Sales Tax Commissioner, U. P. Vs. M/S.
Ladha Singh Mal Singh  INSC 164 (27 July 1971)
CITATION: 1971 AIR 2221 1971 SCR 941
U.P. Sales Tax Act, 1948-Notification dated
June 19, 1948- Cloth manufactured by looms worked by power-If cloth
manufactured by mills.
Under the notification dated June 19, 1948
issued under s. 3(A) of the U.P. Sales Tax Act, 1948, sales tax at the rate of
6 pies in a rupee was payable on "cloth manufactured by mills". Tax
at that rate was sought to be levied on cloth manufactured by means of looms
worked by power on the basis that it was "cloth manufactured by
mills" within the meaning of the notification. The High Court held that
cloth manufactured by power looms could not fall under the term "cloth
manufactured by mills". Dismissing the appeal,
HELD:What has to be seen is the context in
which the word "mill" is used in the notification. The notification,
divides cloth broadly into two categories-mill made and loom made. Loom made
cloth would include all cloth manufactured on looms and, therefore, whether the
energy is supplied manually or by power cannot convert the essential character
of the cloth, namely, its manufacture on looms. As regards mill made cloth the
actual process of weaving is more or less automatic, pre-conceived and definite
and it involves functioning of machinery. In popular language a power loom
cloth is never associated with a mill cloth. [942H943A] Further, it cannot be
said that once the looms worked by power are used in a building the essential
characteristics of mills would be satisfied. To hold so would be contrary to
the accepted and popular meaning of hand-loom or power- loom cloth and
mill-made cloth. The distinction which was kept in view when the notification
was promulgated was between the aforesaid two categories or types of cloth
involving essentially a difference in the process in which it was manufactured.
[943H-944B] Sri Dhandapani Power Loom Factory, Erode v. Commercial Tax Officer,
Coimbatore & Anr., 12 S.T.C. 304 and Ellerker v. Union Cold Storage Co.
Ltd.,  1 A.E.L.R. 23, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 564 of 1967.
Appeal by special leave from the judgment and
order dated August 9, 1966 of the Allahabad High Court in S.T.R. No. 563 of
0. P. Rana, for the appellant.
The respondent did not appear.
The Judgment of the Court was delivered by
Grover, J. The only point for decision in this appeal by special leave is
whether the cloth manufactured by means of 942 looms worked by power can be
regarded as "cloth manufactured by mills" for which sales tax was
payable at the rate of 6 pies in a rupee in terms of the notification dated
June 8, 1948 issued under S. 3A of the U.P. Sales Tax Act, 1948.
The general rate of tax on sale of cloth
otherwise was 3 pies per rupee. The High Court on a reference made under the
relevant provisions of the Act held that cloth manufactured by means of power
looms could not fall under the term "cloth manufactured by the mills".
The approach of the High Court was that since
the word "mills" had not been defined either by the Act or by the
notification mentioned before the meaning of the words "cloth manufactured
by the mills" must be considered according to the common understanding of
mankind. Reference was made to the dictionary meaning as given in Webster' New
International Dictionary, Vol. 2. According to the dictionary two things were
required (1) a building and (2) a machinery, in order to constitute a
"mill". The meaning of the word "machine", according to the
dictionary in a popular and mechanical sense is................. more or less
complex combination of mechanical parts, as levers, gears sprocket wheels,
pulleys, shafts and spindles, ropes, chains, and bands, cams and other turning
and sliding pieces, springs, confined fluids etc., together with the frame work
and fastenings, supporting and connecting them, as when it is designed to
operate upon material to change it in some pre-conceived and definite
According to the High Court looms which are
merely worked by power would hardly fall within the meaning of the word
"ma- chine". It has been pointed out that looms worked by hand or by
power have not been shown by any evidence to be different. It does not appear
to have been disputed before the High Court that a building having looms worked
by manual labour would not be a mill. The court found no difference between
building containing looms worked by manual labour or by power.
According to Words and Phrases, Vol. 27 the
term "mill" in modem usage, includes various machines or combinations
of machinery, as cotton mills, fulling mills, powder mills, etc., to some of
which the term "manufactory" or "factory" is also applied.
In our judgment although the dictionary meaning may be of considerable
assistance in deciding the point before us but what has to be seen is the
context in which the word "mills" is used in the notification. It is
common ground that if cloth was manufactured by looms worked by manual labour
the notification was not applicable and the rate of tax per rupee was 3 pies
but if he cloth was manufactured by mills then the rate was to be 6 pies. Thus
cloth has been divided broadly into two categories, mill- made and loom-made.
It is quite obvious that loom-made cloth would include all cloth manufactured
on looms. It is difficult to understand how the energy by which the looms are
worked 943 would make any difference. In other words whether the energy is
supplied manually or by power cannot convert the essential character of the
cloth, namely, its manufacture on looms. As regards mill made cloth the actual
process of weaving Is more or less automatic, preconceived and definite and it
involves the functioning of machinery. Ramchandra Iyer J., in Sri Dhandapani
Power-loom Factory, Erode v. Commercial Tax Officer, Coimbatore and Anr.(1),
was right in observing that mill cloth is a familiar variety of cloth and
everybody knows what a am is. In popular language, a power- loom cloth is never
associated with a mill cloth.
According to Mcnaghten J., in Ellerker v.
Union Cold Storage Co. Ltd., (2) a mill is building where goods are subjected
to treatment or processing of some sort and where machinery is used for that
purpose. The illustrations given were:
"The miller in his corn-mill grinds
wheat into flour, ,or oats into oatmeal. So too, at a scutching-mill the miller
scutches the flax, to prepare it for spinning. The saw-mill, the rolling mill,
the flatting mill, the puffing mill and the cotton mill are all buildings where
goods are treated or subjected to some process." It must be remembered
that the meaning of the word "mill" ,or "mills" would vary
according to the context in which that word is used. In the above case a
company carried on a large ,cold storage business. In some of the cold stores
part of the building was used for the manufacture of ice for sale; others were
,only used for the purpose of storage. It was held that all the premises fell
within the meaning of the words in Schedule D Cases 1 and 11, r. 5(2) of the
Income-tax Act which were : Mills factories or other similar premises.
Counsel for the appellant has sought to argue
that once the looms worked by power are used In a building the essential
characteristics of "mills" would be satisfied and if any cloth is
manufactured on those looms it would be cloth manufactured by "
mills" within the meaning of the notification. The falacy (1) 12 S. T. C.
(2)  A. E. L. R. 23.
944 in this argument is that by the same
reasoning a building in which looms worked by manual labour are to be found
would also have to be regarded as "mills". This would be contrary to
the accepted and popular meaning of handloom or power loom cloth and mill made
cloth. We are satisfied that the distinction which was kept in view when the
notification was promulgated was between the aforesaid two categories or types
of cloth involving essentially a difference in the process by which it was
We would accordingly uphold the view of the
High Court and dismiss the appeal. There will be no order as to costs.
K. B.N. Appeal dismissed.