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PravIn Bros. Vs. the State of Gujarat - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSales Tax Reference Nos. 8 and 9 of 1963
Judge
Reported in[1964]15STC478(Guj)
ActsBombay Sales Tax Act, 1959 - Sections 3, 4, 5, 5(1), 7, 10, 14 and 15; Central Sales Tax Act, 1956 - Sections 3, 5, 7, 10, 14 and 15
AppellantPravIn Bros.
RespondentThe State of Gujarat
Appellant Advocate S.L. Mody, Adv.
Respondent Advocate J.M. Thakore, Adv.-General, i/b.,; Bhaishanker Kanga and;Girdharlal
Cases ReferredSri Kittappa Dress Manufacturing and Embroidery Works v. The State of Madras
Excerpt:
.....commissioner - whether sales of embroidered clothes exempt from sale tax under section 5 (i) - cotton fabrics mean all varieties of fabrics manufactured either wholly or partly from cotton - cloth for undergarments would fall under entry 22 of schedule e - sales of embroidered cloth not exempt from tax. - - the explanation to this entry clearly shows a distinction between sarees which are decorated during the course of weaving and those which are decorated after the process of their manufacture is completed, that is to say, sarees upon which, after their manufacture is completed, some decoration through an additional process distinct from the process of manufacture is superimposed. it is a well settled rule of construction that where a statute contains both a general provision..........far as the sarees were concerned, but differed from the deputy commissioner in regard to the three yards embroidered piece meant for ladies' underwear, and held that that piece was covered by entry 4 of schedule d to the act, as contended by the petitioners. both the parties being dissatisfied with the aforesaid judgment and order of the tribunal, they applied for a reference to this court and the tribunal has referred to us the following questions for our answers :- '(1) whether on the facts and in the circumstances of the case the sales of embroidered pieces of cloth of 5 yards and 3 yards effected under the applicants' bill no. 290 dated 1st december, 1960, are exempt from tax under section 5(i) of the bombay sales tax act, 1959, as covered by entry 15 of schedule a to the act (2) if.....
Judgment:

Shelat, C.J.

1. These are two references, one at the instance of the assessees and the other at the instance of the State of Gujarat, arising out of a reference made to the Deputy Commissioner by the petitioners, Messrs Pravin Brothers, under section 52(e) of the Bombay Sales Tax Act, 1959. Since they involve the same facts, and arise out of the same order, they can be disposed of by a common judgment.

2. The petitioners in reference No. 8 of 1963 were at the material time dealers in embroidered cloth. On 1st December, 1960, they sold two embroidered sarees, each of five yards in length, for Rs. 12 and Rs. 10-8-0 respectively and they also sold a piece of embroidered cloth of three yards in length at the rate of Rs. 3-10-0 per yard. It is an admitted fact that the five yards pieces were cut from malmal and voil takas ands embroidery work was thereafter superimposed on them. The embroidered piece of three yards also was similarly prepared. The five yards pieces were intended to be used as sarees and the three yards pieces were meant for preparing ladies' underwear. The Deputy Commissioner held that sarees would be covered by entry 3(i) of Schedule E to the Act, as the said entry specifically refers to sarees which are embroidered. As regards the embroidered three yards piece was concerned, he held that there being no entry covering that item, the embroidered piece of cloth fell under entry 22 of Schedule E to the Act. On the matter being taken to the Tribunal in appeal the Tribunal confirmed the order of the Deputy Commissioner in so far as the sarees were concerned, but differed from the Deputy Commissioner in regard to the three yards embroidered piece meant for ladies' underwear, and held that that piece was covered by entry 4 of Schedule D to the Act, as contended by the petitioners. Both the parties being dissatisfied with the aforesaid judgment and order of the Tribunal, they applied for a reference to this Court and the Tribunal has referred to us the following questions for our answers :-

'(1) Whether on the facts and in the circumstances of the case the sales of embroidered pieces of cloth of 5 yards and 3 yards effected under the applicants' bill No. 290 dated 1st December, 1960, are exempt from tax under section 5(i) of the Bombay Sales Tax Act, 1959, as covered by entry 15 of Schedule A to the Act

(2) If not, whether the sales of the 5 yards pieces sold as embroidered sarees are covered by entry 4 in Schedule D to the Act and taxable at the rates shown against that entry and

(3) Whether on proper construction of entry 4 in Schedule D to the Bombay Sales Tax Act, 1959, the sale of embroidered piece of cloth made by original applicants M/s. Pravin Bros. under the bill No. 290 dated 1st December, 1960, is covered by the said entry or whether the same is covered by entry 22 in Schedule E to the Act or any other entry of the Schedules annexed to the Act ?'

3. It would appear that the course of business followed by the petitioners was that they used to purchase takas of malmal and voil cloth and in order to prepare sarees from out of them, they used to cut out five yards pieces out of those task and have embroidery work superimposed upon those pieces and then sell them as embroidered sarees. Similarly, they used to have three yards pieces cut out from those takas and have those pieces thereafter embroidered and then sell such embroidered pieces for ladies' underwear. On these facts, the Deputy Commissioner was of the view (1) that the saree pieces fell under entry 3(i) of Schedule E and not under entry 15 of Schedule A or, in the alternative, entry 4 of Schedule D, as contended by the petitioners, and (2) that the embroidered three yards pieces intended for ladies' underwear would not fall under entry 15 of Schedule A or entry 4 of Schedule D, but would fall under entry 15 of Schedule A or entry 4 of Schedule D, but would fall under entry 22 of Schedule E to the Act. According to the Deputy Commissioner, what was sold by the petitioners was not cotton fabrics as defined by entry 15 to Schedule A to the Act, or item 19 of Schedule I to the Central Excises and Salt Act, 1944, but embroidered sarees for which there is a specific entry, namely, entry 3(i) in Schedule E to the Act. As regards the three yards piece, he was also of the view that what was old was not cotton fabric as defined in item 19 in the First Schedule to the Central Excises and Salt Act, 1944, but an embroidered piece meant for the specific purpose of ladies' underwear and, therefore, not a piece which was a cotton fabric but an embroidered piece for which, there being no specific entry, it fell under the residuary entry, being entry 22 of Schedule E.

4. The Sales Tax Tribunal, agreeing with the Deputy Commissioner, held that under section 2(d) of the Central Excises and Salt Act, 1944, goods specified in the First Schedule to that Act were excisable goods and under section 3 thereof, such excisable goods were declared to be liable to excise duty. The reasoning adopted by the Tribunal was that in order that an article should be called a cotton fabric as defined by item 19 in the First Schedule of that Act, it must be an excisable article and must be subject to the levy of the excise duty. The Tribunal, therefore, held that since the sarees and the aforesaid piece in question were not excisable goods, they could not be termed cotton fabrics within the meaning of item 19 of the First Schedule to that Act and, therefore, would not fall under entry 15 of Schedule A to the present Act.

5. This reasoning, in our view, is not correct. It is clear from entry 15 of Schedule A to the Bombay Sales Tax Act, 1959, that the goods which fall under that entry are inter alia cotton fabrics as defined in item 19 of the First Schedule of the Central Excises Act and not the goods which are excisable goods thereunder or upon which excise duty is leviable under section 3 of that Act. What is, therefore, to be seen is whether the goods in question are cotton fabrics as defined by item 19 in the First Schedule of the Central Excises Act. According to item 19 in the First Schedule to the Central Excises Act, 'cotton fabrics' mean all varieties of fabrics manufactured either wholly or partly from cotton, and include dhotis, sarees, chadars, etc., but do not include any such fabric if it contains 40 per cent. or more by weight of wool, if it contains 40 per cent. or more by weight of silk, if it contains 60 per cent. or more by weight of rayon or artificial silk, or if manufactured on a handloom. It will be noticed that under item 19 in this Schedule, only those articles are cotton fabrics which are manufactured either wholly or partly from cotton. The word 'manufactured' under section 2(f) of the Act includes any process incidental or ancillary to the completion of a manufactured product. On the basis of this definition as also the language used in item 19 in the First Schedule to the Central Excises Act, the Tribunal came to the conclusion that since embroidery was superimposed after the takas from which the pieces were cut were completely manufactured, it was not a process which was either incidental or ancillary to their manufactured and, therefore, the sarees, after they were embroidered, were not cotton fabrics, as defined in item 19, but something else. The Tribunal was laos of the view that section 14 of the Central Sales Tax Act would not apply to the sarees in question, as was contended before it, as that section designated certain goods only as declared goods and amongst them are cotton fabrics as defined in item 19 of the First Schedule to the Central Excises Act, and, therefore, such goods would not get the benefit of section 15 of that Act, as the goods therein mentioned and which are liable to only a rate of two per cent. and not a higher duty, are cotton fabrics as defined in item 19. The Tribunal further held that entry 4 of Schedule D of the Sales Tax Act also would not apply to sarees as that entry refers to ready-made garments and other articles prepared from cotton, woollen and art silk textile fabrics sold at a price exceeding Rs. 5 per article or suit. This entry, according to the Tribunal, was a general entry, and entry 3(i) in Schedule E being a specific entry applicable to embroidered sarees, it would be the latter entry which would apply. As regards the three yards piece, the Tribunal was of the view that the Deputy Commissioner was not right, and held that though such a piece was not a garment, it was an article prepared from cotton fabric intended for ladies' underwear and, therefore, entry 4 of Schedule D would apply to such an article.

6. Entry 15 of Schedule A to the Sales Tax Act, 1959, relied upon by Mr. Mody for the petitioners, runs in the following terms :-

'Cotton fabrics as defined in item No. 12 (now item No. 19) to the First Schedule to the Central Excises and Salt Act, 1944.'

7. There can be no doubt that pieces admeasuring five yards or three yards, either from malmal or voil cloth, would be cotton fabrics, and merely because they are cut from takas, they would not cease to be cotton fabrics, as defined in item No. 19 of the First Schedule to the Central Excises Act, 1944. The fact that they are so cut and are intended for use as sarees also would not make any difference. But the question is, whether after these pieces of five yards and three yards are cut from takas and embroidery work by hand or machine is superimposed upon them so as to make them embroidered sarees and to sell them as such takes them out of entry 15 of Schedule A to the Act.

8. Mr. Mody relied upon section 5(i) of the Act and contended that under that section, notwithstanding anything in the Act, a dealer would not be liable to pay any tax on sales or purchases in respect of goods set out in Schedule A to the Act, the only exception being that such exemption is subject to the conditions or exceptions laid down in column 3 of that Schedule. He contended that there were no such conditions or exceptions in entry 15 in Schedule A and, therefore, once it is established that the goods in question are cotton fabrics within the meaning of entry 15 of Schedule A, the goods would be exempt from any tax and there would be no question then of any other entry in any of the Schedules being applicable to such goods. The question that falls for our determination is whether after the dealer cuts out five yards pieces from the takas of malmal and voil, and has embroidery superimposed upon them for the purpose of selling those pieces as embroidered sarees, such articles can still be said to be cotton fabrics within the meaning of entry 15 of Schedule A. The contention of Mr. Mody was that such saree pieces would still be cotton fabrics within the meaning of entry 15 of Schedule A and the mere fat that the dealer gets them embroidered would not make any difference as they would still retain the characteristics of cotton fabrics and, therefore, section 5(i) would be applicable to such goods. Entry 3 in Schedule E specifically deals with sarees embroidered or otherwise decorated and provides different rates of sales tax, depending upon the price at which they are sold per piece. The explanation to the entry provides that a saree decorated during the process of weaving shall not be a decorated saree for the purposes of this entry. The explanation to this entry clearly shows a distinction between sarees which are decorated during the course of weaving and those which are decorated after the process of their manufacture is completed, that is to say, sarees upon which, after their manufacture is completed, some decoration through an additional process distinct from the process of manufacture is superimposed. Presumably, the former, manufactured from cotton, would be classified as cotton fabrics and would fall within entry 15 of Schedule A, but the latter are specifically intended to fall within entry 15 of Schedule A, but the latter are specifically intended to fall within entry 3 of Schedule E. Entry 3 of Schedule E therefore itself shows the legislative intent to treat the two kinds of sarees differently; those that are embroidered or otherwise decorated within the meaning of that entry and those that are not. Though, therefore, cotton sarees may, in ordinary parlance, be called cotton fabrics, if such sarees are sarees embroidered or decorated, provided such embroidery or decoration is superimposed upon them after the process of their manufacture is over, they would be dealt with differently and the sales thereof are subjected to sales tax under section 10 and entry 3 of Schedule E to the Act. The basis of distinction between the two types of articles, that is, those that fall under entry 15 of Schedule A and those that fall under entry 3 of Schedule E, is that in the latter class of articles, their manufacture as cotton fabrics is complete and the process of embroidering them is done after their manufacture as cotton fabrics is over, so as to make them embroidered sarees and it is that which enables the dealer to sell them not as cotton fabrics but as embroidered sarees. It is this additional process which makes embroidered sarees, a process which is neither incidental nor ancillary to their manufacture as cotton fabrics and renders them subject to entry 3 in Schedule E to the Act.

9. Entry 15 in Schedule A to the Act exempting cotton fabrics of all varieties is a general entry, while entry 3 in Schedule E is a specific entry, dealing only with specific kinds of goods. It is a well settled rule of construction that where a statute contains both a general provision as well as a specific provision, the latter must prevail. Furthermore, where there are two provisions apparently in conflict with one another, the attempt, while construing them, must be to bring about harmony between the two and not to treat them as repugnant to each other. Upon these two principles of construction also, we must hold that the pieces of malmal or voil cloth over which embroidery is superimposed after the process of their manufacture is completed and are sold as embroidered sarees, would not be cotton fabrics within the meaning of item 19 in the First Schedule to the Central Excises Act. On the same reasoning, entry 4 in Schedule D also would not apply to such sarees, assuming that a saree can be said to be a ready-made garment or an article mentioned in that entry, as it assumes that such a ready-made garment or article is prepared inter alia from cotton fabric, the expression 'cotton fabric' in that entry also being a cotton fabric as defined in item 19 in the First Schedule to the Central Excises Act.

10. Mr. Mody, as already pointed out, relied upon section 5 of the Act, and to strengthen his argument that the sarees in question would still be cotton fabrics, pressed into his service section 3 and 7 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Section 3 of that Act provides for the levy of certain additional duties of excise amongst other things on cotton fabrics at the rate or rates specified in the First Schedule to that Act. Section 7 provides for the declaration of certain goods to be of special importance in inter-State trade or commerce and further provides that every sales tax law of a State shall, in so far as it imposes or authorises the imposition of, a tax on the sale or purchase of the declared goods, be subject as from the 1st day of April, 1958, to the restrictions and conditions specified in section 15 of the Central Sales Tax Act, 1956. He argued that under this Act, an additional duty was levied, amongst other goods, on cotton fabrics and that additional duty was to be distributed amongst the various States and that the policy followed both by the Central Government as also by the State Governments was that as the additional duties were to be distributed amongst the States, the States should refrain from taxing by way of sales tax the goods the out in section 3 and section 7 of the aforesaid Act and that it was in pursuance of such a policy that under section 5 of the Sales Tax Act and entry 15 in Schedule A to the Act, cotton fabrics amongst other goods were exempted from the burden of sales tax. There may perhaps be some force in that contention and section 5 and entry 15 in Schedule A to the Bombay Sales Tax Act, 1959, may have been enacted for the reasons stated by Mr. Mody. But we are not in the present case concerned with the reason why section 5 and entry 15 in Schedule A were enacted. We are concerned at present with the construction of the two entries, viz., entry 15 in Schedule A and entry 3 in Schedule E to the Act. In the first place, it is not correct to construe a provision in one Act or an entry therein from another provision in another Act enacted for a distinct purpose. In the second place, section 3 and 7 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957, merely provide for the levy of an additional duty and contain a declaration of certain goods as goods of special importance in inter-State trade or commerce and under section 4 of the Act benefit is given to the States to share such additional duty. It is difficult to see how the provisions of that Act can in any way assist us in construing the entries before us. We are really concerned with only one question, namely, whether the sarees in question fall under entry 15 of Schedule A or entry 3 of Schedule E of the Act and not whether the State Government has followed the provisions of section 3 or section 7 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Mr. Mody is certainly right when he says that section 5 of the Sales Tax Act of 1959 exempts sales of cotton fabrics in general, but the real question before us is whether the saree pieces before us, after they were cut from the takas and embroidered, were still mere cotton fabrics within the meaning of entry 15 of Schedule A to the Act, that is to say, whether they were still cotton fabrics as defined in item 19 of the First Schedule of the Central Excises and Salt Act, 1944, or whether they ceased to be mere cotton fabrics as defined in that entry and fell under entry 3 of Schedule E to the Act. In our view, if a saree piece which is a cotton fabric, is subjected to the process of embroidery after its manufacture as a cotton fabric has been completed, it can no longer be called a cotton fabric as defined by entry 19 of Schedule 1 to the Central Excises and Salt Act and it becomes an embroidered saree within the meaning of entry 3 of Schedule E. As already pointed out, the process of embroidery is not a process incidental or ancillary to its manufacture as defined in section 2(f) of the Central Excises and Salt Act, 1944. It is something which is an additional thing superimposed on an already manufacture cotton fabric, and it is that additional thing which is neither incidental nor ancillary to the completion of the process of its manufacture which beings it under entry 3 of Schedule E to the Act. Mr. Mody, however, relied upon certain observations by the High Court of Madras in Sri Kittappa Dress Manufacturing and Embroidery Works v. The State of Madras ([1962] 13 S.T.C. 34), where the learned Judges while holding that choli bits and sarees are cloth and not clothes have observed that choli bits are mere pieces or lengths of cloth in a state of adaptability to be transformed into garments like bodices but by themselves, they are neither wearing apparel nor garments and that similarly sarees also are pieces of cloth and can hardly be called garments merely because they are draped round the body of a woman. He also relied upon the observations therein contained that the term 'cloth' in accordance with its dictionary meaning and in its ordinary popular meaning, has to be understood as any woven fabric or stuff till it is transformed into an article like dress, garment or bed cover etc. which comes into ready use as such articles. In that decision, however, no question arose in terms of the question that arises before us, namely, whether the process of embroidering a saree piece is an incidental or an ancillary process and whether the superimposition of embroidery after the manufacturing process is completed, takes it out of the expression 'cotton fabric'. The decision, therefore, in Sri Kittappa Dress Manufacturing and Embroidery Works ([1962] 13 S.T.C. 34) cannot possibly assist us in construing the two entries before us. In our view, the Tribunal was right in coming to the conclusion that the two sarees in question fell under entry 3 of Schedule E and not under entry 15 in Schedule A of the Act and that section 5 of the Act did not apply to the two sarees in question.

11. As regards the three yards embroidered piece for ladies' underwear, reliance was placed by Mr. Mody upon entry 4 in Schedule D. That entry applies to ready-made garments and other articles (not being garments and articles to which entry 40 in Schedule A applies) prepared from cotton, woollen and art silk textile fabrics sold at a price exceeding Rs. 5 per article or suit. It is clear from this entry that it applies to ready-made garments and other articles prepared from amongst other things, cotton fabrics. In the view that we have taken in respect of the saree pieces, it must also follow that the three yards piece cannot be said to be an article prepared from cotton fabric. The three yards piece is obviously not a ready-made garment, for, in order to make it into a ladies' underwear, stitching would still have to be resorted to. But Mr. Mody argued that though such a piece was not a ready-made garment, it was nevertheless an article prepared from cotton fabric. The expression 'articles prepared from cotton fabrics' must mean articles prepared and made ready for immediate use. The three yards piece in question was prepared for a garment yet to be made or prepared. The three yards piece, therefore, is neither a ready-made garment nor an article prepared from cotton fabric, as contemplated by this entry. Because of embroidery having been subsequently superimposed on the cloth and it being not an incidental or ancillary process to its manufacture, the three yards piece also is not a cotton fabric. Therefore, entry 4 in Schedule D would not apply to such a case and there being no other entry applicable to such an article in any of the Schedules to the Act, the residuary entry, namely, entry 22 in Schedule E, would apply to such an article. The Tribunal, therefore, in our view was not correct in applying entry 4 in Schedule D to the Act and in disagreeing with the conclusion arrived at by the Deputy Commissioner. The Deputy Commissioner, so far as this article is concerned, was right in his view that it would be the residuary entry, namely, entry 22 in Schedule E to the Act, which would apply.

12. In the view that we take, our answers to the three questions referred to us are as follows :-

Question No. 1. - In the negative.

Question No. 2. - In the negative.

Question No. 3. - The sales of embroidered pieces of cloth therein mentioned would be covered by entry 22 in Schedule E to the Act and not by entry 4 in Schedule D.

13. The petitioner in reference No. 8 of 1963 will pay to the State of Gujarat the costs of both the references.

14. References answered accordingly.


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