M/S. New Khadi Niketan vs State Of Odisha Represented ...
2022 Latest Caselaw 7434 Ori

             HIGH COURT OF ORISSA : CUTTACK.

                       STREV No. 102 of 2017
  (An Application under Section 19 of the Odisha Entry Tax Act, 1999)

    M/s. New Khadi Niketan
    Bhubaneswar                                ...             Petitioner


                                   VERSUS

    State of Odisha represented through
    Commissioner of Sales Tax, Cuttack         ...        Opposite party



   Advocates appeared in the case:

    For the Petitioner         :      Mr. Chitta Ranjan Das, Advocate

    For the Opposite Party     :                       Mr. Sunil Mishra,
                                            Additional Standing Counsel
                                              (CT & GST Organisation)
    CORAM:
    THE CHIEF JUSTICE
    JUSTICE MURAHARI SRI RAMAN

                              JUDGMENT

15.12.2022

Murahari Sri Raman, J.--

1. The petitioner, a proprietorship concern, assailed Order dated 22nd September, 2017 in Second Appeal No.205(ET) of 2014-15 passed by the learned Odisha Sales Tax Tribunal, Cuttack (for short, 'OSTT') by way of revision petition under Section 19 of the Odisha Entry Tax Act, 1999 (referred to as, "OET Act")

directed against Order dated 30.09.2014 of the Deputy Commissioner of Sales Tax, (Appeal), Bhubaneswar Range, Berhampur in connection with Audit Assessment framed under Section 9C of the OET Act by the Sales Tax Officer, Bhubaneswar-II Circle, Bhubaneswar pertaining to tax periods from 01.04.2006 to 30.09.2011.

Question of law framed by this Court:

2. While entertaining the revision petition, this Court vide Order dated 3rd May, 2018 framed the question of law that whether SAREE, PATTA, DHOTI and GAMUCHHA fall under Entry Serial No.3 of Part-II of Schedule appended to the OET Act?

Facts of the case:

3. Tax Audit being undertaken, on the basis of Audit Visit Report submitted under Section 9B of the OET Act, Assessment was framed under Section 9C vide Order dated 05.11.2012 raising a demand to the tune of Rs.7,54,898/- (tax of Rs.2,51,632.82 + penalty of Rs.5,03,265.64) by the Sales Tax Officer, Bhubaneswar-II Circle, Bhubaneswar (be called, "Assessing Authority") rejecting the claim of the petitioner-dealer that Odisha entry tax is not exigible on the goods, such as "saree, patta, dhoti and gamuchha", bought from persons, not registered under the statute, within the State of Odisha and, as such, brought into the "local area" for consumption, use or sale therein, as such goods do not find place at Entry 3, Part-II of Schedule to the OET Act.

3.1. The relevant fact as reflected in the Assessment Order is quoted hereunder for better understanding:

"*** When confronted the facts of observations, the proprietor of the business admitted that he has not paid ET on intra-State purchase effected from unregistered dealers but furnished the check-gate money receipts at the assessment stage for verification and acceptance."

3.2. The petitioner availed remedy of appeal under Section 16 of the OET Act before the Deputy Commissioner of Sales Tax (Appeal), Bhubaneswar, who vide Order dated 30.09.2014 held that the subject-goods, being "handloom products" are not comprehended within the meaning of "textile" and therefore, they are not amenable to levy of Odisha entry tax.

3.3. The State of Odisha, represented by the Commissioner of Sales Tax, Odisha, carried the matter before the Tribunal in Second Appeal being S.A. No.205 (ET) of 2014-15 invoking provisions of Section 17 of the OET Act. The learned Tribunal interfered with the Appellate Order by holding that the goods in question are "textile products" and thereby affirmed the view of the Assessing Authority.

The contentions of the counsel for the petitioner:

4. Sri Chitta Ranjan Das, Advocate for the petitioner submitted that the word "including" appearing in Entry Serial No.3, Part-II of Schedule appended to the OET Act is not always understood in expansive sense, but as interpreted in the cases of N.D.P. Namboodripad Vrs. Union of India & Ors., AIR 2007 SC

1762 and Sterlite Optical Technologies Ltd. Vrs. Oil India Limited & Ors., (2008) 14 VST 9 (Gau), said word is to be construed to be restrictive. Therefore, he would submit that the term "textile" in the said entry is to be restricted to the words "cotton fabrics and ready-made garments" which follow it. Had the intention to tax entire range of "textile products", the words "cotton fabrics and ready-made garments" would not have been placed in the said Entry No.3 of Part-II of Schedule.

4.1. Further plea of learned counsel for the petitioner is that aforesaid Entry No.3, Part-II of Schedule when pitted against Entry No.5, Part-I of same Schedule, it must mean that the intent under the OET Act for levy of tax is restricted to those goods specified therein, namely "pure silk fabric, silk, artificial silk yarn, raw silk".

Contention of the opponent-Revenue:

5. Per contra, Sri Sunil Mishra, learned Additional Standing Counsel (CT&GST Organisation) submitted that the learned OSTT has flawlessly decided the issue at hand and correctly interpreted the classification of commodity vis-à-vis leviability of entry tax on the goods namely "saree, patta, dhoti, gamuchha".

5.1. The learned Additional Standing Counsel has pressed into service the following observations of the learned OSTT:

"9. This Tribunal is, therefore, of the considered view that a conjoint reading of the relevant entries in Part-I and Part-II of the Schedule would imply that by using the

word 'textile products' along with the cotton fabrics and ready-made garments, the Legislature never intended to restrict the meaning thereof, rather the intention was to impose a particular tax for a specific group of textile products like pure silk fabric etc. under Part-I and another rate of tax for all textile products in general. The use of the words 'including cotton fabrics and readymade garments' after the words 'textile products' must be held to be for the purpose of clarification only and to distinguish it from specific items mentioned in Part I least there is any confusion on such score.

10. It is further observed that the goods in question have been mechanically treated as handloom goods even though such a specific stand was never taken by the dealer and it is common knowledge that the goods in question can be prepared not only through handloom but also mechanically, i.e. by using power looms. Therefore, learned Appellate Authority has fallen into error in mechanically treating the goods in question as handloom products. That apart, learned First Appellate Authority has held that the word 'textile' must be understood in common parlance and that, being handloom products, the goods in question cannot be considered as textile as nobody purchases it as a textile in common parlance. This Tribunal is unable to accept the above reasoning for the reason that in common parlance the word 'textile' means any article produced as a result of weaving, i.e. woven fabrics. The above view was taken by the Hon'ble Madras High Court in the case of The State of Madras Vs. T.T. Gopalier and another, reported in (1968) 21 STC 451 (Mad.) and in the case of Silver Chem Industries Vs. The State of Tamil Nadu, reported in (1980) 45 STC 315 (Mad.). Surprisingly, both the decisions stated above were referred by learned First Appellate Authority, but a different meaning appears to have been ascribed to the ratio laid down therein.

11. In the ultimate analysis, this Tribunal holds that the goods in question are 'textile products' with the meaning of entry No.5 of Part-I (sic. Entry No.3 of Part-II)

of Schedule to OET Act. This Tribunal is fortified in its reasoning by the meaning given to the word 'textile' by the Hon'ble Apex Court in the case of Porritts (supra) as under:

'The word 'Textile is derived from the Latin 'texere' which means 'to weave' and it means any woven fabric. When yarn, whether cotton, silk, woolen, rayon, nylon or of any other description or made out of any other material is woven into a fabric, what comes into being is a 'textile' and it is known as such.

The Apex Court further held that whatever be the mode of weaving employed, woven fabric would be 'textiles'.' ***

In such view of the matter, the impugned order is liable to be interfered with and the tax liability to be assessed accordingly. The order of the Assessing Authority to the above extent is hereby confirmed."

5.2. The learned Additional Standing Counsel, therefore, urged that clear and loud reasoning ascribed by the learned OSTT repelling the contentions of the petitioner raised before it and distinguishing the ratio of case laws insisted upon to be applied does not deserve indulgence by this Court in the instant revision.

Discussion and reasons:

6. The relevant entries fall for consideration in the present revision petition are as follows:

Part-I

5. Pure silk fabric, silk, artificial silk yarn and raw silk Part-II

3. Textile products including cotton fabrics and ready-made garments

7. Scrutiny of both the competing entries would suggest that whereas Entry 5 of Part-I relates to items of "silk" which are subject to entry tax @1% in terms of Rule 3(3) of the Odisha Entry Tax Rules, 1999, Entry 3 of Part-II indicates levy of tax @2% as per Rule 3(2) ibid. on "textile products including cotton fabrics and ready-made garments". It can be culled out from what has been laid down in Annapurna Biscuit Manufacturing Co. Vrs. Commissioner of Sales Tax, (1981) 48 STC 254 (SC) that the words used in a law imposing a tax should be construed in the same way in which they are understood in ordinary parlance in the area in which the law is in force and if an expression is capable of a wider meaning as well as narrower meaning the question whether the wider or narrower meaning should be given depends on the context and the background of the case.

7.1. In understanding the use of the word "including" in Entry 3 of Part-II reference to the following words as spoken by the Hon'ble Supreme Court of India in the case of Ramala Sahkari Chini Mills Ltd. Vrs. Commissioner of Central Excise, (2016) 7 SCC 585 = 2016 SCC OnLine SC 299 = 2016 (334) ELT 3 (SC) would suffice:

"2. The answer to the question referred, according to us, is self-contained in the order of reference which has referred, inter alia, to a three-Judge Bench decision of this Court in ESI Corpn. Vrs. High Land Coffee Works [ESI Corpn. v. High Land Coffee Works, (1991) 3 SCC 617]. There are other decisions of this Court by Coordinate Benches (three Judge) on the issue which need not be adverted to specifically inasmuch as it has been clearly held

in ESI Corpn. [ESI Corpn. v. High Land Coffee Works, (1991) 3 SCC 617] that the word "include" in the statutory definition is generally used to enlarge the meaning of the preceding words and it is by way of extension, and not with restriction."

7.2. It, therefore, seems to be correct approach of the learned OSTT in distinguishing the cases on which reliance was placed by the learned counsel for the petitioner. The learned Tribunal came to hold that:

"8. *** In the case of Sterlite Optical Technologies Vrs. Oil India Limited and Ors., (2008) 14 VST 9 (Gau), the Hon'ble Gauhati High Court was seized with the question whether the word 'including' used in Entry No.4 of Assam Entry Tax Act, 2001, is exhaustive or used in a restrictive sense and in such context, it was held that 'sound transmitting equipment' including telephones, mobile phones, pagers and components and parts thereof shall be treated as inclusive to mean only those products as has been stated in the entry itself. In the present case, however, the situation is different inasmuch as different types of textile products have been included under different parts of the schedule with reference to the rate of taxation as has been discussed in detail herein before. Therefore, the restrictive meaning used for the word 'including' occurring under Entry 4 of the Schedule to Assam Entry Tax Act cannot be applied to the entries under Part-I and II of the Schedule to the OET Act."

7.3. In Krishi Utpadan Mandi Samiti Vrs. Shankar Industries, 1993 Supp. (3) SCC 361 it is laid down that where the Legislature uses the words 'means and includes' such definition is to be given a wider meaning and is not exhaustive or restricted to the items contained or included in such definition.

7.4. In Black Diamond Beverages Pvt. Ltd. Vrs. CTO, (1997) 107 STC 219 (SC) = AIR 1997 SC 3550 = (1998) 1 SCC 458, it has been observed as follows:

"It is clear that the definition of 'sale price' in Section 2(d) uses the words 'means' and 'includes'. The first part of the definition defines the meaning of the word 'sale price' and must, in our view, be given its ordinary, popular or natural meaning. The interpretation thereof is in no way controlled or affected by the second part which 'includes' certain other things in the definition. This is a well-settled principle of construction. Craies on Statute Law (7th Edn. 1.214) says:

'An interpretation clause which extends the meaning of a word does not take away its ordinary meaning .... Lord Selborne said in Robinson Vs. Barton Eccles Local Board (1883)8 App.Case 798 (801):

'An interpretation clause of this kind is not meant to prevent the word receiving its ordinary, popular, and natural sense whenever that would be properly applicable, but to enable the word as used in the Act ... to be applied to something to which it would not ordinarily be applicable.'

Therefore, the inclusive part of the definition cannot prevent the main provision from receiving its natural meaning."

7.5. In Asian Paints India Ltd. Vrs. Commissioner of Sales Tax, (2002) 126 STC 239 (MP) it has been stated as follows:

"It is practically impossible for the Legislature to include/add/specify each and every commodity manufactured and sold in the market by their common

names, as they are running in thousand if not in lakhs. Here the craftsmanship of interpretation of statute for a particular word steps in which require interference by the Court in finding out the real meaning of the word specified in a particular notification or the Schedule as the case may be. The use of one word may include more than one commodity though not specified. It is with this approach, the Courts have to interpret the words used and specified in the Schedule and then find out its real meanings, and true scope in relation to those commodities which are not so specified."

7.6. In the above perspective, when this Court attempts to classify the commodities, namely, saree, patta, dhoti and gamuchha, in wider sense it is understood that they all fall within the connotation of the term "textile product".

8. Therefore, this Court further has delved into the meaning of "textile product" for arriving at appropriate conclusion in the present case.

8.1. In Porritts & Spencer (Asia) Ltd. Vrs. State of Haryana, (1978) 42 STC 433 (SC), while deciding whether 'dryer felts' fell within the category of 'all varieties of cotton, woolen or silken textiles', the observation of the Hon'ble Supreme Court runs as follows:

"Now, the word 'textiles' is not defined in the Act, but it is well-settled as a result of several decisions of this Court, of which we may mention only a few, namely, Ramavatar Budhaiprasad Vrs. Assistant Sales Tax Officer, Akola, [1961] 12 STC 286 (SC) = AIR 1961 SC 1325; Motipur Zamindary Co. Ltd. Vrs. State of Bihar, [1962] 13 STC 1 (SC) = AIR 1962 SC 660 and State of West Bengal

Vrs. Washi Ahmed, [1977] 39 STC 378 (SC) = [1977] 3 SCR 149, that in a taxing statute words of everyday use must be construed not in their scientific or technical sense but as understood in common parlance. *** There can, therefore, be no doubt that the word 'textile' in item 30 of Schedule B must be interpreted according to its popular sense, meaning 'that sense which people conversant with the subject-matter with which the statute is dealing would attribute to it'. ***"

In the said case [Porritts & Spencer (Asia) Ltd. Vrs. State of Haryana, (1978) 42 STC 433 (SC)], the Hon'ble Court has described the meaning of 'textiles' in the following manner:

"The word 'textiles' is derived from the Latin 'texere', which means 'to weave' and it means any woven fabric. When yarn, whether cotton, silk, woollen, rayon, nylon or of any other description or made out of any other material is woven into a fabric, what comes into being is a 'textile' and it is known as such. It may be cotton textile, silk textile, woollen textile, rayon textile, nylon textile or any other kind of textile. The method of weaving adopted may be the warp and woof pattern as is generally the case in most of the textiles, or it may be any other process or technique. There is such phenomenal advance in science and technology, so wondrous is the variety of fabrics manufactured from materials hitherto unknown or unthought of and so many are the new techniques invented for making fabric out of yarn that it would be most unwise to confine the weaving process to the warp and woof pattern. Whatever be the mode of weaving employed, woven fabric would be 'textiles'. What is necessary is no more than weaving of yarn and weaving would mean binding or putting together by some process so as to form a fabric. Moreover a textile need not be of any particular size or strength or weight. It may be in small pieces or in big rolls: it may be weak or strong, light or heavy, bleached or dyed, according to the requirement of the purchaser. The use to

which it may be put is also immaterial and does not bear in its character as a textile. It may be used for making wearing apparel, or it may be used as a covering or bed-sheet or it may be used as tapestry or upholstery or as duster for cleaning or as towel for drying the body. A textile may have diverse uses and it is not the use which determines its character as textile. ***"

8.2. In Delhi Cloth & General Mills Co. Ltd. Vrs. State of Rajasthan, (1980) 46 STC 256 (SC) = (1980) 4 SCC 71, the term "fabric" and "textile" have been discussed as under:

"9. What is a fabric? The "Mercury" Dictionary of Textile Terms defines "fabric" as a term which covers all textiles no matter how constructed, how manufactured, or the nature of the material from which made, and the expression "textile" is described as:

any product manufactured from fibres through twisting, interlacing, bonding, looping, or any other means, in such a manner that the flexibility, strength, and other characteristic properties of the individual fibres are not suppressed.

The Man-Made Textile Encyclopaedia (1959) defines fabric as:

a collective term applied to cloth no matter how constructed or manufactured and regardless of the kind of fibre from which made. In structure it is planar produced by interlacing yarns, fibres or filaments. Textile fabrics include the following varieties, bonded, felted, knitted, braided and woven.

The Fairchild's Dictionary of Textiles (1959) says that fabric is:

a cloth that is woven or knit, braided, petted, with any textile fibre ...

and "textile" is said to refer to:

a broad classification of any material that can be worked into fabric, such as fibres and yarns including woven and knitted fabric, felt, netted fabric, laced and crouched goods.

In TEXTILE TERMS AND DEFINITIONS (1960) the word cloth is defined as:

a generic term embracing all textile fabrics and laminar felts and 'textile' is applied in its modern sense to:

any manufacture from fibres, filaments, or yarns, natural or artificial, obtained by interlacing.

The 1967 Annual Book of ASTM Standards defines cloth as:

any textile fabric but specially one designed for apparel, domestic or industrial use and textile fabric as a planar structure consisting of interlaced yarns or fibres.

The 1973 Annual Book of ASTM Standards reproduced those definitions."

8.3. In Shree Meenakshi Mills Ltd. Vrs. Union of India, (1974) 1 SCC 468 the term "textile" has been described thus:

"18. The dictionary meanings of cotton textile are any material that is woven, a material, as a fibre or yarn, used in or suitable for weaving, woven or capable of being woven. The meaning of "textile" as a noun is a fabric which is or may be woven, a fabric made by weaving, a woven fabric, or a material suitable for weaving, textile material. The dictionary meanings show that cotton yarn is included in cotton textile."

8.4. In State of Haryana Vrs. Crown Agencies P. Ltd., (2010) 34 VST 84 (P&H), while considering whether "labels" are regarded as "textile", the view of the Hon'ble Punjab and Haryana High Court was expressed in the following words:

"20. To the same effect is the judgment of this Court delivered by a Division Bench of this court in GSTR No. 65 to 67 of 1991 vide order dated 19.1.2009 [(2009) 23 VST 389], wherein it was held that handkerchiefs fall under Item 30 of Schedule A of the Punjab General Sales Tax Act, 1948 which is similar to Entry 14 of Schedule B of the Act. The same reads as under:

'But the question then is whether it would include handkerchiefs because handkerchiefs are not subjected to any knitting and embroidery. As already observed, handkerchiefs are hemmed and therefore, it may fall within the meaning of 'cotton, woolen or silken textiles on which knitting and embroidery work has been done.

However the question directly fell for consideration before the Division Bench of Kerala High Court in Deputy Commissioner of Sales Tax v. Mohammed Abdul Khader (1980) 46 STC 512. The facts in that case are akin to the facts of the case in hand. The assessee in both the cases have purchased excise duty paid handkerchief from the Mill and without subjecting those to any process sold it in the market. The handkerchiefs have been sold in the same condition in which it had been supplied to the assessee from Mills. The further fact and position has not been denied that the handkerchiefs have been produced wholly out of cotton. In the wake of the aforesaid fact and position, the Division Bench opined as under:

'*** It is not in dispute that the handkerchiefs have been manufactured wholly out of cotton. The mere fact that as part of the process of manufacture the edges of the cloth have been stitched will not in any way affect its character as a cotton fabric. In fact such process of stitching is essentially involved in the manufacture of several of the items enumerated in the inclusive portion of the definition of cotton fabrics contained in entry No. 19 of the First Schedule to the Central Excises and Salt Act, for example, bed sheets, bed spreads, counterpanes, tablecloths, etc. it is not therefore possible to accept the plea put forward by the learned Government Pleader that the fact that the edges of the G.S.T.R. Nos. 65 to 67 of 1991 kerchiefs have been stitched will take the article out of the scope of the entry "cotton fabrics". We find that the same view has been taken by the Calcutta High Court in Delhi Cloth General Mills Co. Ltd.

Vrs. Commercial Tax Officer, Central Section, West Bengal, with which ruling we are in respectful agreement.'

21. When the facts of the present case are examined in the light of the principles laid down in the aforesaid judicial pronouncements, we are left with no doubt that 'labels' have to be regarded as textiles. It has remained undisputed on facts that names of the companies for which the labels are prepared is woven, which is the process used for weaving any other textile. It does not involve any printing by any external aid. Therefore, in the facts and circumstances of the case 'labels' have to be regarded as textile and covered by Entry 14 of Schedule 'B' of the Act."

8.5. In Vrajlal Bhukhandas Vrs. State of Gujarat, (1964) 15 STC 437 (Guj) after referring to meaning of "cloth" from different

Dictionaries, the Hon'ble Court referring to Kosuri Subba Raju, (1956) 7 STC 479, stated thus:

"... In that decision, the Andhra High Court laid down that the words 'cotton cloth' were used in the aforesaid provisions to denote every fabric used for any purpose including the use as a wearing apparel and that cloth did not cease to be cloth merely because it was used as a dhoti or a sari. ..."

8.6. Whether kulfi is "milk product", has been discussed in Dayal Singh Kulfiwala Vrs. CST, (1979) 43 STC 374 (All) as follows:

"Kulfi is prepared from milk. The milk is first heated till it becomes viscid. Then sugar, dry fruits and essence are mixed in this and the paste is filled in small containers. These containers are then sealed and put in a freezer and after they solidify, the seals are broken and the kulfi is sold to customers.

*** Thus, the entry so far as milk product is concerned, excluding such items with which we are not concerned, has remained unchanged. The word 'milk product' has not been defined in the notification although illustrations of some milk products are given in the notification of 31st March, 1956. Before a particular commodity can be said to be milk product, it must be produced from it. Produce, according to the Webster's 3rd New International Dictionary, means something that is brought forth or yielded either naturally or as a result of effort or work. Kulfi is not yielded naturally from milk, but is produced as a result of evaporating the milk to a certain extent till it becomes viscid, and the addition of sugar, dry fruits and essence. Dry fruits, sugar and essence are added to give sweetness and flavor to the viscid milk and form a very small constituent of kulfi. The

main constituent is milk. Thus, kulfi is nothing else but a milk product and is exempt from tax under both the notifications."

8.7. The Hon'ble Supreme Court in Alladi Venkateswarlu Vrs. State of Andhra Pradesh, (1978) 2 SCC 552 considered the question "whether 'Atukulu' (parched rice), and 'Muramaralu' (puffed rice) are 'rice' within the meaning of Entry 66(b) of Schedule I to the Andhra Pradesh General Sales Tax Act, 1957?" and held as follows:

"17. We think that, on a parity of reasoning the term "rice" as ordinarily understood in English language would include both parched and puffed rice."

8.8. In the same analogy when "saree, patta, dhoti, gamuchha" are considered, they are the products of "textile". They do not lose essential characteristics of fabric. Thus, the expression "textile products including cotton fabrics and ready-made garments" is wide enough to take into its sweep the goods in question as mentioned above. The learned OSTT has appropriately held that the Appellate Authority has erred in giving restricted meaning to the expression contained in Entry 3 of Part-II of Schedule appended to the OET Act.

8.9. Conspectus of decisions referred to supra read juxtaposed to the entries in the schedule appended to the OET Act, there is no confusion in mind but to affirm the view expressed by the learned OSTT that items in question, viz., "saree, patta, dhoti and

gamuchha", would fall within the ambit of Entry Serial No.3 of Part-II of the Schedule.

Decision:

9. For the discussions made in foregoing paragraphs and on the reasons stated above, the question whether the Division Bench of the Odisha Sales Tax Tribunal, Cuttack is right in law to hold that saree, patta, dhoti and gamuchha do fall under Entry No.3 of Part-II of Schedule appended to the OET Act, is answered in the affirmative in favour of the State of Odisha-Revenue and against the petitioner-dealer.

9.1. In the result, this Court confirms the Order dated 22.09.2017 of the OSTT and consequently, the sales tax revision petition filed at the behest of petitioner-dealer is dismissed. However, parties are left to bear their own costs.

                              (Murahari Sri Raman)              (Dr. S. Muralidhar)
                                     Judge                         Chief Justice



Laxmikant   High Court of Orissa, Cuttack
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