COMMISSIONER OF SALES TAX, ORISSA AND ANR. versus JAGANNATH COTTON COMPANY AND ANR.

Citation: [1995] SUPP. 2 S.C.R. 390 · Decided: 28-07-1995 · Supreme Court of India · Bench: B.P. JEEVAN REDDY · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
COMMISSIONER OF SALES TAX, ORISSA AND ANR. 
v. 
JAGANNATH COTTON COMPANY AND ANR. 
JULY 28, 1995 
B 
(B.P. JEEVAN REDDY AND S.C. SEN, JJ.) 
State of Orissa-Industrial Policy Resolution of 1986 and 1989-Con-
cession to Industries-Exemption from Sales Tax-Co"esponding amend-
ment in Sales Tax Act-Claim for concessions-Held concessions were meant 
C only for units which were engaged in manuf actur~Woeful lack of material 
as to whether process employed by claimant was manufactured-Matter 
remitted to High Cowt. 
· 
Orissa Sales Tax Act, 1947: Entry 39(ff). 
D 
Sales Tw:-Exemption to new industries-Exemption in tune with In-
dustrial Policy Resolution-Applicability of exemptio~iff erence in 
provisions of-Act and Industrial Policy Resolution and effect of difference 
should be examined. 
E 
Words and Phrases: 'Manufacture'-Meaning of 
In its Industrial .Policy Resolution 1986, the State of Orissa an-
nounced certain sales tax concession to those establishing new industries 
in the State and also to those who expanded their existing capacities. 
Further in case of village, cottage and small scale industries, exemption 
F 
from tax was provided on the purchase of raw material as well as the sale 
of finished product. Besides the provisions of Orissa Sales Tax Act were 
also amended in tune with the said policy resolution. 
The respondent-company filed writ petitions in the High Court 
claiming benefit of exemption from the sales tax asserting that the process 
G undertaken by it in obtaining cotton waste from cotton was manufacturing 
activity. The High Court allowed the writ petitions holding that (i) for 
obtaining benefits of sales tax exemption it was not necessary that the 
industry should be engaged in the manufacture or production of goods; 
(ii) the process adopted by the respondent-company amounted to 
H manufacture. Revenue preferred appeals before this Court. 
390 
--
COMMR. OF SALES TAX v. JAGANNATH COTTON CO. 
391 
Allowing the appeals and setting aside the judgment of the High A 
Court, this Court 
HELD : 1. A reading of the provisions of the Industrial Policy Resolu-
tion relating to sales tax concessions shows that the incentives are meant 
only for those units which are engaged in the manufacture or production of B 
goods. Indeed clause (2) (a) speaks of "concerned manufacturing units". 
Furthermore, the use of the expression "purchase of raw material" itself 
shows that what is ultimately produced is different goods than the raw 
material used. Similarly the repeated use of the expression "finished 
products" and the grant of exemption in case of small scale industries both 
in respect of raw materials as well as finished products indicates that these 
concessions at substantial cost to public exchequer were ~eing provided 
with a view to encourage units engaged in the manufacture or production of 
goods and not to help those units which merely engaged themselves in some 
sort of processing whereunder the goods remain essentially the same goods 
even after the said process. (394-C-F] 
2. The High Court seems to have proceeded on the assumption that 
the Industrial Policy Resolution by itself is enough to provide the exemp-
tion from the sales tax. But where the provisions of the Sales Tax Act are 
c 
D 
also amended providing for exemption, then the court has to see whether 
they are the same as the Industrial Policy Resolution or are they different E 
- and if different, what is the effect of such difference. (394-G] 
3. Before the Court can express itself on the question whether a 
particular process amounts to manufacture or not, it must know what is 
the precise process that is gone through. In this case there is a woeful lack 
of material on record. Accordingly the matters are remitted to the High 
Court for a fresh decision. (395-C; B; El 
CIVIL APPELLATE JURISDICTION 
Civil Appeal Nos. 6627-
6631 of 1995. 
From the Judgment and Order dated 29.7.94 of the Orissa High 
Court in O.J.C. No. 1166/92 & 6, 162, 181, 1982 of 1993. 
B.A. Mohanty and Ms. Kirti Mishra for the Appellants. 
F 
G 
Badar Durrez Ahmad and Parijat Singh for the Respondents. 
H 
392 
SUPREME COURT REPORTS [1995] SUPP. 2 S.C.R. 
A 
The Judgment of the Court was delivered by 
B.P. JEEVAN REDDY, J. Leave granted. 
The appeals are preferred against a common judgment of the Orissa 
High Court in five writ petitions All the five Writ Petitions were filed by 
B 
the respondent herein, Jagannath Cotton Company, wherein the question 
is w

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