STATE OF GUJARAT versus M/S. ANANTA MILLS LTD.

Citation: [1966] 2 S.C.R. 669 · Decided: 23-11-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

Judgment (excerpt)

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A 
B 
c 
D 
E 
F 
G 
6 69 
STATE OF GUJARAT 
v. 
M/S. ANANTA MILLS LTD. 
November 23, 1965 
[K. SUBBA RAO, J. C. SHAH AND S. M. S!KRI, JJ.] 
Bombay Sales Tax (Exemption, set-cfj and Composition) Rules, 
1954, rr. 6 and 12-Purchase Tax paid on unginned cotton-Ginned 
Cotton used in manufacture-Sale of Cotton seeds-Purchase tax, if re-
fundable. 
The respondent, a manufacturer of co,tton 1'cxtiles, purchased unginn-
ed cotton and paid purchase tax thereon. 
The cotton was ginned and 
pressed by the respondent, the ginned cotton was used in the manufacture 
of cotton textile while the cotton seeds w-ore sold by it. The respondent 
claimed refund of purchase tax paid on the unginned cotton under the 
Bombay Sales Tax (Exemption, Set-off and Compo•ition) Rules, 
1954 
which was disallowed by the Sales Tax authorities on the ground that 
r. 6(ii) was not applicable when subsidiary or incidental pToduct alone was 
sold and the main product was used in the manufacture of the goods and 
looking at the working of the aforesaid Rule, all the products of the 
unprocessed goods should he sold. 
Jn reference, the High Court allowed 
the refund of the purchase tax under r: 12(i) . 
HELD : The respondent was entitled to refund under r. 12(i). 
What is necessary under rule 12(i) is that the goods should have been 
actually used for the purpose specified viz., the production of any of the 
goods aforementioned for sale. The;se conditions have been satisfied in 
this case because unginned cotton was used for the purpose of producing 
one of the goods specified in column 2 for sale, namely, cotton seeds. [672 
H] 
CIVIL APPELLATE JURISDICTION: 
Civil Appeal No. 807 of 
1964. 
Appeal by special leave from the judgment and order dated 
December 10, 1962 of the Gujarat High Court in Sales-tax Refer-
ence No. 8 of 1961. 
R. Ganapathy Iyer and B. R. G. K. Achar, for the appellant. 
I. N. Shroff, for the respondent. 
The Judgment of the Court was delivered by 
Sikri, J. 
This appeal by special leave is directed against the 
judgment of the Gujarat High Court in a Sales Tax Refer~nce 
made to it by the Gujarat Sales Tax Tribunal. 
Two quesuons 
R 
were referred by the said Tribunal to the High Court : 
"1. Whether in the facts and circumstances of the 
case, the purchase of the raw cotton by the applicant Mill 
'670 
SUPREME 
COURT 
REPORTS 
[1966] 2 S.C.R. 
could be said to have been intended for use in the 
production of cotton seeds for sale within the meaning 
of clause (ii) of rule 6 of the Bombay Sales Tax 
(Exemption, Set-off and Composition) Rules, 1954; 
2. Whether the applicant Mill is entitled under rule 
12(1) to a refund of the purchase tax paid 'by it." 
The facts set out in the statement of the case by the Tribunal 
are briefly as follows : The respondent is a manufacturer of cotton 
textile, particularly of coarse and medium variety cloth. During 
A 
B 
the assessment period from April 1, 1955 to March 31, 1956, it C 
purchased unginned cotton worth Rs. 5,93,266/- from unregister-
ed dealers and paid purchase tax of Rs. 5,932/- under s. lO(a) 
of the Bombay Sales Tax Act, 1953. The cotton was ginned and 
pressed by the respondent, the ginned cotton was· used in the 
manufacture of cotton textiles while the cotton seeds were sold 
by it. 
During the course of assessment proceedings the respon-
n 
dent applied for refund of purchase tax paid on the unginned 
cotton under the Bombay Sales Tax (Exemption, Set-off and 
Composition) Rules, 1954, (hereinafter referred to as the Rules). 
The Sales Tax Officer refused to allow any refund on the ground 
that the conditions of r. 12(1) read with r. 6(ii) of the Rules had 
not been fulfilled. 
The Assistant Collector of Sales Tax on appeal 
E 
confirmed the order of the Sales Tax Officer on the ground that 
"rule 6(ii) is not applicable when subsidiary or incidental product 
alone is sold and the main product is used in the manufacture of 
other goods. 
Looking the working of the aforesaid Rule, al! the 
products of the unprocessed goods should be sold." 
F 
The respondent filed a revision before the Deputy Commis-
sioner of Sales Tax, who also upheld the order of the Sales Tax 
Officer. 
The respondent then filed a revision before the Gujarat 
Sales Tax Tribunal. 
The Tribunal rejected the revision on the 
ground that "the purpose underlying the applicant's purchases was 
primarily the production of ginned cotton for manufacture. The G 
cotton seeds which form the bye-product of the gi

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