# 6 69 STATE OF GUJARAT v. M/S. ANANTA MILLS LTD

- **Citation:** [1966] 2 S.C.R. 669
- **Court:** Supreme Court of India
- **Decided:** 1965-11-23
- **Case number:** Civil Appeal No. 807 of 1964
- **Bench:** K. Subba Rao, J. C. Shah, S. M. S!Kri
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/6-69-state-of-gujarat-v-m-s-ananta-mills-ltd-3737
- **Pages:** 5

## Headnote

Bombay Sales Tax (Exemption, set-cfj and Composition) Rules,
1954, rr. 6 and 12-Purchase Tax paid on unginned cotton-Ginned
Cotton used in manufacture-Sale of Cotton seeds-Purchase tax, if refundable.
The respondent, a manufacturer of co,tton 1'cxtiles, purchased unginned cotton and paid purchase tax thereon.
The cotton was ginned and
pressed by the respondent, the ginned cotton was used in the manufacture
of cotton textile while the cotton seeds w-ore sold by it. The respondent
claimed refund of purchase tax paid on the unginned cotton under the
Bombay Sales Tax (Exemption, Set-off and Compo•ition) Rules,
1954
which was disallowed by the Sales Tax authorities on the ground that
r. 6(ii) was not applicable when subsidiary or incidental pToduct alone was
sold and the main product was used in the manufacture of the goods and
looking at the working of the aforesaid Rule, all the products of the
unprocessed goods should he sold.
Jn reference, the High Court allowed
the refund of the purchase tax under r: 12(i) .
HELD : The respondent was entitled to refund under r. 12(i).
What is necessary under rule 12(i) is that the goods should have been
actually used for the purpose specified viz., the production of any of the
goods aforementioned for sale. The;se conditions have been satisfied in
this case because unginned cotton was used for the purpose of producing
one of the goods specified in column 2 for sale, namely, cotton seeds. [672
H]

## Text

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6 69
STATE OF GUJARAT
v.
M/S. ANANTA MILLS LTD.
November 23, 1965
[K. SUBBA RAO, J. C. SHAH AND S. M. S!KRI, JJ.]
Bombay Sales Tax (Exemption, set-cfj and Composition) Rules,
1954, rr. 6 and 12-Purchase Tax paid on unginned cotton-Ginned
Cotton used in manufacture-Sale of Cotton seeds-Purchase tax, if refundable.
The respondent, a manufacturer of co,tton 1'cxtiles, purchased unginned cotton and paid purchase tax thereon.
The cotton was ginned and
pressed by the respondent, the ginned cotton was used in the manufacture
of cotton textile while the cotton seeds w-ore sold by it. The respondent
claimed refund of purchase tax paid on the unginned cotton under the
Bombay Sales Tax (Exemption, Set-off and Compo•ition) Rules,
1954
which was disallowed by the Sales Tax authorities on the ground that
r. 6(ii) was not applicable when subsidiary or incidental pToduct alone was
sold and the main product was used in the manufacture of the goods and
looking at the working of the aforesaid Rule, all the products of the
unprocessed goods should he sold.
Jn reference, the High Court allowed
the refund of the purchase tax under r: 12(i) .
HELD : The respondent was entitled to refund under r. 12(i).
What is necessary under rule 12(i) is that the goods should have been
actually used for the purpose specified viz., the production of any of the
goods aforementioned for sale. The;se conditions have been satisfied in
this case because unginned cotton was used for the purpose of producing
one of the goods specified in column 2 for sale, namely, cotton seeds. [672
H]
CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 807 of
1964.
Appeal by special leave from the judgment and order dated
December 10, 1962 of the Gujarat High Court in Sales-tax Reference No. 8 of 1961.
R. Ganapathy Iyer and B. R. G. K. Achar, for the appellant.
I. N. Shroff, for the respondent.
The Judgment of the Court was delivered by
Sikri, J.
This appeal by special leave is directed against the
judgment of the Gujarat High Court in a Sales Tax Refer~nce
made to it by the Gujarat Sales Tax Tribunal.
Two quesuons
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were referred by the said Tribunal to the High Court :
"1. Whether in the facts and circumstances of the
case, the purchase of the raw cotton by the applicant Mill
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[1966] 2 S.C.R.
could be said to have been intended for use in the
production of cotton seeds for sale within the meaning
of clause (ii) of rule 6 of the Bombay Sales Tax
(Exemption, Set-off and Composition) Rules, 1954;
2. Whether the applicant Mill is entitled under rule
12(1) to a refund of the purchase tax paid 'by it."
The facts set out in the statement of the case by the Tribunal
are briefly as follows : The respondent is a manufacturer of cotton
textile, particularly of coarse and medium variety cloth. During
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the assessment period from April 1, 1955 to March 31, 1956, it C
purchased unginned cotton worth Rs. 5,93,266/- from unregistered dealers and paid purchase tax of Rs. 5,932/- under s. lO(a)
of the Bombay Sales Tax Act, 1953. The cotton was ginned and
pressed by the respondent, the ginned cotton was· used in the
manufacture of cotton textiles while the cotton seeds were sold
by it.
During the course of assessment proceedings the responn
dent applied for refund of purchase tax paid on the unginned
cotton under the Bombay Sales Tax (Exemption, Set-off and
Composition) Rules, 1954, (hereinafter referred to as the Rules).
The Sales Tax Officer refused to allow any refund on the ground
that the conditions of r. 12(1) read with r. 6(ii) of the Rules had
not been fulfilled.
The Assistant Collector of Sales Tax on appeal
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confirmed the order of the Sales Tax Officer on the ground that
"rule 6(ii) is not applicable when subsidiary or incidental product
alone is sold and the main product is used in the manufacture of
other goods.
Looking the working of the aforesaid Rule, al! the
products of the unprocessed goods should be sold."
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The respondent filed a revision before the Deputy Commissioner of Sales Tax, who also upheld the order of the Sales Tax
Officer.
The respondent then filed a revision before the Gujarat
Sales Tax Tribunal.
The Tribunal rejected the revision on the
ground that "the purpose underlying the applicant's purchases was
primarily the production of ginned cotton for manufacture. The G
cotton seeds which form the bye-product of the ginning process
would no doubt have to be sold because the Mill has no use for
them.
But that does not mean that the purpose for which unginned cotton was purchased was the sale of cotton seeds. It is
not reasonable to suppose that a textile mill purchases unginned
cotton for the purpose of selling the cotton seeds." At the instance
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of the respondent, as already stated, the Tribunal referred the
case to the High Court.
The High Court answered question
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STATE V. ANANTA MILLS (Sikri, J.)
671
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No. 2 in the affirmative, but did not answer question No. 1 on the
ground that the answer to the question was not relevant for the
purpose of determining the matter in controversy.
Mr. Ganapathy Iyer, the learned counsel for the appellant,
contends before us that the Sales Tax authorities were right in
B refusing to allow a refund to the respondent and that the High
Court erred in answering the second question in favour of the
respondent.
In order to appreciate the contentions of the parties,
it is necessary to set out rr. 6 and 12 and the Schedule to the
Rules.
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"6. Classes of sales on which general sales tax shall
not be payable.
The general sales tax leviable under
section 9 shall not be payable in respect of the following classes of sales :-
(i)
(ii) Sales of any goods falling under any entry specified in column 1 of the Schedule hereto to a dealer
who holds a licence under s. 12 who furnishes to the
selling dealer a certificate in Form ( 4) declaring that
the goods sold to him are intended to be used by him in
producing any goods falling under the corresponding
entry in column 2 of the said Schedule for sale
SCHEDULE
Ooods from which the goods specified in
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column 2 are produced
Goods produced
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J. Cotton in pod; unginned or unpressed
cotton
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2
Unginncd cotton; ginned
or pressed cotton; cotton
seeds.
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12. Refund and remission of purchase tax in certain
cases.-
( 1 ) Where a dealer who has purchased any goods
specified in clauses ( i) or (ii) of rule 6 shows to the
satisfaction of the Collector that they have been used by
him for the purpose specified in the said clause, the
Collector shall on application for refund made by the
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[1996) 2 S.C.R.
dealer in the manner specified in rule 25 of the Bombay
Sales Tax (Procedure)
Rules, 1954, refund to such
dealer the amount of purchase tax paid by him in respect of such purchase; or where the amount of purchase
tax payable under clause (a) of section IO in respect of
such purchase has not yet been paid, the Collector shall
by order remit the amount so payable."
Mr. Ganapathy Iyer contends that when r. 12 speaks of the
purpose specified in cl. (ii) of r. 6, it means the purpose of "producing any goods falling under the corresponding entry in column
2 of the said Schedule for sale." In other words, he says that the
purpose must be producing unginned cotton, ginned or pressed
cotton or cotton seeds for sale, and if any of these goods are
produced but not sold then r. 12 does not apply.
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Mr. Shroff, on the other hand, contends that the words "purpose specified in the said clause" only mean the purpose of producing any goods falling under the corresponding entry in column
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2 of the Schedule, and he wants us to omit from consideration
the words "for sale".
We agree with Mr. Ganapathy Iyer that
the purpose must be the purpose of producing goods--unginned
cotton, ginned or pressed cotton, cotton seeds--for sale, and the
words "for sale" must be given effect to.
But even if this contention of Mr. Ganapathy Iyer is accepted
the respondent would still, in our opinion, be entitled to refund
under r. 12(1). Rule 6 speaks of the intention at the time of
the purchase, but r. 12 does not incorporate that intention by
referring to the purpose specified in cl. 6 (ii).
The intention at
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the time of the purchase is irrelevant for the purpose of r. 12. In F
r. 6(ii) intention was relevant because the purchasing dealer had
to furnish to the selling dealer a certificate in Form ( 4) declaring
that the goods sold to him were intended to be used by him for
producing any of the goods falling under the corresponding entry
in Column 2 of the said schedule for sale. But when the respondent paid the purchase tax on unginned cotton under s. lO(a) of
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the Act, he paid it because he purchased the same from persons
who were_ not registered dealers, and there was no question of
furnishing any certificate at that stage. As the High Court observed
"what is necessary is that goods should have been actually used
for the purpose specified viz .. the production of any of the goods
aforementioned for sale." These conditions have been satisfied in H
this case because unginned cotton was used for the purpose of
producing one of the goods specified in column 2, namely, cotton
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STATE V. ANANTA MILLS (Sikri, J.)
673
seeds. Consequently, the respondent is entitled to a refund under
r. 12 and the High Court was right in answering the second question in the affinnative.
We also agree with the High Court that
in view of its answer to question No. 2 it is not necessary to answer
question No. 1.
In the result the appeal fails and is dismissed with costs here
and in the High Court.
Appeal dismissed.