Sales tax classification of rags and chindies turned on statutory definition, not buyer's intended use or irregular cut pieces.

Rags and chindies sold as cut or irregular pieces were treated as cotton fabrics for sales tax classification because Entry 15 had to be read with the statutory definition of cotton fabrics, which covered all varieties manufactured wholly or partly from cotton. Their character was not altered by damage, sub-standard quality, or the buyer's intended use as paper-making raw material. The exemption notification of 5 January 1957 reinforced that damaged and sub-standard cotton fabrics, including chindies, rags and fents, remained cotton fabrics. On that construction, the goods fell within Entry 15 of Schedule A and not the residuary entry.

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Issues: Whether rags and chindies sold by the applicants were covered by Entry 15 of Schedule A to the Bombay Sales Tax Act, 1959 as cotton fabrics, or fell under the residuary entry and were taxable.

Analysis: The expression used in Entry 15 was read with the definition of cotton fabrics in Item No. 12, later Item No. 19, of the First Schedule to the Central Excises and Salt Act, 1944. That definition covered all varieties of fabrics manufactured wholly or partly from cotton. The fact that the goods were sold in cut pieces of irregular shape or size, or were purchased for use as raw material in paper manufacture, did not change their character as manufactured cloth. The exemption notification of 5 January 1957 also treated damaged or sub-standard cotton fabrics, including chindies, rags and fents, as cotton fabrics, supporting that understanding of the term. On a plain and grammatical construction, the description was not controlled by the buyer's intended use.

Conclusion: Rags and chindies were cotton fabrics and were covered by Entry 15 of Schedule A. The Tribunal's contrary view was incorrect.

Final Conclusion: The reference was answered in favour of the applicants, and the disputed sales were held not taxable under the residuary entry.

Ratio Decidendi: A tariff or sales tax description of goods must be determined by the statutory definition and the plain character of the goods, and not by the purchaser's intended use or by the fact that the goods are sold in cut or irregular pieces.

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