JUDGMENT [ENTITY], J.
1. The applicant-mill is a manufacturer and dealer of goods popularly known as "bookbinding cloth". It had applied to the Commissioner of Sales Tax under [SECTION] of the [ACT] (hereinafter to be referred to as "the said Act") for determination of the question whether any tax was payable, and if yes, at what rate on the said product. The said application of the applicant was heard by the Deputy Commissioner of Sales Tax (Enforcement). It was the case of the applicant that the articles manufactured by it is "cotton fabric" within the meaning of [SECTION] to the said Act. According to the applicant the process to which cotton fabric was subjected was as under :
"The grey powerloom cloth is purchased by the applicant, which is dyed and thereafter dried. The cloth dried and starched is again calendered and this calendered cloth is sold as 'bookbinding cloth'."
The Deputy Commissioner of Sales Tax (Enforcement) before whom the said application of the applicant was posted for hearing negatived the plea of the applicant and decided that the "bookbinding cloth" cannot enjoy the benefit of exemption under [SECTION] to the said Act. He, inter alia, held that the goods manufactured by the applicant were covered by the residuary entry, namely, [SECTION] to the said Act, and was to be taxed accordingly. The contention of the applicant that it was entitled to the benefit of item No[SECTION] of the Government Notification issued under [SECTION] of the said Act was also negatived by the Deputy Commissioner of Sales Tax.
2. Being aggrieved by the said order of the Deputy Commissioner of Sales Tax, the applicant carried the matter in appeal in the Gujarat Sales Tax Tribunal. The Tribunal, by its judgment and order, dated 10th October, 1979, held that the "bookbinding cloth" is not "cotton fabric" and it does not fall within the definition of "cotton fabric" because the cotton fabric after its manufacture has undergone a further process of dyeing, starching and calendering. The said process had converted the basic cotton fabric into a distinct commercial commodity. However, on the question as to whether the "bookbinding cloth ?" would fall within the inclusive part of the definition of "cotton fabric" the Tribunal was of the opinion that there was no sufficient material before the Deputy Commissioner, and therefore, the Tribunal remanded the matter to the Deputy Commissioner.
3. Feeling aggrieved by the said decision of the Tribunal, the applicant filed an application under [SECTION] of the said Act requiring the Tribunal to refer questions of law arising from its judgment and order, and thereupon, the Tribunal, has framed and referred the following question of law for our decision :
"(1) Whether the Tribunal was, on the facts and in the circumstances of the case, right in holding that bookbinding cloth is not a variety of fabric within the main part of the definition of 'cotton fabric' given in [SECTION] to the [ACT] because the grey cotton fabric after its manufacture had undergone a further process of dyeing starching and calendering ?
(2) Whether the Tribunal was, on the facts and in the circumstances of the case, right in law in holding that the process of dyeing starching and calendering has converted the basic grey fabric into a distinct commercial commodity which has brought about a basic change in the character, nature and form whereby its identity as a cotton fabric has been lost ?
(3) Whether the Tribunal was right, on the facts and in the circumstances, in holding that the process of dyeing, starching and calendering is not an incidental or ancillary process under [SECTION] of the [ACT], in order to bring out a manufactured product, namely, bookbinding cloth ?
(4) Whether the Tribunal was on the facts and in the circumstances of the case, right in holding that the sale or purchase of bookbinding cloth would not fall under [SECTION] of the Schedule to the Government Notification issued under [SECTION] of the [ACT] on the ground that the process of starching and calendering is not included therein ?".
4. In order to answer the questions referred above, it would be necessary to refer to [SECTION] to the said Act. [SECTION] in the [SECTION] of the said Act at the relevant time was as under :
"37. Cotton fabrics as defined in [SECTION] to the [ACT]."
It is clear from the said entry that the Legislature has not separately defined "cotton fabric" for the purpose of the said Act, but it has referred to the definition of "cotton fabric" as given in [SECTION] to the [ACT]. It is, thus, clear that this is a incidence of referential legislation and in that the Legislature has adopted by reference the definition of "cotton fabric" as given in the [ACT], for the purpose of defining the said article in the [ACT].
5. [SECTION] to the [ACT], as it stood after its amendment by the [ACT] is as under :
"19. Cotton fabrics :
'Cotton fabrics' means all varieties of fabrics manufactured either wholly or partly from cotton and includes dhoties, sarees, chaddars, bed-sheets, bed-spreads, counterpanes, table-cloths, embroidery in the piece, in strips or in motifs, and fabrics impregnated, coated or laminated with preparation of cellulose derivatives or of other artificial plastic materials and fabrics covered partially or fully with textile flocks or with preparations containing textile flocks, if, (i) in such fabrics cotton predominates in weight, or (ii) such fabrics contain more than 40 per cent by weight of cotton and 50 per cent or more by weight of non-cellulosic fibres or yarn or both."
We have not reproduced in entire item No. 19 inasmuch as the same is not relevant and material for the purpose of answering this reference. However, we may mention that after defining "cotton fabric" the Legislature has enacted two provisions, and has thereafter tried to classify the "cotton fabric"into five broad heads with a view to subjecting such cotton fabrics to different rates of duty, We may also mention at this stage that the [ACT], namely, the [ACT], has not made any change, whatsoever, in the main definition of "cotton fabric" as given in item No. 19 as reproduced hereinabove. For the purpose of this reference we are concerned mainly with the definitions of the "cotton fabric" as given in the first part of item No. 19 which is reproduced hereinabove.
6. The definition of "cotton fabric" falls into three parts. The first part of item No. 19 defines "cotton fabric" while the second part is inclusive definition so as to include various varieties of products into cotton fabric and the third part to definition is exclusive definition which excludes certain fabrics from the definition of "cotton fabric".
7. From the reference of [SECTION] to the [ACT] it becomes clear that the first part of the item defines "cotton fabric" so as to mean all varieties of fabrics manufactured either wholly or partly from cotton. Second part of the definition is inclusive definition so as to include dhotis, sarees, chaddars, bed-sheets, bed-spreads, counterpanes, table-cloths, embroidery in the piece, in strips or in motifs, fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials. However, condition imposed is that in such material cotton should predominate in weight or such fabric should contain more than 40 per cent by weight of cotton. From this description of cotton fabric, as is given in item No. 19 we shall have to decide whether the product in question is cotton fabric or not. Question which arises for our consideration is as to whether the cotton fabric purchased by the applicant after being subjected to the process of dyeing, starching, drying and calendering would continue to remain as cotton fabric within the meaning of [SECTION] to the [ACT], and therefore, would continue to remain as cotton fabric under [SECTION] to the said Act.
8. To be a "cotton fabric" three conditions are required to be satisfied, i.e., (1) the article in question must be a fabric, (2) it must have been manufactured either wholly or partly from cotton, and (3) if it is a fabric made out of cotton mixed with other materials, cotton should predominate in weight or such fabric should contain more than 40 per cent by weight of cotton and 50 per cent more by weight of non-cellulosic fibre or yarn or both.
9. In the case before us, the third condition has no application and we will decide by reference to first two conditions as to whether bookbinding cloth is cotton fabric or not.
10. In order that the "bookbinding cloth" may fall within the definition of "cotton fabric" the first condition which it shall have to satisfy is that it must be a fabric. It must also satisfy the requirement that it is made dither wholly or partly from cotton. It is the submission of the learned counsel for the applicant that, in fact, the applicant purchases the cotton fabric from the market and subjects such cotton fabric to the process of dyeing and thereafter drying. It, thereafter, subjects such fabric to the process of starching, drying and calendering and at the end of such process bookbinding cloth emerges. In his submission the product that emerges in fabric and it is wholly made out of cotton. He, therefore, submits that the bookbinding cloth falls within the first part of the definition clause and by the process to which the cotton fabric is subject to, the commodity that emerges retains the characteristic of cotton fabric. In his submission, the process which is carried out in the factory is that of dyeing, starching and calendering only and by dyeing and starching cotton fabric does not cease to be cotton fabric. He further submits that by such process no new distinct commercial commodity emerges, though after such process cotton fabric may be put to different and specific uses. In his submission simply because the product after such process can be put to specific use it does not cease to be cotton fabric. He, therefore, submits that bookbinding cloth would fall within [SECTION] to the [ACT], and therefore, would fall under [SECTION] to the said Act so as to be exempted from liability of tax under the said Act.
11. The learned Assistant Government Pleader on the other hand, contends that after purchasing the cotton fabric from the market the applicant subjects such cotton fabric to the process of dyeing, starching and calendering and such process results into bringing about a totally new, distinct commercial commodity. He therefore contended that bookbinding cloth being a distinct commodity would not fall within the definition of "cotton fabric" as given in [SECTION] to the [ACT] and the product would be classified under residuary entry No. 13.
12. We may mention at this stage that the Deputy commissioner of Sales Tax as well as the Tribunal applied the common parlance test and held that bookbinding cloth is distinct, separate commercial commodity after cotton fabric having undergone the process of dyeing, starching and calendering. Both the authorities proceeded on the finding that once the distinct commercial commodity comes into existence because of process carried out by the applicant such a product would cease to be cotton fabric and it would not fall within item No. 19. In our opinion this approach of the Deputy Commissioner of Sales Tax and the Tribunal is not legal and permissible in view of the definition of "cotton fabric" as given in item No. 19. In the first part of the definition, namely, to mean fabric manufactured either wholly or partly from cotton, bookbinding cloth can be said to be a fabric since it is admittedly made out of cotton. Assuming that the first part of the definition is not attracted the inclusive part of the definition is so wide so as to include fabric impregnated or coated or laminated with preparations of cellulose derivatives or other artificial plastic materials, and in fact, it is submitted before the Tribunal that the process of starching and calendering is a process that would squarely fall within the category of impregnation or coating with preparations of cellulose derivatives. The Tribunal did not answer this particular plea on the ground that such a plea was not raised before the Deputy Commissioner, and further on the ground that there was no material on record to decide whether starches are cellulose derivatives. However, in view of the fact that we have already reached the finding that the "bookbinding cloth" is "cotton fabric" and that process of dyeing, bleaching and calendering does not, in anyway, change the basic characteristic of cotton fabric, we do not think it necessary for us to decide as to whether the produce in question would fall into inclusive part of the definition. In our opinion, the processes of dyeing, starching and calendering are merely incidental or ancillary and such processes do not change basic characteristic of cotton fabric. In view of the wide definition of the words "cotton fabric" we are of the opinion that "bookbinding cloth" would fall within the definition of "cotton fabric"as contained in [SECTION] to the [ACT].
13. The learned advocate for the applicant relied upon the decision of this Court in the case of [PRECEDENT]. In that case the question that arose before the Division Bench of this Court was as to whether tarpaulin was "cotton fabric" falling under [SECTION] to the [ACT] and, therefore, not liable to tax. The sales tax authorities held that the tarpaulin was not prepared from cotton fabric or textile fabric and that they would be covered by [SECTION] to the said Act. However, the Division Bench of this Court was called upon to apply the enlarged definition of "cotton fabric" as inserted in the [ACT] in first instance by [ACT] which came into force by 24th November, 1979 and was followed by [ACT] with retrospective effect from 1st March, 1955. It was contended before the Division Bench that in view of the fact that the definition was a piece of referential legislation, the legislative mandate must be carried out by substituting amended definition in the statute book and the definition of "cotton fabric" should be read as if amendment was there on the statute book with effect from 1st March, 1955. Any attempt therefore to read the exemption provision (cotton fabric) de hors the intimately connected provision of the [ACT] may possibly result in rendering the exemption provision wholly ineffective and unworkable. Therefore, since the referential legislation contained in [SECTION] to the [ACT] is supplemental to the [ACT], the amendments made in the original incorporated provision must necessarily project and must be read as a part of the referential legislation contained in [SECTION]. The Division Bench of this Court therefore held that the Gujarat State Legislature before passing the [ACT], applied its mind and decided that "cotton fabric" should have the same meaning as assigned to it in the [ACT] having regard to the purpose and object underlying the impost of excise duty as well as sales tax on such important commodities like, cotton fabrics. In the second place, the Legislature prescribed a policy and provided a definition which should be in consonance with the definition of "cotton fabrics" as understood in the [ACT].
14. The Division Bench of this Court in that case first referred to the definition of "cotton fabric" as contained in [SECTION] to the [ACT] and then referred to the amendment as inserted in the said item by the amending Act which came into force on and from 24th November, 1979. It should be noted that under the [ACT], which had been placed on the statute book with effect from 24th December, 1957, additional duties of excise are levied and collected on certain goods which, inter alia, include cotton fabric. The words and expression "cotton fabric" have been given the same meaning as per tariffs under relevant [SECTION] to the [ACT] by [SECTION] of the [ACT]. The [ACT] effected amendment in the [SECTION] to the [ACT] as well as the [SECTION] to the [ACT] with retrospective effect. By [SECTION] of the amending Act [SECTION] of the [ACT] has been amended by inserting sub-clause (v) after sub-clause (iv) in [SECTION]. Material part of the amending Act provides as under :
"2. In the [ACT] (hereinafter referred to as "the [ACT]") in [SECTION], [SECTION], after sub-clause (iv), the following sub-clause shall be inserted namely :
(v) in relation to goods comprised in Item No. 19. I of the [SECTION], includes bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or anyone or more of these processes."
At the same time, amendment was made in [SECTION] to the [ACT] by [SECTION] of the amending Act after definition of "cotton fabric" as contained in item No. 19 as reproduced hereinabove in place of [SECTION] the following sub-item was substituted :
"(i) In item No. 19, for [SECTION], the following sub-item shall be substituted, namely :-
"I. Cotton fabrics other than (i) embroidery in the piece, in strips or in motifs, and (ii) fabrics impregnated, coated or laminated with preparations of cellulose derivatives or of other artificial plastic materials -
(a) cotton fabrics, not subjected to any process,
(b) cotton fabrics, subjected to the process of bleaching, mercerising, dyeing, printing, water-proofing, rubberisings, shirnk-proofing organdie processing or any other process or any two or more or these processes."
15. We are concerned with the amending Act only in so far as the definition of "cotton fabric" in [SECTION] to the [ACT] has been enlarged by amending [SECTION] of the said Act. It is this part of the amending Act which has been relied upon by the advocate appearing for the applicant for urging that "bookbinding cloth" would fall within the meaning of "cotton fabric" as contained in the first part of the definition as stated hereinabove. The first part of the definition, in fact, defines "cotton fabric" to mean "all varieties of fabrics manufactured either wholly or partly from cotton". By amending the said [SECTION] and adding [SECTION], the Legislature has attempted to further clarify the meaning of "cotton fabric". [SECTION] refers to cotton fabrics not subjected to any process and clause (b) thereof refers to cotton fabrics subjected to processes of bleaching, mercerising, dyeing, printing, water-proofing, rubberising, shrink-proofing, organdie processing or any other process or any two or more of these processes. By this wider definition, cotton fabric which is subjected to any of those processes or any two or more processes would continue to be cotton fabric. This clarification by substitution of [SECTION] is required to be read with introduction of sub-clause (v) after sub-clause (iv) in [SECTION] of the [ACT]. It is thus clear that because first part of the definition of "cotton fabric" refers to all varieties of fabrics manufactured either wholly or partly from cotton the Legislature by substituting [SECTION] clarified that even if cotton fabric is subjected to any of the processes referred to in [SECTION] the commodity would continue to be classified as "cotton fabric". This has necessitated the amendment in the definition of the word "manufacture" and by introducing sub-clause (v) in [SECTION] of the [ACT], the Legislature introduced all those processes to fall within the definition of "manufacture". Thus, it is clear that even when cotton fabric is subjected to processes like to bleaching, mercerising, dyeing, printing, etc., it would remain cotton fabric for the purpose of [ACT]. The learned advocated appearing for the applicant therefore submits since [SECTION] to the [ACT] is piece of referential legislation for all intents and purposes definition of "cotton fabric" in [SECTION] to [ACT] must be read accordingly and it should be deemed to have been part of the [ACT]. While effecting amendment in [SECTION] to the [ACT] the Legislature has given retrospective effect and, therefore, its was submitted that for the purpose of [SECTION] to the [ACT] the said amendment shall have retrospective effect. We are of the opinion that if as a necessary sequel to amending Act the legislative amendment is to read the definition of term, namely, "cotton fabric" with effect from March 1, 1955, we must read the definition accordingly and decide as if the amended definition was on the statute book for all intents and purposes from March 1, 1955.
16. It, thus, becomes clear that the words "cotton fabric" as defined by [SECTION] to the [ACT] shall include all varieties of fabrics manufactured either wholly or partly from cotton. Definition of the word "manufacture" as amended by introduction of sub-clause (v) in [SECTION] shall include all processes like bleaching, mercerising, dyeing, printing, water-proofing, etc. This sub-clause (v) as reference to [SECTION] which also came to be substituted by the amending Act and [SECTION] clarifies that "cotton fabric" even if it is subjected to the process of bleaching, mercerising, dyeing, printing, etc., would continue to be "cotton fabric". Therefore, when the applicant purchased cotton fabric from the market and subjected the cotton fabric to the process of bleaching, mercerising, dyeing, starching, drying, calendering, he was in fact carrying on the manufacturing activity on such cotton fabric. The processes of bleaching, mercerising, dyeing, printing etc., are the processes which even if applied would not take the cotton fabric out of the definition of "cotton fabric" firstly because of [SECTION], and secondly because of introduction of sub-clause (v) in [SECTION] of the [ACT]. We are, therefore, of the opinoin that what the applicant did after purchasing the cotton fabric from open market was to subject it to manufacturing process, namely that of dyeing, starching and calendering, said processes are closely identical to the processes described in [SECTION] as well as in [SECTION] of the [ACT]. Despite application of such processes cotton fabric would continue to be cotton fabric for the purpose of [SECTION] of the [ACT] and since [SECTION] of the [ACT] is nothing but a referential legislation, the cotton fabrics subjected to processes of dyeing starching and calendering should continue to be classified as "cotton fabrics".
17. In the case of State of Kerala v. [ENTITY] (Agro Industrial Trading Corporation) reported in [1989] 72 STC 1, the Supreme Court was called upon the decide the question as to whether the "PVC" cloth" which was being manufactured by [ENTITY] before the Supreme Court was "cotton fabric" within the meaning of the said term as defined by the [ACT]. It may be noted that [SECTION] of the [ACT] defined "cotton fabric" as defined in [SECTION] to the [ACT]. The questions which arose before the Supreme Court were : (1) What is the effect of the mention of the definition of "cotton fabric" given in the 1944 Act in the Schedule to the 1963 Act ? and (2) Does it attract only the said definition as on April 1, 1963, or also the subsequent amendments thereto ? The Supreme Court made reference to the principles of interpretation of an enactment which, for purposes of convenience, refers to or incorporates a provision of another statute. The court drew distinction between referential legislation which merely contains a "reference to or citation of" a provision of another statute. In the case of referential legislation the court held that the provisions of second statute along with all its amendments and variations from time to time should be read into the first statute, and accordingly, the court applied the amended definition of "cotton fabric" and held that the "PVC cloth" would be "cotton fabric" within the meaning of the said term. The court in the said case relied upon the exclusive definition and held that the "fabrics impregnated or coated with preparation of cellulose derivatives would also be cotton fabrics". The court held that the "PVC cloth" would clearly fall within this amended definition of "cotton fabric" so as to be entitled to exemption from sales tax.
18. At this stage it is also required to be examined as to whether the fact that the bookbinding cloth which emerges after subjecting cotton fabric to the process of dyeing, starching and calendering would cease to be cotton fabric, firstly because a new commercial commodity comes into existence, and secondly because bookbinding cloth has a separate and specific use. Identical contention was raised before the Division Bench of this Court in the case of [PRECEDENT]. The Division Bench of this Court in that case took the view that if the definition in [SECTION] takes into its sweep the tarpaulin which is a water-proof cloth there is no scope for invoking the principles of user's test' The Division Bench of this Court observed as under :
"The use to which tarpaulins are put to is, in our opinion, immaterial for deciding the question whether they can be classified as cotton fabrics or not since cotton fabrics are defined."
In reaching this conclusion the Division Bench has also relied upon the decision of the Supreme Court in the case of [PRECEDENT]. In that case the question before the Supreme Court was as to whether the "dryer felts" fall within the category of "textiles". The observations made by the Supreme Court were exhaustively referred to by the Division Bench and since the Supreme Court disapproved the application of user's test the Division Bench of this Court also disapproved the application of user's test. We, therefore, hold that the fact that bookbinding cloth is put to specific use or is known as distinct commercial commodity having a specific use cannot be decisive of its classification in view of the fact that cotton fabric is very widely defined by [SECTION] to the [ACT] and [SECTION] to the [ACT] being a referential piece of legislation must carry the same meaning. We are of the opinion that having regard to the enlarged definition of the term "cotton fabric" in [SECTION] "bookbinding cloth" must be held to be "cotton fabric".
19. That taken us to the second contention which was raised before the Deputy Commissioner of Sales Tax as well as before the Tribunal. It was the case of the applicant that it was entitled to the benefit of [SECTION] of the Government Notification issued under [SECTION] of the said Act. Item 67 of the said notification reads as under :
"67. Sales or purchases of cotton, rayon, artificial silk or woolen fabrics, dyed, bleached or printed."
20. It is, therefore, clear from [SECTION] that it includes sale of cotton fabrics dyed, bleached or printed. The Tribunal was of the opinion that the processes of starching, calendering are not included in this [SECTION], and therefore, sales of bookbinding cloth would not fall within [SECTION] so as to earn the benefit of exemption. We are of the opinion that it is not necessary for us to decide in this case as to whether "bookbinding cloth" would fall within [SECTION] of the Government Notification issued under [SECTION] of the said Act in view of our finding that it falls within the definition of "cotton fabric" as contained in [SECTION] to the [ACT].
21. In the result, we answer question number 1,2,3 and 4 in the negative, i.e., against the department and in favour of the applicant. There shall be no order as to costs.
22. Reference answered in the negative.