 of the First Schedule to the Central Excises and Salt Act, 1944, on plain and grammatical interpretation thereof irrespective of any Notification is sought to be relied to enlarge the definition of the term 'cotton fabrics' as contained in the said Item. No. 12, but the Notification has been relied on merely to show how the said term was interpreted or understood by the Government itself.
9. In the result, we answer the question referred to us in the negative. The respondent to pay to the applicants the costs of this reference fixed at Rs. 300/- The fee of Rs. 100/- paid by the applicants to be refunded to the applicants.