TaxTMI 
TaxTMI 
2014 (4) TMI 593
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....ssing the cotton and transforming it into surgical cotton. 3. The assessment years in question are 1992-93 to 1998-99. The assessee purchases cotton after paying tax at the rate of 4% and thereafter process it into surgical cotton for sale. 4. For the relevant assessment years, the assessing authority had conducted a survey on the business premises of the assessee and opined that surgical cotton produced and sold by the assessee is a separate commercial commodity from cotton and thus liable to be taxed at 4% under the Act. Accordingly, a show cause notice was issued to the assessee. The assessee took the stand that cotton and surgical cotton are not distinct commodities for the purposes of levy of tax under the Act. The said stand of the assessee was rejected by the Assessing Authority which passed an order of assessment whereby the assessee was taxed at the rate of 4% and the penalty and interest thereon, dated 28.03.2000. 5. Being aggrieved by the aforesaid order of assessment, the assessee had carried the matter by way of an appeal before the Deputy Commissioner (Appeals) Commercial Tax, Ajmer. The said authority, accepted the stand of the assessee that the process adopted fo....
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.... 525, to bring home the point, that, since the purpose of sales tax is to levy tax on sale of goods of each variety and not the sale of the raw material of which they may have been made and therefore, where commercial goods are merely subjected to some processing, they may remain commercially the same goods which cannot be taxed again in a series of sales so long as they continue to retain their identity as goods of that particular variety. He would further explain the term "manufacture" in context of the Act and draw support from the decisions of this Court in, inter alia, Sterling Foods v. State of Karnataka, (1986) 3 SCC 469 and CST v. Pio Food Packers, 1980 Supp SCC 174 and submit that that the essential feature of "manufacturing" is the utilization of original commodity and its transformation into a different commodity wherein the original article stands distinguished from the end product as an entirely different commodity and since the aforesaid is not the case herein, the process of transformation of cotton into surgical cotton would not be a manufacture for the levy of tax under the Act and therefore, the High Court has erroneously dismissed the case of appellants confirmin....
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.... of the Act and whether the same commodity in the same entry would be liable for taxation twice specially when the scheme of Act suggests that cotton is a commodity of special importance and must be taxed only once in terms of Section 15 of the CST Act. Since the relevant entry has been amended vide successive notifications for each Assessment Year, we would analyse it sequentially. Assessment Year 1992-93 14. For the Assessment Year 1992-93, Entry 16 as reproduced above prescribes that cotton of all kinds whether indigenous or imported and whether ginned or unginned, baled, pressed or otherwise including cotton waste is covered by this entry. This is a comprehensive inclusion of all kinds of cotton for the purposes of taxing. A reading of this entry means that the commodity cotton in all its forms namely, indigenous, imported, ginned, unginned, baled, pressed, non-pressed is liable to be taxed at the rate of 4% alongwith cotton waste. Since neither does "surgical cotton" find mention in the aforesaid entry as a commodity nor does it suitably fit into the description aforesaid, it becomes relevant to delve into the question whether the commodity in question has undergone any chan....
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....icle is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character or use. " (CCE v. Osnar Chemical (P) Ltd., (2012) 2 SCC 282; Jai Bhagwan Oil & Flour Mills v. Union of India, (2009) 14 SCC 63; Crane Betel Nut Powder Works v. Commr. of Customs & Central Excise, (2007) 4 SCC 155; CIT v. Tara Agencies, (2007) 6 SCC 429; Ujagar Prints (II) v. Union of India, 1986 Supp SCC 652; Saraswati Sugar Mills v. Haryana State Board, (1992) 1 SCC 418; Gramophone Co. of India Ltd. v. Collector of Customs, (2000) 1 SCC 549; CCE v. Rajasthan State Chemical Works, (1991) 4 SCC 473; CCE v. Technoweld Industries, (2003) 11 SCC 798; Metlex (I) (P) Ltd. v. CCE, (2005) 1 SCC 271; Aman Marble Industries (P) Ltd. v. CCE, (2005) 1 SCC 279; Shyam Oil Cake Ltd. v. CCE, (2005) 1 SCC 264; South Bihar Sugar Mills Ltd. v. Union of India, (1968) 3 SCR 21; Laminated Packings (P) Ltd. v. CCE, (1990) 4 SCC 51; Dy. CST v. Coco Fibres, 1992 Supp (1) SCC 290; CST v. Jagannath Cotton Co., (1995) 5 SCC 527; Ashirwad Ispat Udyog v. State Level Committee, (1998) 8 SCC 85; State of Maharashtr....
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.... In the present case, the Tribunal was right in holding that the characteristics of the tissue paper in the jumbo roll are not different from the characteristics of the tissue paper, after slitting and cutting, in the table napkins, in the toilet rolls and in the facial tissues." (emphasis supplied) 22. At this stage the discussion of difference between "processing" and "manufacture" holds much relevance to well appreciate the contention canvassed by Shri Giri that the transformation of cotton into surgical cotton would be mere processing and not manufacture. 23. According to Oxford English Dictionary one of the meanings of the word "process" is "a continuous and regular action or succession of actions taking place or carried on in a definite manner and leading to the accomplishment of some result". In Chambers 21st Century Dictionary, the term "process" has been defined as "1. a series of operations performed during manufacture, etc. 2. a series of stages which a product, etc. passes through, resulting in the development or transformation of it." 24. In East Texas Motor Freight Lines v. Frozen Food Express, 351 US 49 the Supreme Court of United States of America has held that ....
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....td. case (supra) wherein the classification of refined edible oil after refining was under consideration and on similar lines it was held that the process of refining of raw edible vegetable oil did not amount to manufacture. In Aman Marble Industries case (supra), this Court has held that the cutting of marble blocks into smaller pieces would not be a process of manufacture for the reason that no new and distinct commercial product came into existence as the end product still remained the same and thus its original identity continued. 27. This Court in Crane Betel Nut Powder Works case (supra) citing the earlier decision in Brakes India Ltd. v. Supdt. of Central Excise, (1997) 10 SCC 717 wherein the process of drilling, trimming and chamfering was said to amount to "manufacture", has reiterated that if by a process, a change is effected in a product and new characteristic is introduced which facilitates the utility of the new product for which it is meant, then the process is not a simple process, but a process incidental or ancillary to the completion of a manufactured product. In Kores India Ltd. v. CCE, (2005) 1 SCC 385 the cutting of duty-paid typewriter/telex ribbons in jumb....
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.... washed thoroughly. b) Bleaching: Washed cotton is bleached to remove brownish colour developed due to chemical treatment. Bleaching is done by using bleaching agent such as sodiumhypochlorite or hydrogen peroxide. The bleaching process improves whiteness, wetting properties and assists in disintegration of any remaining foreign materials. c) Removal of Chemicals: The bleached cotton is thoroughly washed again to remove the chemicals. A little quantity of dilute hydrochloric acid or sulphuric acid is also added to neutralize excess alkali. If required, again washed with water. The water of cotton is removed with the help of hydro-extractor. It is then sent to a wet-cotton opening machine. d) Drying: The cotton so obtained is dried by passing through dryer or alternatively subjected to sun drying where provision for dryer is not there. e) Lapping: The dried cotton is sent to blower room where it is thoroughly opened and made into laps. f) Carding: The laps are then fed into carding machine wherein cotton is warped around rollers in thin layers. g) Rolling: Cotton so obtained is compressed and rolled into suitable role size along with packaging paper. h) Weighing and cut....
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....e purpose. Surgical cotton is only used in form of medicine or pharmaceutical product, thus it cannot be said that use of commodity is interchangeable and in that view of the matter, surgical cotton is a different commodity. It is a commodity which is used with a completely distinct identity in itself. As what is used for medical purpose is perfectly sterilized disinfected purified cotton. If raw cotton is used for surgical purposes, it would be counter-productive. Surgical cotton is extensively used for making napkins, sanitary pads and filters, etc. The surgical cotton is exclusively consumed into medical field while ordinary cotton has so many uses. The main chemical properties desired in a surgical dressing are inertness and lack of irritation in use, which is provided by the surgical cotton only if manufactured as per the standards specified. Raw cotton is purified by a series of processes and rendered hydrophilic in character and free from other external organic impurities for use in surgical dressings. Surgical cotton is, thus, completely different from ordinary cotton. 34. The surgical cotton is made sterile and fit for surgical use and it is not put to the same use to whi....
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....set-off for the manufactured surgical cotton fails to impress us. The High Court has noticed that the said question was not raised before the original assessing authority and consequently, the authorities below have not considered the said question and such being the case, the High Court has declined to consider the same. In our considered opinion, the said question cannot be considered by us for the first time in these appeals and thus, the conclusion of the High Court in this regard stands affirmed. However, the appellant is at liberty to raise the said question before the appropriate authorities in accordance with law. 38. In view of the above, we cannot take any exception to the impugned judgment and order passed by the High court in so far as the Assessment Year 1992-93 is concerned. Assessment Years 1993-94 to 1998-99: 39. We would now proceed to examine the claim of the assessee for the Assessment Years 1993-94 to 1999-2000. The Entry for the relevant years is reproduced in the preceding paragraph no. 12. 40. In the year 1993, by an amendment notification F.4 (56) FD/Gr.IV/82-2 (S.O. No. 8) dated 12.04.1993, the legislature has consciously included "absorbent cotton wool....
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....s have also expressed the same medicinal use and properties of surgical cotton in terms of definition of absorbent cotton. The Collins English Dictionary defines "cotton wool/absorbent cotton/surgical cotton" as "absorbent cotton, purified cotton, bleached and sterilized cotton form." The Oxford Dictionary of English explains the meaning of "absorbent cotton" as cotton which is used for cleaning the skin or bathing wounds. In Encarta dictionary "absorbent cotton" is defined as under: "Cotton that has had the natural wax removed, making it absorbent and suitable for medical and cosmetic use as dressings or swabs". 46. In fact, the Rajasthan High Court in the case of Durga Cotton Industries Vs. State of Rajasthan and Ors., 1994 (1) WLC 696 had an occasion to look into the meaning of the expression "absorbent cotton wool I.P." while considering notification dated 27.6.1990 which provided the rates of tax for cotton in Item No. 16 (the same as Entry 16 for Assessment Year 1992-93). The Court on consideration of the relevant literature had come to the conclusion that "absorbent cotton wool I.P." is commercially known as surgical cotton. In our considered opinion, the view of the Rajas....
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.... definitions" as under: "32. We do not think it necessary to launch into a discussion of either Dilworth case or any of the other cases cited. All that is necessary for us to say is this: legislatures resort to inclusive definitions (1) to enlarge the meaning of words or phrases so as to take in the ordinary, popular and natural sense of the words and also the sense which the statute wishes to attribute to it; (2) to include meanings about which there might be some dispute; or (3) to bring under one nomenclature all transactions possessing certain similar features but going under different names. Depending on the context, in the process of enlarging, the definition may even become exhaustive." 52. In Karnataka Power Transmission Corpn. v. Ashok Iron Works (P) Ltd., (2009) 3 SCC 240 this Court after analyzing the afore-cited decisions has observed as follows: "17. It goes without saying that interpretation of a word or expression must depend on the text and the context. The resort to the word 'includes' by the legislature often shows the intention of the legislature that it wanted to give extensive and enlarged meaning to such expression. Sometimes, however, the context may sugge....