Case: State Of Punjab &amp; Ors Vs. M/S. Chandu Lal Kishori Lal &amp; Ors. Etc

but not including cotton waste. Section 15 of the Central Sales Tax, 1956 has been amended from time to time. Originally Section 15 reads as follows:-"15. Restrictions and conditions in regard to tax on sales or purchases of declared goods: Notwithstanding anything contained in the sales tax law of any State, the tax payable by any dealer under that law in respect of any sales or purchases of declared goods made by him inside the state shall not exceed two per cent of the sale price thereof, and such tax shall not be levied at more than one stage in a State."This Section was amended by the Central Sales Tax (Amendment) Act (No. 16 of 1957) and again by Centra1 Act No. 31 of 1958 and the amended Section reads as follows:-"15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State: Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely:(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed two per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage;(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State".4. On behalf of the appellants the argument was stressed that ginning process was a manufacturing process, and ginned cotton and cotton seeds were different commercial commodities and the respondent was not entitled to the exemption under Section 5 (2) (a) (vi) of the Act. It was said that unginned cotton was transformed into two distinct commercial commodities and there was no substantial identity between unginned cotton and ginned cotton or cotton seeds. It was argued that the ginning process required complicated machinery of manufacture. Reference was made in this connection to the mechanical aspect of the ginning process described in Encyclopedia Britannica, Vol. 6 :-"Hand separation of lint and seed was replaced rapidly by use of saw-type gins in the United States after the inventions of Eli Whitney in 1794 and of Hogden Holmes in 1796. Whitneys gin was improved upon by Holmes who substituted toothed saws for the hooked cylinder and flat metal ribs for the slotted bar used by Whitney. The saws, metal ribs and doffing brush in these early models persist in modern gins, with no basic change in ginning principle having been made, although some modern gins substitute an air blast for the doffing brushes.Additional gin machinery has been developed to keep pace with changes in harvesting practices which have resulted in a trend from careful hand picking to rougher hand and machine harvesting. These developments include seed-cotton driers, seed-cotton cleaners, burr extractors, green-boll trap and magnetic devices for removing metal. Line cleaners, desiged to remove trash from lint after it had been removed from the seed, were added to modern gins in the late 1940s and 1950s. Improvement in grade, which resulted in a higher price for the lint, was, in some cases, offset by the loss in weight. Gin installations include presses for baling the lint and equipment for moving the seed away from the gin stands. While some of the seed is saved for planting purposes, most of it moves directly, to an oil mill for processing"*1.*1. Encyclopedia Britannica, Vol. 6, p. 614.In our opinion, the appellants are right in their contention that the ginning process is a manufacturing process. But the question presented for determination in the present case is somewhat different viz., whether the respondent is entitled to the exemption under Section 5 (2) (a) (vi) of the Act in the context and setting of the language of Sections 14 and 15 of the Central Sales Tax Act, 1956. "Declared goods" in Section 14 of the Central Sales Tax Act, 1956 are individually specified under separate items. "Cotton ginned or unginned" is treated as a single commodity under one item of declared goods. It is evident that cotton ginned or unginned being treated as a single commodity and as a single species of declared goods cannot be subject under Sec. 15 (a) of the Central Sales Tax Act to a tax exceeding two per cent of the sale or purchase price thereof or at more than one stage. But so far as cotton-seeds are concerned, it is difficult to accept the contention that the sale of cotton-seeds must be treated as a sale of declared goods for the purpose of Section 15 (a) or (b) of the Central Sales Tax Act, 1956. It is true that cotton in its unginned state contains cotton-seeds.But it is by a manufacturing process that the cotton and the seed are separated and it is not correct to say that the seeds so separated is cotton itself or part of the cotton. They are two distinct commercial goods though before the manufacturing process the seeds might have been a part of the cotton itself. There is hence no warrant for the contention that cottonseed is not different from cotton. It follows that the respondent is not entitled to deduct the sale price of the cotton-seeds from the purchase turnover under Section 5 (2) (a) (vi) of the Act.In our opinion, the assessing authority was right in holding that the respondent was not entitled to deduction in respect of cotton-seeds sold by it to registered, dealers. It is conceded that the assessing authority had already granted deduction under Sec. 5 (2) (a) (vi) so far as ginned cotton is concerned.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our opinion, the appellants are right in their contention that the ginning process is a manufacturing process. But the question presented for determination in the present case is somewhat different viz., whether the respondent is entitled to the exemption under Section 5 (2) (a) (vi) of the Act in the context and setting of the language of Sections 14 and 15 of the Central Sales Tax Act, 1956. "Declared goods" in Section 14 of the Central Sales Tax Act, 1956 are individually specified under separate items. "Cotton ginned or unginned" is treated as a single commodity under one item of declared goods. It is evident that cotton ginned or unginned being treated as a single commodity and as a single species of declared goods cannot be subject under Sec. 15 (a) of the Central Sales Tax Act to a tax exceeding two per cent of the sale or purchase price thereof or at more than one stage. But so far as cotton-seeds are concerned, it is difficult to accept the contention that the sale of cotton-seeds must be treated as a sale of declared goods for the purpose of Section 15 (a) or (b) of the Central Sales Tax Act, 1956. It is true that cotton in its unginned state contains cotton-seeds.But it is by a manufacturing process that the cotton and the seed are separated and it is not correct to say that the seeds so separated is cotton itself or part of the cotton. They are two distinct commercial goods though before the manufacturing process the seeds might have been a part of the cotton itself. There is hence no warrant for the contention that cottonseed is not different from cotton. It follows that the respondent is not entitled to deduct the sale price of the cotton-seeds from the purchase turnover under Section 5 (2) (a) (vi) of the Act.In our opinion, the assessing authority was right in holding that the respondent was not entitled to deduction in respect of cotton-seeds sold by it to registered, dealers. It is conceded that the assessing authority had already granted deduction under Sec. 5 (2) (a) (vi) so far as ginned cotton is concerned.