1988 (9) TMI 333 - HC - VAT and Sales Tax

Interpretation of 'cotton' under Assam Sales Tax Act exempts 'cotton waste' & 'cotton yarn waste' from taxation.

The High Court of GAUHATI interpreted the term 'cotton' in the Assam Sales Tax Act, 1947 to include 'cotton waste,' exempting it from taxation. The Court ... - Issues:Interpretation of the term 'cotton' in the Assam Sales Tax Act, 1947 to include 'cotton waste' and exemption from taxation, interpretation of 'cotton yarn' to include 'cotton yarn waste' and exemption from taxation, applicability of section 19A of the Assam Sales Tax Act, 1947 to reopen completed assessment.Analysis:The High Court of GAUHATI was tasked with interpreting the term 'cotton' in the Assam Sales Tax Act, 1947 to determine if it includes 'cotton waste' and is exempt from taxation. The Assam Board of Revenue had previously held that 'cotton waste' is distinct from 'cotton,' and similarly, 'cotton yarn waste' is distinct from 'cotton yarn.' The Court examined the definitions in Schedule III of the Act, noting that the term 'cotton' was substituted with 'cotton and cotton yarn' in 1956. The Court referenced Black's Law Dictionary and previous case law to understand the distinction between 'cotton' and 'cotton waste.'In the case of Krishi Utpadan Mandi Samiti v. Ganga Dal Mill & Co., the Supreme Court discussed the definition of 'cotton' in relation to ginned and unginned cotton, emphasizing that cotton waste is a residue of ginned cotton and not a by-product. The Court also referred to Alladi Venkateswarlu v. Government of A.P., where various tests were laid down to identify commodities for taxation purposes, favoring interpretations that benefit the assessee. The Court applied the common-sense rule of interpretation to conclude that 'cotton waste' falls under the category of 'cotton,' and 'cotton yarn waste' falls under 'cotton yarn,' exempting them from taxation.The third issue regarding the applicability of section 19A of the Assam Sales Tax Act, 1947 to reopen completed assessments was not pressed for an answer by the assessees' counsel. Therefore, the Court did not provide a ruling on this question. The judgment answered the first and second questions in the affirmative, in favor of the assessees and against the Revenue. No costs were awarded in this matter, and the reference was answered in the affirmative.