1971 (7) TMI 131 - SC - VAT and Sales Tax

Definition of 'mills' clarified for sales tax: power-loom cloth not included.

The Supreme Court affirmed the High Court's ruling that cloth manufactured using power-looms does not qualify as 'cloth manufactured by mills' for sales ... Whether the cloth manufactured by means of looms worked by power can be regarded as 'cloth manufactured by mills' for which sales tax was payable at the rate of 6 pies in a rupee in terms of the notification dated June 8, 1948, issued under section 3A of the U.P. Sales Tax Act, 1948? Held that:- Appeal dismissed. The fallacy in the appellant's argument is that by the same reasoning a building in which looms worked by manual labour are to be found would also have to be regarded as 'mills'. This would be contrary to the accepted and popular meaning of handloom or power-loom cloth and mill-made cloth. We are satisfied that the distinction which was kept in view when the notification was promulgated was between the aforesaid two categories or types of cloth involving essentially a difference in the process by which it was manufactured. Issues:Interpretation of term 'cloth manufactured by mills' for sales tax purposes.Analysis:The Supreme Court addressed the issue of whether cloth manufactured using power-looms can be considered 'cloth manufactured by mills' for sales tax assessment. The High Court had ruled that cloth produced by power-looms did not fall under the category of 'cloth manufactured by mills.' The Court analyzed the definition of 'mills' from various sources, including dictionaries and legal precedents. It was noted that the common understanding of a mill includes a building with machinery for processing goods. The Court emphasized that the context of the term 'mills' in the notification was crucial. The notification categorized cloth broadly into mill-made and loom-made, with different tax rates applicable. The Court concluded that the energy source for operating looms, whether manual or power, does not change the essential character of the cloth. Mill-made cloth involves an automatic and machinery-driven weaving process. The judgment referenced previous cases to illustrate the concept of mills in different contexts. The Court rejected the argument that power-operated looms automatically classify a building as a mill, as it would conflict with the accepted distinction between handloom, power-loom, and mill-made cloth. The Court upheld the High Court's decision, dismissing the appeal with no costs awarded.