A. Banerji, J.
1. These are three references under Section 11(1) read with Section 11(3) of the U.P. Sales Tax Act submitted by the Additional Revising Authority, Sales Tax, Gorakhpur, at the instance of the assessee. The question submitted for the decision of the court is :
Whether, on the facts and in the circumstances of the case, the Additional Revising Authority, Gorakhpur Range, Gorakhpur, was justified in holding the turnover of cotton sewing thread on cops and cones taxable and not exempt under Notification No. ST-911/X dated 31st March, 1956 ?
2. The assessee deals in cotton sewing thread. In respect of the assessment years 1959-60 and 1960-61 the assessee claimed that the sales made by it in respect of 'cotton sewing thread on cops and cones' was not liable to sales tax as it came within the meaning of the words 'cotton yarn on cops and cones', which was totally exempt from sales tax. The Sales Tax Officer rejected this contention. The appellate authority, however, held that cotton sewing thread on cops and cones partook the nature of 'cotton yarn on cops and cones' and was not liable to tax, The revising authority, however, set aside the order of the appellate authority and upheld the order of the Sales Tax Officer. Thereupon an application was made for a reference to this court and ultimately by its order dated 15th December, 1972, the above-mentioned question has been referred to this court. Identical questions arise in all the three references and they are being dealt with together.
3. In the notification issued by the State Government ST-911/X dated 31st March, 1956, 'cotton yarn on cops and cones' was made exempt from sales tax. It is contended that 'cotton sewing thread on cops and cones' came within the meaning of the words 'cotton yarn on cops and cones' and is, therefore, not liable to any sales tax. In the years to which the assessment relates there was no separate entry either levying tax or exempting from tax the item 'cotton sewing thread on cops and cones'. In a notification issued on 1st October, 1961 [ST-927/X-902(ii) 1958], it was stated that the turnover in respect of cotton sewing thread would not be liable to tax except at the point of sale to the consumer. The Hindi version of the above notification used the words 'silai ke sooti dhage' as the equivalent of cotton sewing thread.
4. Mr. Raja Ram Agarwal, the learned counsel for the assessee, raised a three-fold argument. Firstly, that the cotton sewing thread was another form of cotton yarn although called by a different name and, therefore, has to be treated for the purposes of the tax as cotton yarn. Secondly, the different user of the two commodities would not be a correct test for determining as to whether 'cotton sewing thread on cops and cones' was an entirely different commodity. And thirdly, the commodity did not become a different commodity merely because it was twisted, it still remained yarn.
5. In support of his above contentions the learned counsel cited a number of decisions of this court and of the Supreme Court. Learned counsel for the Commissioner of Sales Tax has supported the view taken by the revising authority and has also urged that the exemption clause has to be strictly construed. He has also cited certain decisions in support of his contentions. We will refer to these decisions in due course.
6. Learned counsel for the petitioner urged that there was no difference between cotton sewing thread and cotton yarn for the former was made out of the latter. The process involved was only twisting the yarn in certain thickness. The yarn did not undergo any process of manufacture to convert it into sewing thread. Basically, he urged, the thread was a part and parcel of yarn.
7. Undoubtedly, cotton sewing thread is made of cotton yarn. But these are two well-known and distinct commodities available for sale. In the commercial world these are two distinct and separate commodities. These two items have different user. Cotton yam cannot be used for the purposes of sewing as cotton thread nor can cotton sewing thread be used as cotton yarn. While cotton sewing thread is used particularly for the purposes of sewing or stitching or securing together two objects, to wit, sewing a button on a coat, cotton yarn cannot be used for the same purpose. Similarly, cotton yarn is used for weaving or knitting cloth but cotton sewing thread would not be used for the said purpose. It would thus be seen that the two items are distinct and separate entities in the commercial world and further these two items have distinct and separate user although the cotton sewing thread basically emanates from cotton yarn after going through a process. The principal question, therefore, to be decided in this reference is what are the tests to be applied to find out whether the 'cotton sewing thread on cops and cones' is a part and parcel of the commodity known as 'cotton yarn on cops and cones'.
8. It will now be appropriate to examine the various decisions cited at the Bar.
9. In the case of State of Madhya Bharat v. Hiralal, A.I.R. 1966 S.C. 1546 the Supreme Court held that scrap iron after converting it into flats, bars and plates did not lose its character as iron and steel and, since the latter was exempt under the notification, the sale of the former was also exempt from sales tax. The reason given by their Lordships are in the following words:.iron and steel used as raw material for manufacturing other goods are exempted from taxation. So long as iron and steel continue to be raw materials, they enjoy the exemption. Scrap iron purchased by the respondent was merely re-rolled into bars, flats and plates. They were processed for convenience of sale. The raw materials were only re-rolled to give them attractive and acceptable forms. They did not in the process lose their character as iron and steel. The dealer sold 'iron and steel' in the shape of bars, flats and plates and the customer purchased 'iron and steel' in that shape. We, therefore, hold that the bars, flats and plates sold by the assessee are iron and steel exempted under the notification.
10. The ratio decidendi in the above case was that the bars, flats and plates did not in the process lose their character as iron and steel. In the above case the change was merely of the shape of the goods sold and not a change of the commodity. The shape was changed for the convenience of the customers. The process that was undertaken only changed its shape but not its character from iron and steel.
11. In State of Gujarat v. Sakarwala Brothers  19 S.T.C. 24 (S.C.) the Supreme Court was considering whether the sale of patasa, harda and alchidana (small lumps of sugar) fell within the definition of 'sugar' in entry 47 of Schedule A to the Bombay Sales Tax Act, 1959, and whether these were exempt from payment of sales tax. Sugar had been defined in the relevant Act as 'sugar means any form of sugar containing more than 90 per cent of sucrose'. It was contended before the Supreme Court that patasa, harda and alchidana contained more than 90 per cent of sucrose and they were not 'forms of sugar' but they were products of sugar and did not fall within entry 47 of Schedule A. This contention on behalf of the appellant, State of Gujarat, was rejected as incorrect. It was held that patasa, harda and alchidana were only different forms of refined sugar with the requisite sucrose contents and, as such, entitled to the exemption as sugar. Their Lordships further opined :
We are accordingly of the opinion that the word 'sugar' in item No. 47 is intended to include within its ambit all forms of sugar, that is to say, sugar of any shape or texture, colour or density and by whatever name it is called. The qualifying words are that it must contain more than 90 per cent of sucrose.
12. It would thus be seen that the definition of 'sugar' was of a wide import and the court was called upon to decide whether patasa, harda and alchidana came within the said definition of sugar or not.
13. In the case of Commissioner, Sales Tax v. Baltabh Das  25 S.T.C. 372 a Division Bench of this Court was considering whether twisted yarn could be allowed absolute exemption on the ground that it was hand-spun yarn. This court held that the emphasis in the notification was on the process of spinning and the process of twisting had nothing to do with the process of spinning. It was held that the treatment of hand-spun yarn by way of colouring and twisting will not destroy its essential nature of being hand-spun yarn. The court held that hand-spun yarn which underwent a process of twisting would still be exempt as hand-spun yarn. The court held that no material had been placed before the court to show that the twisted yarn was commercially a different commodity or that the twisted yarn did not serve the purposes which untwisted yarn did. The court was of the view that the intention behind the notification appeared to exempt from sales tax the turnover of hand-spun yarn as opposed to mill-spun yarn. The basic principle on which reliance was placed in the above decision was stated in the following words :
The principle that emerges from the perusal of various authorities cited above is that in answering a question like the one before us, the essential thing to be kept in mind is to see if as a result of any process including a process of manufacture, the article concerned becomes commercially a different commodity. If the process of manufacture of vanaspati cannot be said to bring about such a change, we see no reason why the mechanical process of twisting should change the nature of yarn.
14. The cardinal point for determination in the above case was whether mechanically twisted yarn destroyed its essentials of being hand-spun yarn. It must be noticed at once that there was no change of the nomenclature of 'yarn' even if it was twisted. Whether it was hand-spun yarn or mechanically twisted yarn it remained yarn alright. By the process in twisting the hand-spun yarn did not cease to be hand-spun yarn. It was commercially known as such.
15. In the case of Madura Mills Company Ltd. v. Government of Madras  25 S.T.C. 407 the question before the Madras High Court was whether 'cotton tyre cord warp sheet' was cotton yarn. The court held that 'cord' is cotton yarn in the accepted commercial sense. The court held that the cord was not a fabric or textile or cord as is normally understood. 'Cord' means twisted thread thicker than string and thinner than rope. Ordinarily 'cord' is understood as rope of small diameter or a thick string. String, cord and rope are, no doubt, different species of the same genus, namely, yarn. But yarn as such means spun thread. It may form one of the threads of a string, cord or rope. But cotton yarn is distinct by itself and does not evade analysis. The 'cord' in question is a bunch of spun thread spread to a particular shape for a definite commercial purpose. Nevertheless it does not cease to be yarn. This decision, in our opinion, does not assist in deciding the question before us. The court was considering whether the main identity of the goods as yarn was lost or not. On the facts of that case, it came to the conclusion that it did not. The cotton tyre cord warp sheet retained its characteristic of yarn. In the present case, we are concerned with two distinct and separate commodities well-known in the commercial world. The court in the Madras case was not really considering whether the cotton tyre cord warp sheet was a distinct and separate item known as such in the commercial world.
16. The last case relied upon by the learned counsel for the petitioner was the case of Commissioner of Sales Tax, U. P. v. Tata Iron & Steel Co. Ltd. 1975 U.P.T.C. 104. In that case, this court was considering whether plain and corrugated iron sheets were not iron and steel. It observed that galvanisation and corrugation process does not change the essential character of iron and steel and sheets made of iron remained iron and steel. It relied on the decision of State of Andhra Pradesh v. Sri Durga Hardware Stores  32 S.T.C. 322. The court held that galvanisation was nothing but coating the iron sheet with zinc by an electrical process or some other process to prevent it from oxidation. It was held that galvanisation improved the utility of the raw material of iron. It further held that corrugation was merely wrinkling of the sheets in one direction for the purpose of making the sheets more suitable for roofing and walling and the corrugation and galvanisation improved the utility of the raw material. This case, in our opinion, does not assist the petitioner. In the above case, the basic material, viz., iron and steel, was changed into a different shape, viz., into sheets, plain or corrugated, for better utilisation but they did not cease to be iron and steel.
17. In the case of iron and steel, whether it was in the shape of flats, bars or plates, galvanised or corrugated sheets, they could all be melted and they would retain the basic characteristic of being iron and steel. If this test is applied in the present case it will be seen that the cotton sewing thread cannot be re-vamped into cotton yarn. Once cotton sewing thread emanate from cotton yarn the same again cannot be re-converted into cotton yarn. It is because of this feature that cotton sewing thread cannot be said to be cotton yarn any more.
18. Learned counsel for the Commissioner of Sales Tax cited three decisions before us. Firstly, Union of India v. Commercial Tax Officer A.I.R. 1956 S.C. 202 in which their Lordships laid down the law that the exemption is creation of statute and must be construed strictly. Their Lordships were considering whether the exemption granted in favour of two particular departments of the Government could be extended to any other department of the Government. The principle that these exemptions have to be construed strictly is not disputed. Learned counsel contended that if the exemption was for 'cotton yarn on cops and cones' it could not embrace in its fold any other commodity which emanated from cotton yarn.
19. In the case of Bharat Bhandar, Kanpur v. Commissioner, Sales Tax, U. P. 1972 U.P.T.C. 657. the court was considering whether the sale of yarn ropes and niwar pattis would be regarded as a sale of commodities other than yarn of niwar. In the above case, the assessee after purchasing cotton yarn made cotton ropes out of the same by employing manual labour. He claimed exemption in respect of sale of cotton yarn ropes on the strength of a notification dated 15th November, 1961, on the ground that the liability of tax was confined to a single point taxation at the time of sale by the dealer to the consumer. The court rejecting this contention held that the notification applied only when cotton yarn as such was sold. It lost its character as cotton yarn when it was converted into cotton rope and, as such, the notification had no application. It was held in that case that cotton yarn had undergone a drastic change, by being converted into yarn rope, and had acquired the character of a new commodity. It was also conceded before the court that yarn ropes could not be put to the same use to which the cotton yarn was put. This decision, in our opinion, is in part materia with the question involved in the present case. Three tests have been indicated in this decision. Firstly, the material has undergone a drastic change, secondly, it had acquired the character of a new commodity and, thirdly, that the new commodity cannot be put to the same use as the original commodity. If all these tests are applied in the present case too the same result would follow.
20. In the case of Ganesh Trading Co. v. State of Haryana A.I.R. 1974 S.C. 1362. the court was considering whether paddy and rice could be considered as identical goods for the purpose of imposition of sales tax. It was argued before their Lordships that the dictionary meaning of the word 'paddy' showed that rice was nothing but dehusked paddy. It will be relevant to quote the view expressed by their Lordships on the point:
This court has firmly ruled that in finding out the true meaning of the entries mentioned in a Sales Tax Act, what is relevant is not the dictionary meaning, but how those entries are understood in common parlance, specially in commercial circles. Sales tax primarily deals with dealers who are engaged in commercial activity.
21. Their Lordships thereafter referred to a number of decisions of the Supreme Court and, in particular, to the case of Ramavatar Biidhaipraaadv. Assistant Sales Tax Officer, Akola A.I.R. 1961 S.C. 1325. where the question was whether the betel leaves could be considered as vegetables. The court had ruled that 'the word 'vegetable' should 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'. Their Lordships thereafter referred to the case of Commissioner of Sales Tax, Madhya Pradesh, Indore v. Jaswant Singh Charan Singh A.I.R. 1967 S.C. 1454 where the court held that the word 'coal' included 'charcoal' on the ground that in ordinary parlance 'coal' includes 'charcoal'. In the case of State of Punjab v. Chandu Lai Kishori Lai A.I.R. 1969 S.C. 1073 the Supreme Court held that cotton and cotton-seeds were two distinct commercial goods, though before the seeds were separated the cotton and the seeds were part of one commodity. Their Lordships also referred to the case of State of Madhya Bharat v. Hiralal, A.I.R. 1966 S.C. 1546. and to the case of State of Gujarat v. Sakarwala Brothers  19 S.T.C. 24 (S.C.) and to the case of Tungabhadra Industries Ltd. v. Commercial Tax Officer A.I.R. 1961 S.C. 412 where the question arose whether hydrogenated oil continued to be groundnut oil. These three decisions were distinguished on the ground that in each of these cases the identity of goods had not changed. Their Lordships emphasised that identity of goods is one of the essential elements borne in mind in deciding the nature of the transaction. Applying these tests their Lordships ultimately concluded :
Now, the question for our decision is whether it could be said that when paddy was dehusked and rice produced, its identity remained. It was true that rice was produced out of paddy but it is not true to say that paddy continued to be paddy even after dehusking. It had changed its identity. Rice is not known as paddy. It is a misnomer to call rice as paddy. They are two different things in ordinary parlance. Hence quite clearly when paddy is dehusked and rice produced, there has been a change in the identity of the goods.
22. A consideration of all these decisions leads us to conclude that two principles have to be borne in mind while deciding the question whether cotton sewing thread was cotton yarn. Firstly, whether the things are not two different things in ordinary parlance. Secondly, whether the identity of the goods is retained even in its changed form or shape. It has also to be borne in mind that the exemption clause has to be construed strictly. Applying these principles it would be seen that cotton yarn and cotton sewing thread are two distinct and well-known commodities. They are separate things in ordinary parlance. It cannot be said that they are the same thing. Even their user is distinct arid separate. Thus in the commercial world when one asks for cotton yarn one would not be given cotton sewing thread or vice versa. It is, therefore, evident that cotton yarn and cotton sewing thread are two distinct and separate items in ordinary parlance. On the question whether cotton sewing thread retained its characteristic of its being cotton yarn the question has to be answered in the negative. The cotton sewing thread, although it comes out of the basic raw material, viz., cotton yarn, but is a distinct product and of a particular thickness and strength. Although the cotton sewing thread is made out of cotton yarn, it cannot be re-converted into cotton yarn if not used as a cotton sewing thread. Further although cotton yarn is twisted to produce cotton sewing thread but there is a distinct process to do so and the end result is entirely a distinct and separate product. It has no bearing or relationship to cotton yarn as is known in common parlance.
23. Learned counsel for the assessee contended that in the Hindi version of the Gazette notification in 1961 cotton sewing thread has been described as 'silai ke sooti dhage'. . 'Sooti' is yarn and 'dhage' is thread. It is on this basis contended that thread was described as yarn. We see no substance in this contention. The Hindi version merely describes the thing. Instead of using the Hindi equivalent word of 'cotton', it has chosen to describe it as made out of yarn.
24. For the reasons given above, we are unable to accept the contentions raised by the learned counsel and we are of the opinion that 'cotton sewing thread on cops and cones' is an entirely different item from 'cotton yarn on cops and cones'. In this view of the matter the commodity known as 'cotton sewing thread on cops and cones' is not entitled to any exemption under the notification dated 31st March, 1956, for the relevant years in question. We, therefore, answer the reference in the negative and in favour of the department. The respondent will be entitled to one set of costs only in these three references, which are assessed at Rs. 100.