# RAJASTHAN v. ASSISTANT COMMISSIONER (ANTI-EVASION), BHILWARA, RAJASTHAN - **Citation:** [2014] 2 S.C.R. 589 - **Court:** Supreme Court of India - **Decided:** 2014 - **Case number:** Civil Appeal No. 7084 of 2005 - **Bench:** H.L. Dattu, S.A. Bobde - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/rajasthan-v-assistant-commissioner-anti-evasion-bhilwara-rajasthan-29856 - **Pages:** 30 ## Headnote RAJASTHAN SALES TAX ACT, 1994: C s. 2 (27) - 'Manufacture' - 'Surgical cotton' processed from cotton - Assessment Year 1992-93 -- Entry no. 16 - "Cotton, that is to say, all kinds of cotton (indigenous or imported),· whether ginned or unginned, baled, pressed or 0 otherwise including Cotton waste" -- Assessee purchasing raw cotton by paying tax at the rate of 4 per cent - Processing it into 'surgical cotton' - Held: "Surgical cotton" is a separately identifiable and distinct commercial commodity manufactured out of raw cotton and, therefore, ceases to be cotton under Entry 16 - In the instant case, after going through the various E steps that are carried out by assessee for getting surgical cotton from raw cotton, it can be certainly said that cotton has undergone a change into a new commercially identifiable commodity which has a different name, different character and different use - The process of transformation is not merely F processing to improve quality or superficial attributes of the raw cotton - Cotton looses its original form and is marketed as a commercially different and distinct product - As regards the claim of set off against tax paid on raw cotton, assessee is at liberty to raise the question before appropriate authorities G in accordance with law -- Judgment and order passed by High court in so far as Assessment Year 1992-93 is concerned. confirmed. 589 H 590 SUPREME COURT REPO~TS [2014] 2 S.C.R. A s.2(27) - 'Manufacture' - Held: "Manufacture" can be said to have taken place only when there is transformation of raw materials into a new and different article having a different identity, characteristic and use - While mere improvement in quality does not amount to manufacture, when the change or B a series of changes transform the commodity such that commercially it can no longer be regarded as the original commodity but recognised as a new and distinct article. Entry No. 16 - Surgical cotton' -- Assessment Years 1993-94 to 1998-99 - Held: In' the year 1993, by an C amendment notification F.4 (56) FD!Gr.IV/82-2 (S.O. No. 8) dated 12. 04. 1993, legislature has consciously included ''absorbent cptton wool J.P." iA Ent(}' 16 and it was retained for all subsequent years till Assessment Year 1998-99 -- The I commodity "absorbent cotton wool J.P." as included in 1he D relevant entries is the same as "surgical cotton" which the . assessee manufactures - The absorbent cotton wool l.P. is a technical name of the cotton which is sold in the market and commonly known as surgical cotton - By introducing the word . "including" immediately after detail(ng the definition of cotton,/ E legislature has expanded the meaning of expression "cotton" for the purposes of the Act - While fhe natural import suggests and prescribes only unmanufactured cotton in all forms, commodities "absorbent cotton wool l.P." and "cotton waste" manufactured out of "cotton 'I are intentionally and F purposefully included in the relevant entries a/ongwith cotton in its ordinary meaning - "Surgical cotton/absorbent cotton ' wool l.P." is also "cotton" for the purposes of relevant entries in the notifications for assessment years 1993-94 to 1998-99 and, therefore, is liable to exemption from levy of tax under G the Act - Judgment and order passed by High Court for assessment years 1993-1994 to 1998-1999 is set aside. Words and Phrases: H Word "include" - Held: Is generally used to enlarge MAMTA SURGICAL COTION INDUS., RAJASTHAN v. ASSTT. 591 COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN meaning of the words or phrases occurring in the body of A statute, and when it is so used those words or phrases must be constnied as comprehending, not only such things, as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include - When word "includes" is used in definition, B legislature does not intend to restrict the definition: it makes the definition enumerative but not exhaustive - The te ## Text _Characters 0–39,858 of 53,512. This is a partial read: ask again with offset=39858 for what follows._ [2014] 2 S.C.R. 589 M/S MAMTA SURGICAL COTTON INDUSTRIES, A RAJASTHAN V. ASSISTANT COMMISSIONER (ANTI-EVASION), BHILWARA, RAJASTHAN (Civil Appeal No. 7084 of 2005 etc.) B JAN~ARY 23, 2014 [H.L. DATTU AND S.A. BOBDE, JJ.] RAJASTHAN SALES TAX ACT, 1994: C s. 2 (27) - 'Manufacture' - 'Surgical cotton' processed from cotton - Assessment Year 1992-93 -- Entry no. 16 - "Cotton, that is to say, all kinds of cotton (indigenous or imported),· whether ginned or unginned, baled, pressed or 0 otherwise including Cotton waste" -- Assessee purchasing raw cotton by paying tax at the rate of 4 per cent - Processing it into 'surgical cotton' - Held: "Surgical cotton" is a separately identifiable and distinct commercial commodity manufactured out of raw cotton and, therefore, ceases to be cotton under Entry 16 - In the instant case, after going through the various E steps that are carried out by assessee for getting surgical cotton from raw cotton, it can be certainly said that cotton has undergone a change into a new commercially identifiable commodity which has a different name, different character and different use - The process of transformation is not merely F processing to improve quality or superficial attributes of the raw cotton - Cotton looses its original form and is marketed as a commercially different and distinct product - As regards the claim of set off against tax paid on raw cotton, assessee is at liberty to raise the question before appropriate authorities G in accordance with law -- Judgment and order passed by High court in so far as Assessment Year 1992-93 is concerned. confirmed. 589 H 590 SUPREME COURT REPO~TS [2014] 2 S.C.R. A s.2(27) - 'Manufacture' - Held: "Manufacture" can be said to have taken place only when there is transformation of raw materials into a new and different article having a different identity, characteristic and use - While mere improvement in quality does not amount to manufacture, when the change or B a series of changes transform the commodity such that commercially it can no longer be regarded as the original commodity but recognised as a new and distinct article. Entry No. 16 - Surgical cotton' -- Assessment Years 1993-94 to 1998-99 - Held: In' the year 1993, by an C amendment notification F.4 (56) FD!Gr.IV/82-2 (S.O. No. 8) dated 12. 04. 1993, legislature has consciously included ''absorbent cptton wool J.P." iA Ent(}' 16 and it was retained for all subsequent years till Assessment Year 1998-99 -- The I commodity "absorbent cotton wool J.P." as included in 1he D relevant entries is the same as "surgical cotton" which the . assessee manufactures - The absorbent cotton wool l.P. is a technical name of the cotton which is sold in the market and commonly known as surgical cotton - By introducing the word . "including" immediately after detail(ng the definition of cotton,/ E legislature has expanded the meaning of expression "cotton" for the purposes of the Act - While fhe natural import suggests and prescribes only unmanufactured cotton in all forms, commodities "absorbent cotton wool l.P." and "cotton waste" manufactured out of "cotton 'I are intentionally and F purposefully included in the relevant entries a/ongwith cotton in its ordinary meaning - "Surgical cotton/absorbent cotton ' wool l.P." is also "cotton" for the purposes of relevant entries in the notifications for assessment years 1993-94 to 1998-99 and, therefore, is liable to exemption from levy of tax under G the Act - Judgment and order passed by High Court for assessment years 1993-1994 to 1998-1999 is set aside. Words and Phrases: H Word "include" - Held: Is generally used to enlarge MAMTA SURGICAL COTION INDUS., RAJASTHAN v. ASSTT. 591 COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN meaning of the words or phrases occurring in the body of A statute, and when it is so used those words or phrases must be constnied as comprehending, not only such things, as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include - When word "includes" is used in definition, B legislature does not intend to restrict the definition: it makes the definition enumerative but not exhaustive - The term defined will retain its ordinary meaning but its scope would be extended to bring within it m€Jtters, which in its ordinary meaning may or may not comprise. c Empire Industries /..imited and Ors. v. Union of India and Ors., (1985) 2 SCC 314; CCE v. Osnar Chemical (P) Ltd. 2012 (2) SCR 1035 = (2012) 2 SCC 282; Jai Bhagwan Oil & Flour Mills v. Union of India 2009 (7) SCR 409 = (2009) 14 0 SCC 63; Crane Betel Nut Powder Works v. Commr. of Customs & Central Excise, 2007(4) SCR 109 = (2007) 4 SCC 155; CIT v. Tara Agencies 2007 (8) SCR 136 = (2007) 6 SCC 429; Ujagar Prints (II) v. Union of India, 1986 Supp SCC 652; Saraswati Sugar Mills v. Haryana State Board, 1991 (1) Suppl. SCR 523 = (1992) 1 SCC 418; Gramophone Co. of E India Ltd. v. Collector of Customs, (2000) 1. SCC 549; CCE v. Rajasthan State Chemical Works, 1991 (1) Suppl. SCR 124 = (1991) 4 SCC 473; CCE v. Technoweld Industries, (2003) 11 sec 798; Mettex (I) (PJ Ltd. v. CCE, (2005) 1 sec 271 ; Aman Marble Industries (P) Ltd. v. CCE, (2005) 1 SCC F 279; Shyam Oil Cake Ltd. v. CCE 2004 (6) Suppl. SCR 346 = (2005) 1 SCC 264; South Bihar Sugar Mills Ltd. v. Union of India, .(1968) 3 SCR 21; Laminated Packings (P) Ltd. v. CCE 1990 ( 3) SCR 630 = (1990) 4 SCC. 51; Dy. CST v. Coco Fibres, 1990 ( 3 ) Suppl. SCR 419 = 1992 Supp (1) SCC G 290; CSTv. Jagannath Cotton Co. 1995 (2) Suppl. SCR 390 = (1995) 5 SCC 527; Ashirwad /spat Udyog v. State Level Committee, 1998(2) Suppl. SCR 542 = (1998) 8 SCC 85; State of Maharashtra v. Mahalaxmi Stores, 2002 (4) Suppl. H 592 SUPREME COURT REPG>RTS · [2014] 2 S.C.R. A SCR 292 = (2003) 1 SCC 70; Aspinwall & Co. Ltd. v. CIT, 2001 (2) Suppl. SCR 559 = (2001) 7 SCC 525; J.K. Cotton $pg. & Wvg. Mills Co. Ltd. v. STO, (1965) 1 SCR 900; CCE v. Kiran Spg. Mills, 1988 (2) SCR .1006 = (1988) 2 SCC 348 and Park Leather Industry (P) LtdJ v. State of U.P. 2001 (1) B SCR 1035 = (2001) 3 SCC 135; Union of India \f. Delhi Cloth & General Mills Co. Ltd., 1963 Supp (1) SCR 5~6; Union of India v. J. G. Glass Industries Ltd . . 1997 (6) Suppl. SCR 345 = (1998) 2 SCC 32; Devi Das Gopal Krishnan v. State of Punjab, (1967) 3 SCR 557; CCE v. S.R. Tissues (P) Ltd. 2005 c (2}' Suppl. SCR 355 = (2005) 6 SCC 310, Brakes India Ltd. v. Supdt. of Central Excise, (1997).1Q SCC 717, 'Kores India Ltd. v. CCE, 2004 (6) Suppl. SCR1320 = (2005) 1 sec 385t' Standard Fireworks Industries v. Collector of Central Excise, (1987) 1 SCC 600; South Gujarat· Roofing Tiles 0 Manufacturers Association and anr. v. State of Gujarat and Anr., 1977 (1) SCR 878 = (1976) 4 1SCC 601; RBI v. Peerless General Finance & Investment Co. Ltd. 1987 (2) SCR 1 =·· (1987) 1 SCC 424; Kamataka Power Transmission Corpn. v. Ashok Iron Works (P) Ltd. 2009 (1) SCR 1109 = (2009) 3 SCC~ E 240; Commr. of Customs v. Caryaire Equipment India (Pi Ltd., (2012) 4 SCC 645; U.P. Power Corpn. Ltd. v. NTPC Ltd., (2014) 1 SCC 371; Associated lndem Mechanical (P) Ltd. v. WB .. Smal/ Industries DevelopmentCorpn. Ltd., 2007 (1) SCR 174 = (2007) 3 SCC .607; Dadaji v. Sukhdeobabu; F Mahalakshmi Oil Mills v. State of 'A.P.; Bharat Coop. Bank (Mumbai) Ltd. v. Employees Union 2007 (4) SCR 347 = (2007) 4 sec 685- referred to. McNichol and Anor v. Pinch,, {1906] 2 KS 352; East Texas Motor Freight Lines v. Frozen Food Express, 351 US G 49; Dilworth v. Commr. of Stamps, ' (1899) AC 99 - referred to. • Collins English Dictionary;, Oxford Dictionary of English;Encarta dictionary ; Rrinciples of Statutory H Interpretation (12th Edn., 2010) by Justice G.P. Singh, at p. MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT. 593 COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN 181 - referred to. A "Durga Cotton Industries Vs. State of Rajasthan and Ors. 1994 (1) WLC 696 - approved. CST v. Lal Kunwa Stone Crusher (PJ Ltd., 2000 (2) SCR B 276 = (2000) 3 SCC 525; Sterling Foods v. State of Kamataka 1986 (3) SCR 367 = (1986) 3 SCC 469 and CST v. Pio Food Packers 1980 SCR 1271 = 1980 Supp SCC 174 - cited. Case Law Reference: [1906] 2 KB 352 referred to Para 16 c 2000 (2) SCR 276 cited para 10 1986 (3) SCR 367 cited para 10 1980 SCR 1271 cited para 10 D (1985) 2 sec 314 referred to para 17 2012 (2) SCR 1035 referred to para 17 2009 (7) SCR 409 referred to para 17 E 2007 (4) SCR 109 referred to para 17 2007 (8) SCR 136 referred to para 17 1986 Supp sec 652 referred to para 17 F 1991 (1) Suppl. SCR 523 referred to para 17 c2000) 1 sec 549 referred to para 17 1991 (1) Suppl. SCR 124 referred to para 17 (2003) 11 sec 798 referred to para 17 G 2004 (6) Suppl. SCR 346 referred to para 17 (2005) 1 sec 211 referred to para 17 H 594 SUPREME COURT REPORTS [2014] 2 S.C.R. A (2005) 1 sec 219 referred to para 17 (1968) 3 SCR 21 r:eferred to para 17 1990 (3) SCR 630 referred to para 17 B 1990 (3) Suppl. SCR 419 referred to para 17 1995 (2) Suppl. SCR 390 referred to para 17 1998 (2) Suppl. SCR 542 referred to para 17 2002 (4) Suppl. SCR 292 referred to para 17 c 2001 (2) Suppl. SCR 559 referred to para 17 (1965) 1 SCR 900 referred to para 17 1988 (2j SCR 1006 referred to para 17 D 2001 (1) SCR 1035 referred to para 17 1963 Supp (1) SCR 586 referred to para-18 1997 (6) .Suppl. SCR 345 referred to para 19 E (1967) 3 SCR 557 referred to para 20 2005 (2) Suppl. SCR 355 referred to para 21 351 us 49 referred to para 24 F (1997) 10 sec 111 referted to para 27 2004 (6) Suppl. SCR 320 referred to para 27 (1987) 1 sec 600 referred to para 27 ... 1994 (1) WLC 696 approved para 46 G (1899) AC 99 referred to para 48 1977 (1) SCR 878 referred to para 49 1987 (2) SCR 1 referred to para 51 H MAMTA SURGICAL COTION INDUS., RAJASTHAN v. ASSTI. 595 COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN 2009 (1) SCR 1109 referred to para 52 (2012) 4 sec 645 referred to para 53 (2014) 1 SCC.371 referred to para 53 2007 (1) SCR 174 referred to para 53 2007 (4) SCR 347 referred to para 53 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7084 ·of 2005. A B From the Judgment and Order dated 23.01.2003 of the C High Court of Ju~icature at Rajasthan at Jodhpur in S.B. C}vil Sales Tax Revision No. 932 of 2002. WITH Civil Appeal Nos. 7085-7093 and 7094-7097 of 2005. D V. Giri, Dharmendra Kumar Sinha, Abhilash, Mohd. Sadiqi for the Appellant. Milind Kumar, Shovan Mishra for the Respondent. The following Order of the Court was delivered ORDER E F 1. These appeals are directed against the common judgment and order passed by the High Court of Rajasthan in S.B. Civil Sales Tax Revision No. 932 of 2002 and connected matters, dated 23.01.2003. By the impugned judgment and order, the High Court has opined'that "surgical cotton" is a commerciallx.~ifferent commodity from 'cotton' and accordingly G confirmed the order passed by the Rajasthan Tax Board, Ajmer in Appeal Nos. 509 to 512 of 2001, dated 28.06.2002. Facts: 2. The appellant is a partnership firm registered as a H .596 SUPREME COURT REPORTS [2014] 2 S.C.R. A dealer both under the Rajasthan Sales Tax Act, 1994 (for short, "the Act") and the Central Sales Tax Act, 1956 (for short, "the CST Act"). The appellant carries on the business of processing the cotton and transforming it into surgical cotton. B 3. The assessment years in question are 1992-93 to 199899. 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 C 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 D 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 E 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 F process adopted for making surgical cotton out of cotton purchased does not bring into existence a new commercial commodity and that surgical cotton is nothing but another form of cotton and accordingly, allowed the appeal and granted the relief to the assessee by order dated 10.10.2000. G 6. Aggrieved by the aforesaid o~der passed by the First Appellate Authority, the Revenue had carried the matter before the Rajasthan Tax Board, Ajmer (for short, "the Board"). The Board after considering the me;an'ing of the expression 'manufacture' as defined under the Act and also placing reliance H on the observations made by this Court in various decisions has MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT. 597 COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN come to the conclusion that the surgical cotton manufactured A by the assessee is a new commercial commodity exigible to tax separately at the rate of 4% under the Act and therefore, set aside the orders passed by the First Appellate Authority and restored the orders passed by the assessing authority for the assessment Y.ears in question by order dated 28.06.2002. B 7. The assessee being aggrieved by the said order passed by the Board had approached the High Court in S.B. Civil Sales Tax Revision No. 932 of 2002. The High Court has noticed Entry 16 of the notification F.4 (7) FD/Gr.IV/92-70 (S.O. C No. 993), dated 04.03.1992 for the assessment year 1992-93 and analysed the submissions of parties to the lis and thereafter reached the conclusion that surgical cotton is amenable to be taxed as an independent entity and accordingly, rejected the tax revision cases and confirmed the orders passed by the Tax 0 Board by the impugned judgment and order dated 23.01.2003. 8. It is the correctness or otherwise of the said judgment and order is the subject matter of these appeals. 9. We have heard .the learned counsel appearing for the E parties to the lis. We have also perused the documents on record including the judgments and orders passed by the Courts below. Submissions: 10. Shri V. Giri, learned senior counsel for the appellant submits th.at by the process of transformation of cotton into surgical cotton no new commercial commodity comes into existence as a result of such process, and therefore it cannot F be considered as "manufacture" of surgical cotton from cotton G and thus would not be liable to tax at the rate of 4% under the Act. He would place reliance on the decision of this Court in CST v. Lal Kunwa Stone Crusher (P) Ltd., (2000) 3 SCC 525, to bring home the point, that, since the purpose of sales tax.is H 598 SUPREME COURT REPORTS [2014] 2 S.C.R. A to levy tax on sale of goods of each variety and not the sale of the raw materiai 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 B as they continue to retain their identity as goods of that particular variety.· He would further expfain the term "manufacture" in context of the Act a11d draw support from the· decisions of this Court in, inter alia, Sterling Foods v. Stat~ o~ ' Kamataka, (1986) 3 SCC 469 and CST v. Pio Food Packers, c 1980 Supp sec 174 and submit that that the essentialfeature 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 0 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 confirming the, levy of tax on surgical cotton under the Act. Alternatively, he would submit that even if E surgical cotton is assumed to be a distinct commodity from cotton, the originally purchased raw cott.on has already suffered taxation at the outset and therefore, a set off has to be provided in light of the scheme of the Act and tHe CST Act. 11. Per contra, learned counsel for the Revenue would F support the judgment and order passed by the High Court. Relevant Provisions 12. Before we advert to test the correctness or otherwise G of the aforesaid submissions, it is necessary to notice that the Entry prescribing the rate of tax on cotton for the assessment years in question, i.e., from 1992-1993 till 1998-1999. The entry has been amended vide series of', seven subsequent notifications issued by the State Government. The said Entry H MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT. 599 COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN for the aforesaid relevant years reads as under: Assessment Notification Entry Entry Year Date Number Number 1992-93 04.03.92 F.4 (7) 16 Cotton, that is to FD/Gr. say all kinds of IV/92-70 cotton (indigenous (S.O. No. or imported), 993) whether ginned or unginned, baled, pressed or otherwise including Cotton waste. 1993-94 12.04.93 F.4 (56) Amen- "after the existing FD/Gr. ded words "Cotton waste" IV/82-2 only .... the expression (S.O. Entry "and Absorbent No. 8) 16 with Cotton wool LP." (Amendimmeshall be added." ment diate notifieffect cation) 1994-95 07.03.94 F.4 (8) 20 Cotton, that is to FD/Gr. say, all kinds of IV/94-46 cotton (indigenous or (S.O. No imported), kil')ds of 176) Readymade garments, whether ginned or unginned, baled, pressed or otherwise including Absorbent cotton wool LP. and Cotton , waste. 1995-96 27.03.95 F.4 (11) 25 FD/Gr. IV/95-49 (S.O. No Cotton as defined 399) in clause (iv) of Section 14 of the 1996-97 15.03.96 F.4 (69) 28 Central Sales Tax FD/Gr. Act, 1956 including A B c D E F G H A B c D 600 SUl')REME COURT REPORTS [2014) 2 S.C.R. IV/95.32 . absorbent cotton (S.O. No. wool l.P. & cotton 267) waste. 1997·98 12.0~.97 F.4 (1) 27 FD/Gr. IV/97·101 (S.O. No. 299) . 1998"99 09.07.98 F.4 (14) 29 FD/Gr. IV/98·16 (S.O. No. 114) 1999"2000 26.03.99 F.4 (4) 39 FD/Gr. IV/99·126 (S.O. No. 423) 13. The question which arises fdr our consideration and decision in these appeals is whether the manufacturing process I is involved in the production of surgiqal cotton from cotton in E terms of definition mentioned in Section 2(27) 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 F the relevant entry has been amended vide successive notifications for each Assessment Year, we would analyse it sequentially. Assessment Year 1992-93 G 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 inclusicm of all kinds of cotton H for the purposes of taxing. A reading of this er.try means that MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT. 601 COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN the commodity cotton in all its forms namely, indigenous, A 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 B question whether the commodity in question has undergone any change in its characteristics so as to acquire a new commercial identity, that is to say, whether surgical cotton remain as cotton after having undergone transformation through various processes. In other words whether the process of conversion c of cotton into surgical cotton be termed as "manufacture of surgical cotton". 15. It is therefore relevant to notice the definition of 'manufacture' as defined in the dictionary clause of the Act. Section 2(27) of the Act defines the expression 'manufacture' as under: "27. "Manufacture" includes every processing of goods which bring into existence a commercially different and distinct commodity but shall not include such processing as may be notified by the State Government." D E F The definition aforesaid is an inclusive definition and therefor~ would encompass all processing of goods which would produce new commodity which is commercially different and distinctly identifiable from the original goods. The definition however excludes all such mechanisms of processing of goods which have been notified by the State Government to the said effect. Admittedly, no such exclusion in respect of the process in analysis for surgical cotton has been notified by the State Government. Therefore, the process of transformation has to G be tested on the anvil of proposition whether surgical cotton is processed such that it is commercially different and distinctly identifiable than cotton. 16. The essential test for determining whether a process H 602 SUPREME COURT REPORTS [2014) 2 S.C.R. A is manufacture or not has been the analysis of the end product of such process in contradistinction with the original raw material. In 1906, Darling, J. had subtly explained the quintessence of the expression "manufacture" in McNichol and B Anor v. Pinch, [1906) 2 KB ·'352 as under: " ... I think the essence of making, or of manufacturing is that what is made shall be a different thing from that out of which it is made." 17. In order to understand the finer connotation of the C expression 'manufacture', it may be useful to refer to the decision of this Court in the case of Empire Industries Limited and Ors. v. Union of India and Ors.,(1'985) 2 SCC 314, wherein this Court after exhaustively noticing the views of the Indian D E Courts, Privy Council and this Court had stated as under: "'Manufacture' implies a change; but every change is not manufacture and yet every change of an article 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 & F 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 G State Chemical Works, (1991) 4. SCC 4 73; CCE v. Technoweld Industries, (2003) 11 SCC 798; Met/ex (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 H India, (1968) 3 SCR 21; Laminated Packings (P) Ltd. v. CCE, MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT. 603 COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN (1990) 4 SCC 51; Dy. CST v. Coco Fibres, 1992 Supp (1) A SCC 290; CST v. Jagann&th Cotton Co., (1995) 5 SCC 527; Ashirwad /spat Udyog v. State Level Committee, (1998) 8 SCC 85; State of Maharashtra v. Mahalaxmi Stores, (2003) 1 sec 70; Aspinwall & Co. Ltd. v. CIT, (2001) 7 sec 525; J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. STO, (1965) 1 SCR B 900; CCE v. Kiran Spg. Mills, (1988) 2 SCC 348 and Park . Leather Industry (P) Ltd. v. State of UP., (2001) 3 SCC 135) 18. The following observations by the Constitution Bench of this Court in Union of India v. Delhi Cloth & General Mills Co. Ltd., 1963 Supp (1) SCR 586 where the change in the C character of raw oil after being refined fell for consideration are also quite apposite: "14 .... T,he word 'manufacture' used as a verb is generally understood to mean as 'bringing into existence a new D substance' and does not mean merely 'to produce some change in a substance."' 19. For determining whether a process is "manufacture" or not, this Court in Union of India v. J.G. Glass Industries Ltd., (1998) 2 SCC 32 has laid down a two-pronged test. Firstly, whether by such process a differE;lnt commercial commodity comes into existence or whether the identity of the original commodity ceases to exist and secondly, whether the commodity which was already in existence would serve no purpose but for the said process. In light of the said test it was held that printing on bottles does not amount to manufacture. 20. A Constitution Bench of this Court in Devi Das Gopal Krishnan v. State of Punjab, (1967) 3 SCR 557 observed that E F if by a process a different identity comes into existence then it G can be said to be "manufacture" and therefore, when oil is produced out of the seeds the process certainly transforms raw material into different article for use. 21. In CCE v. S.R. Tissues (P) Ltd., (2005) 6 SCC 310. H 604 SUPREME COURT REPORTS [2014] 2 S.C.R. A the issue for consideration was whether the process of unwinding, cutting and slitting to sizes of jumbo rolls into toilet rolls, napkins and facial tissue papers amounted to manufacture. While holding that the said process did not amount to manufacture this Court inter alia, held as under: B c D E F "12 .... However, the end use of the tissue paper in the jur:nbo rolls and the end use of the toilet rolls, the table I ,. ' ·'.napkins an~ the facial tissues remains the same, namely, for.household or sanitary use. The predominant test in such a case is whether the characteristics of the tissue paper in the jumbo roll enumerated above is different from the characteristics of the tissue paper in the form of table napkin, toilet roll and facial tissue; 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 G 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." H MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT. 605 COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN 24. In East Texas Motor Freight Lines v. Frozen Food A Express·, 351 US 49 the Supreme Court of United States of America has held that the processing of chicken in order to make them marketable but without changing their substantial identity did not turn chicken from agriculture commodities into manufactured commodities. B 25. A three-Judge Bench of this Court in Pio Food Packers case (supra) has dealt with the distinction between "manufacture" and "processing". Therein the appeals were filed against the order of the Kerala High Court holding that the turnover of pineapple fruits purchased for preparing pineapple C slices for sale in sealed cans is not covered by Section 5A(1 )(a) of the Kerala General Sales Tax Act, 1963. This Court while-deciding whether such conversion of pineapple fruit into pineapple slices for sale in sealed cans amounted to manufacture or not has observed as follows: D "5 .... Commonly, manufacture is the end result of one [or] more processes through which the originai commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be E several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead F is recognised as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to G say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity." (emphasis supplied) H 606 SUPREME COURT REPORTS [2014] 2 S.C.R. A This Court held that.when the pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans, there is no consumption of the original pineapple fruit for the purpose of manufacture. Pineapple retains its character as fruit and whether c;:anned or fresh, it could be put to the same use s and utilized in similar fashion. 26. In Sterling Foods case (supra) this Court has observed that processed and frozen shrimps, prawns and lobsters cannot be regarded as commercially distinct commodity from raw shrimps, prawns and lobsters. The aforesaid view has further C been adopted and applied by this Court in Shyam Oil Cake Ltd. 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 D (supra), this Court has held that the cutting of marble blocl