1980 PLP 201 (PTD)

Sh. Abdul Haque, Advocate Supreme Court, Riazul Haq Sh., Advocate Supreme Court and Iftikharuddin Ahmed, Advocate-on-Record for Respondent (in all the C. Ps. S. L. A.). Date of hearing: 17th February 1980. NASIM HASAN SHAH, J. -This order will dispose of 9 Civil Petitions for Special Leave to Appeal, namely, C. Ps. S. L. A. Nos. 28 to 36 of 1977, as the questions for determination are the same. According to the office, all these petitions are barred by various lengths of time but the learned counsel for the petitioner has in excuse of the delay submitted that soon after the impugned judgment of the High Court dated the 5th December 1974 was passed, the petitioner submitted an application under section 66-A of the Income-tax Act for grant of certificate of fitness against the judgment and order of the High Court but the same was refused as not being maintainable by the order of the High Court date 29-11-1976. As the time spent in prosecuting the application for grant of certificate was spent bona fide, the delay is liable to be condoned. The petition it is submitted, are within time as from the date of refusal of the certificate. As we have heard these cases also on the merits we consider to decide these cases on merits without expressing our considered opinion on the point as to whether the limitation is liable to be condoned or not in the circumstances of the cases. The facts which form the background are that petitioners/assessees are running Textile Mill and Cotton Factories for manufacture of cotton and yarn cloths. They purchase cotton which is subjected to the following process:- (a) Firstly, it is ginned whereby cottonseed and cotton are separated by cotton ginning machines and this process is called "ginning of the cotton. (b) While separating cotton from cottonseed by the process of ginning certain amount of cotton remains stuck to the cottonseed which is later removed by another process known as "delinting". This delinted cotton was sold in the assessment year in question and subjected to charge. (c) The cotton obtained after ginning is then put to another pro, which is known as "blowing" which divides it into two separate namely, (i) fine fibre (also called as superior fibre or long, fibre) and (ii) rough fibre (which is also known as inferior or smaller fibre). (d) The fine fibre is utilised by the assessee by the process of spinning the manufacture of fine yarn from which the cloth is made by weaving through looms. The inferior fibre is called as "cotton waste" thou it is capable of being utilised in the manufacture of inferior yarn from which goods like flurries and carts, etc. are made but the assessees, petitioners sold it away rather than utilise it for manufacture of durries, etc. In so far as the assessees/petitioners sold away the "delinted cotton" and "cotton waste" these sales were assessed to sales tax by the Sales Tax Officer. On appeal, the Appellate Assistant Commissioner held that both the items were not taxable because in his view they were nothing but another form of "ginned cotton". The Department went in further appeal to the Appellate Tribunal which reversed the order of the Appellate Assistant Commissioner and restored that of the Salt Tax Officer holding that the goods in question were manufactured goods having distinct names and characteris tics capable of different use and could no longer be called "ginned cotton" and were, therefore, liable to sales t It was observed that, in fact, the goods like durries and carpets could be made only from the waste cotton; hence were not exempt from sales tax. Aggrieved by this order, the petitioners/assessees moved the High Court for answering the following three questions: - (1) Whether on the facts and circumstance of the case the learned Appellate Tribunal was right in holding that "waste cotton" sold by the assessees/petitioners was a manufactured article in respect of which the assessees/petitioners were liable to sales tax under section 3 read with clause (11) and not a refuse or remains of the raw material, i.e. ginned cotton which had resulted in the failure of production or has not resulted in the production of any goods? (2) Whether on the facts and circumstances of the case, the learned Tribunal was right in holding that the sales of Rs. 1,47,606 (in C. P. ZS/77) on account of delinted cotton were liable to tax under the Sales Tax Act under section 3 of the Sales Tax Act, 1951? (3) Whether on the facts and circumstances of the case, there is any material to support the finding of the Tribunal that durries, carpets, cotton wool etc. can only be manufactured out of cotton waste" The Lahore High Court in an elaborate and a very well considered judgment discussed the questions and answered these questions in the affirmative. So far as "delinted cotton" is concerned, it was observed that it must be held to be manufactured article within the meaning of section 2(11) of the Sales Tax Act. Dealing with the argument that delinting of cotton is not a manufactur ing process inasmuch as even after delinting the delinted cotton still remains a cotton i.e. the generic kappas and no new good comes into existence it was observed that no doubt by delinting cotton and cottonseed are separa ted but the delinted cotton is not the same generic cotton as kappas was. Its use is different, its value is different, its form and shape are different, its poten tialities, characteristics and finish also undergo a change and as such it is neither generic kappas nor ginned cotton but is a separate good manufactured. Coming to "cotton waste" it was observed that the process of blowing employed is definitely a manufacturing process which results in separating inferior fibre cotton from the superior fibre cotton. This is a process of breaking it into two the different components contained in the cotton. The inferior fibre, it was observed, then becomes a good by itself fit for distinct use which may be exclusive or in addition to that to which fine fibre cotton can be put. It becomes a marketable commodity in its own right under a different name. It has value and is recognised independently by all concerned for its own potentialities. The assessees/petitioners call it a waste cotton but the word "waste" is a misnomer and is not used here in the sense that it is of no use at all but is used in comparison with the fine fibre cotton because qua the uses to which fine fibre cotton can be put i.e., cloth or fine cloth the inferior fibre cotton is a waste and cannot be utilised for the purpose though otherwise' it is not altogether a waste and nor is it a refuse of no value. It has definite uses for its own potenti alities. In other words, fine fibre cotton is utilised for fine yarn and cloth whereas inferior fibre cotton is utilised for inferior yarn and is meant for flurries and carpets, etc. Therefore, to say that by blowing inferior fibre cotton has not come into being or that a good by that name has not been manufactured is not correct. Thus, the waste cotton is not legally waste in the sense of refuse. It is a cotton containing inferior fibre. It has its own finish use and market value. It is a good by itself and comes into existence by a process of machinery which can definitely be called a process of manufacture or production. The learned Judges also referred to this Court's decision in the case of Messrs Noorani Cotton Corporation v. The Sales Tax Officer, "A" War': Lyallpur P L D 1965 S C 161, in support of their findings that the goods in question are manufactured goods on which the assessees/petitioners were bound to pay the tax. Mr. Javed Hashmi, learned counsel for the petitioners, did not seriously challenge the finding of the High Court that the process of delinting is not a manufacturing process and delinted cotton is not a manufactured article. He, however, vehemently contended that the High Court had erred in holding that the cotton waste was a manufactured article. According to him it would only be a manufactured article if it was Produced as a result of a process employed to- consciously produce it. If as a result of failure to produce yarn some other product is left the said residual product cannot be held to be a manufactured product. He also submitted that only because the product comes into existence after undergoing a process it does not imply that the said product is a manufactured article and in this connection be tried to draw a distinction between process and manufacture. Referring to the case of Superintendent of Central Excise, Layallpur v. Ch. Faqir Muhammad P L D 1959 S C (Pak.) 103, he argued that to determine, the meaning of the expression "manufacture" -on its basis is not proper because therein the learned Judges were dealing with the meaning of 'manufacture' as defined in section 2(i) of the Central Excises and Salt Act, 1944 which definition was different from that contained in Sales Tax Act. He also attempted to argue that the case of Messrs Noorani Cotton Corporation v. The Sales Tax Officer, "A" Ward, Lyallpur was not properly decided and required reconsideration. Sh. Abdul Haque, standing counsel of the Department, was also heard in reply at our own request. After giving our full consideration to the matter we consider that the judgment of the High Court does not require any interference. In our opinion, cotton waste is a manufactured article which may be considered A as "partly manufactured goods" for the purpose of manufacturing flurries, carpets, surgical cotton. etc. and these goods are chargeable to sale tax as these goods can be manufactured only from cotton waste, which consists of small fibre cotton; the finer element of ginned cotton consisting of long fibre cotton could not be have gone into the manu facture of durries and carpets etc. We also think that cotton waste is undoubtely different from ginned cotton. It may not acquire an improved look or more vendibility but it does become possessed of a new and specific use in its new state and it is only this material from which durries and carpets, etc. can be manufactured. The important point is that cotton waste has come) into being by an act of man, which has made it capable of being sold in an acceptable form to satisfy some want or desire. In "Words and Phrases judicially defined" the word 'manufacture' is thus explained:-- "The word 'manufacture' has been generally understood to denote either a thing made, which is useful for its own sake and vendible as such, as a medicine, a stove, a telescope, and many others, etc., etc." We find that after going through the process of blowing, cotton waste becomes capable of being sold in an acceptable form to satisfy the want of manufacturing carpets, durries etc. and hence is a manufactured product. As for the submission that the case Messrs Noorani Cotton Corporation v. The Sales Tax Officer, "A" Ward, Layallpur requires reconsideration we are not satisfied that on the argument presented before us any such question has been raised which can induce us to refer this matter to the Full Court for reconsideration. The result is that no ground is made out for interfering with the orders of the High Court, these petitions fail and are dismissed hereby. Petition dismissed.