M/S MAMTA SURGICAL COTTON INDUSTRIES, RAJASTHANversusASSISTANT COMMISSIONER (ANTI-EVASION), BHILWARA, RAJASTHAN

                     [2014] 2 S.C.R. 589


     M/S MAMTA SURGICAL COTTON INDUSTRIES,                           A
                  RAJASTHAN
                               V.
      ASSISTANT COMMISSIONER (ANTI-EVASION),
                  BHILWARA, RAJASTHAN
           (Civil Appeal No. 7084 of 2005 etc.)                      B
                     JAN~ARY 23, 2014

           [H.L. DATTU AND S.A. BOBDE, JJ.]

    RAJASTHAN SALES TAX ACT, 1994:                                   C

      s. 2 (27) - 'Manufacture' - 'Surgical cotton' processed
from cotton - Assessment Year 1992-93 -- Entry no. 16 -
"Cotton, that is to say, all kinds of cotton (indigenous or
imported),· whether ginned or unginned, baled, pressed or
                                                                     0
otherwise including Cotton waste" -- Assessee purchasing raw
cotton by paying tax at the rate of 4 per cent - Processing it
into 'surgical cotton' - Held: "Surgical cotton" is a separately
identifiable and distinct commercial commodity manufactured
out of raw cotton and, therefore, ceases to be cotton under
Entry 16 - In the instant case, after going through the various      E
steps that are carried out by assessee for getting surgical
cotton from raw cotton, it can be certainly said that cotton has
undergone a change into a new commercially identifiable
commodity which has a different name, different character
and different use - The process of transformation is not merely      F
processing to improve quality or superficial attributes of the
raw cotton - Cotton looses its original form and is marketed
as a commercially different and distinct product - As regards
the claim of set off against tax paid on raw cotton, assessee
is at liberty to raise the question before appropriate authorities   G
in accordance with law -- Judgment and order passed by High
court in so far as Assessment Year 1992-93 is concerned.
confirmed.

                               589                                   H
    590      SUPREME COURT REPO~TS                 [2014] 2 S.C.R.


A      s.2(27) - 'Manufacture' - Held: "Manufacture" can be said
  to have taken place only when there is transformation of raw
  materials into a new and different article having a different
  identity, characteristic and use - While mere improvement in
  quality does not amount to manufacture, when the change or
B a series of changes transform the commodity such that
  commercially it can no longer be regarded as the original
  commodity but recognised as a new and distinct article.

          Entry No. 16 - Surgical cotton' -- Assessment Years
    1993-94 to 1998-99 - Held: In' the year 1993, by an
C   amendment notification F.4 (56) FD!Gr.IV/82-2 (S.O. No. 8)
    dated 12. 04. 1993, legislature has consciously included
    ''absorbent cptton wool J.P." iA Ent(}' 16 and it was retained
    for all subsequent years till Assessment
                                          I
                                               Year 1998-99 -- The
    commodity "absorbent cotton wool J.P." as included in 1he
D   relevant entries is the same as "surgical cotton" which the .
    assessee manufactures - The absorbent cotton wool l.P. is a
    technical name of the cotton which is sold in the market and
    commonly known as surgical cotton - By introducing the word .
    "including" immediately after detail(ng the definition of cotton,/
E   legislature has expanded the meaning of expression "cotton"
    for the purposes of the Act - While fhe natural import suggests
    and prescribes only unmanufactured cotton in all forms,
    commodities "absorbent cotton wool l.P." and "cotton waste"
    manufactured out of "cotton 'I are intentionally and
F   purposefully included in the relevant entries a/ongwith cotton
    in its ordinary meaning - "Surgical cotton/absorbent cotton
                                       '
    wool l.P." is also "cotton" for the purposes of relevant entries
    in the notifications for assessment years 1993-94 to 1998-99
    and, therefore, is liable to exemption from levy of tax under
G   the Act - Judgment and order passed by High Court for
    assessment years 1993-1994 to 1998-1999 is set aside.

          Words and Phrases:

          Word "include" - Held: Is generally used to enlarge
H
 MAMTA SURGICAL COTION INDUS., RAJASTHAN v. ASSTT.         591
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

meaning of the words or phrases occurring in the body of           A
statute, and when it is so used those words or phrases must
be constnied as comprehending, not only such things, as
they signify according to their natural import, but also those
things which the interpretation clause declares that they shall
include - When word "includes" is used in definition,              B
legislature does not intend to restrict the definition: it makes
the definition enumerative but not exhaustive - The term
defined will retain its ordinary meaning but its scope would be
extended to bring within it m€Jtters, which in its ordinary
meaning may or may not comprise.                                   c
     Empire Industries /..imited and Ors. v. Union of India and
Ors., (1985) 2 SCC 314; CCE v. Osnar Chemical (P) Ltd.
                       =
2012 (2) SCR 1035 (2012) 2 SCC 282; Jai Bhagwan Oil &
Flour Mills v. Union of India 2009 (7) SCR 409 = (2009) 14
SCC 63; Crane Betel Nut Powder Works v. Commr. of                  0
Customs & Central Excise, 2007(4) SCR 109 = (2007) 4 SCC
155; CIT v. Tara Agencies 2007 (8) SCR 136 =(2007) 6 SCC
429; Ujagar Prints (II) v. Union of India, 1986 Supp SCC 652;
Saraswati Sugar Mills v. Haryana State Board, 1991 (1)
Suppl. SCR 523     =  (1992) 1 SCC 418; Gramophone Co. of          E
India Ltd. v. Collector of Customs, (2000) 1. SCC 549; CCE
v. Rajasthan State Chemical Works, 1991 (1) Suppl. SCR
124 = (1991) 4 SCC 473; CCE v. Technoweld Industries,
(2003) 11 sec 798; Mettex (I) (PJ Ltd. v. CCE, (2005) 1 sec
271 ; Aman Marble Industries (P) Ltd. v. CCE, (2005) 1 SCC         F
279; Shyam Oil Cake Ltd. v. CCE 2004 (6) Suppl. SCR 346
=  (2005) 1 SCC 264; South Bihar Sugar Mills Ltd. v. Union
of India, .(1968) 3 SCR 21; Laminated Packings (P) Ltd. v.
CCE 1990 ( 3) SCR 630 =(1990) 4 SCC. 51; Dy. CST v. Coco
                                       =
Fibres, 1990 ( 3 ) Suppl. SCR 419 1992 Supp (1) SCC                G
290; CSTv. Jagannath Cotton Co. 1995 (2) Suppl. SCR 390
=  (1995) 5 SCC 527; Ashirwad /spat Udyog v. State Level
Committee, 1998(2) Suppl. SCR 542 = (1998) 8 SCC 85;
State of Maharashtra v. Mahalaxmi Stores, 2002 (4) Suppl.
                                                                   H
    592     SUPREME COURT REPG>RTS ·            [2014] 2 S.C.R.


A   SCR 292   =   (2003) 1 SCC 70; Aspinwall & Co. Ltd. v. CIT,
    2001 (2) Suppl. SCR 559 = (2001) 7 SCC 525; J.K. Cotton
    $pg. & Wvg. Mills Co. Ltd. v. STO, (1965) 1 SCR 900; CCE
                                            =
    v. Kiran Spg. Mills, 1988 (2) SCR .1006 (1988) 2 SCC 348
    and Park Leather Industry (P) LtdJ v. State of U.P. 2001 (1)
B   SCR 1035 = (2001) 3 SCC 135; Union of India \f. Delhi Cloth
    & General Mills Co. Ltd., 1963 Supp (1) SCR 5~6; Union of
    India v. J. G. Glass Industries Ltd. .1997 (6) Suppl. SCR 345
    =  (1998) 2 SCC 32; Devi Das Gopal Krishnan v. State of
    Punjab, (1967) 3 SCR 557; CCE v. S.R. Tissues (P) Ltd. 2005
c   (2}' Suppl. SCR 355 = (2005) 6 SCC 310, Brakes India Ltd.
    v. Supdt. of Central Excise, (1997).1Q SCC 717, 'Kores India
    Ltd. v. CCE, 2004 (6) Suppl. SCR1320 = (2005) 1    sec   385t'
    Standard Fireworks Industries v. Collector of Central Excise,
    (1987) 1 SCC 600; South Gujarat· Roofing Tiles
0   Manufacturers Association and anr. v. State of Gujarat and
    Anr., 1977 (1) SCR 878 = (1976) 4 1SCC 601; RBI v. Peerless
    General Finance & Investment Co. Ltd. 1987 (2) SCR 1       =··
    (1987) 1 SCC 424; Kamataka Power Transmission Corpn. v.
    Ashok Iron Works (P) Ltd. 2009 (1) SCR 1109 = (2009) 3 SCC~
E   240; Commr. of Customs v. Caryaire Equipment India (Pi
    Ltd., (2012) 4 SCC 645; U.P. Power Corpn. Ltd. v. NTPC Ltd.,
    (2014) 1 SCC 371; Associated lndem Mechanical (P) Ltd. v.
     WB .. Smal/ Industries DevelopmentCorpn. Ltd., 2007 (1) SCR
     174 = (2007) 3 SCC .607; Dadaji v. Sukhdeobabu;
F   Mahalakshmi Oil Mills v. State of 'A.P.; Bharat Coop. Bank
     (Mumbai) Ltd. v. Employees Union 2007 (4) SCR 347 =
    (2007) 4 sec     685- referred to.

      McNichol and Anor v. Pinch,, {1906] 2 KS 352; East
  Texas Motor Freight Lines v. Frozen Food Express, 351 US
G 49; Dilworth v. Commr. of Stamps, ' (1899) AC 99 - referred
    to.                    •
       Collins English Dictionary;, Oxford Dictionary of
  English;Encarta dictionary ; Rrinciples of Statutory
H Interpretation (12th Edn., 2010) by Justice G.P. Singh, at p.
 MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT.      593
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

181 - referred to.                                             A
    "Durga Cotton Industries Vs. State of Rajasthan and Ors.
1994 (1) WLC 696 - approved.
    CST v. Lal Kunwa Stone Crusher (PJ Ltd., 2000 (2) SCR
    =
276 (2000) 3 SCC 525; Sterling Foods v. State of Kamataka      B
                     =
1986 (3) SCR 367 (1986) 3 SCC 469 and CST v. Pio Food
Packers 1980 SCR 1271    =
                         1980 Supp SCC 174 - cited.
                     Case Law Reference:
    [1906] 2 KB 352               referred to     Para 16      c
    2000 (2) SCR 276              cited           para 10
    1986 (3) SCR 367              cited           para 10
    1980 SCR 1271                 cited           para 10      D
    (1985) 2 sec 314              referred to     para 17
    2012 (2) SCR 1035             referred to     para 17
    2009 (7) SCR 409               referred to    para 17      E
    2007 (4) SCR 109               referred to    para 17
    2007 (8) SCR 136               referred to    para 17
    1986 Supp sec 652              referred to    para 17
                                                               F
    1991 (1) Suppl. SCR 523        referred to    para 17
    c2000) 1 sec 549               referred to    para 17
    1991 (1) Suppl. SCR 124        referred to    para 17
    (2003) 11 sec 798              referred to    para 17      G

    2004 (6) Suppl. SCR 346        referred to    para 17
    (2005) 1 sec 211               referred to    para 17
                                                               H
    594      SUPREME COURT REPORTS             [2014] 2 S.C.R.


A         (2005) 1 sec 219           referred to    para 17
          (1968) 3 SCR 21            r:eferred to   para 17
          1990 (3) SCR 630           referred to    para 17
          1990 (3) Suppl. SCR 419    referred to    para 17
B
          1995 (2) Suppl. SCR 390    referred to    para 17
          1998 (2) Suppl. SCR 542    referred to    para 17
          2002 (4) Suppl. SCR 292    referred to    para 17
c
          2001 (2) Suppl. SCR 559    referred to    para 17
          (1965) 1 SCR 900           referred to    para 17
          1988 (2j SCR 1006          referred to    para 17
D         2001 (1) SCR 1035          referred to    para 17
          1963 Supp (1) SCR 586      referred to    para-18
          1997 (6) .Suppl. SCR 345   referred to    para 19
E         (1967) 3 SCR 557           referred to    para 20
          2005 (2) Suppl. SCR 355    referred to    para 21
          351 us 49                  referred to    para 24
          (1997) 10 sec 111          referted to    para 27
F
          2004 (6) Suppl. SCR 320    referred to    para 27
          (1987) 1 sec 600           referred to    para 27
             ...
          1994 (1) WLC 696           approved       para 46
G
          (1899) AC 99               referred to    para 48
          1977 (1) SCR 878           referred to    para 49
          1987 (2) SCR 1             referred to    para 51
H
 MAMTA SURGICAL COTION INDUS., RAJASTHAN v. ASSTI.        595
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

    2009 (1) SCR 1109              referred to     para 52       A
    (2012) 4 sec 645                 referred to   para 53

    (2014) 1 SCC.371                 referred to   para 53
    2007 (1) SCR 174                 referred to   para 53
                                                                 B
    2007 (4) SCR 347                 referred to   para 53

    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
7084 ·of 2005.

    From the Judgment and Order dated 23.01.2003 of the          C
High Court of Ju~icature at Rajasthan at Jodhpur in S.B. C}vil
Sales Tax Revision No. 932 of 2002.
                              WITH
Civil Appeal Nos. 7085-7093 and 7094-7097 of 2005.               D

      V. Giri, Dharmendra Kumar Sinha, Abhilash, Mohd. Sadiqi
for the Appellant.

    Milind Kumar, Shovan Mishra for the Respondent.
                                                                 E
    The following Order of the Court was delivered

                           ORDER

     1. These appeals are directed against the common
judgment and order passed by the High Court of Rajasthan in
                                                                 F
S.B. Civil Sales Tax Revision No. 932 of 2002 and connected
matters, dated 23.01.2003. By the impugned judgment and
order, the High Court has opined'that "surgical cotton" is a
commerciallx.~ifferent commodity from 'cotton' and accordingly   G
confirmed the order passed by the Rajasthan Tax Board, Ajmer
in Appeal Nos. 509 to 512 of 2001, dated 28.06.2002.

    Facts:

    2. The appellant is a partnership firm registered as a       H
    .596    SUPREME COURT REPORTS                 [2014] 2 S.C.R.

A dealer both under the Rajasthan Sales Tax Act, 1994 (for short,
  "the Act") and the Central Sales Tax Act, 1956 (for short, "the
  CST Act"). The appellant carries on the business of processing
  the cotton and transforming it into surgical cotton.

B        3. The assessment years in question are 1992-93 to 1998-
    99. The assessee purchases cotton 'after paying tax at the rate
    of 4% and thereafter process it into· surgical cotton for sale.

       4. For the relevant assessment years, the assessing
  authority had conducted a survey on the business premises of
C the'assessee and opined that surgical cotton produced and sold
  by the assessee is a separate commercial commodity from
  cotton and thus liable to be taxed at 4% under the Act.
  Accordingly, a show cause notice was issued to the assessee.
  The assessee took the stand that cotton and surgical cotton are
D not distinct commodities for the purposes of levy of tax under
  the Act. The said stand of the assessee was rejected by the
  Assessing Authority which passed ,an order of assessment
  whereby the assessee was taxed at the rate of 4% and the
  penalty and interest thereon, dated 28.03.2000.
E
         5. Being aggrieved by the aforesaid order of assessment,
    the assessee had carried the matter by way of an appeal before
    the Deputy Commissioner (Appeals) .Commercial Tax, Ajmer.
    The said authority, accepted the stand of the assessee that the
F   process adopted for making surgical cotton out of cotton
    purchased does not bring into existence a new commercial
    commodity and that surgical cotton is nothing but another form
    of cotton and accordingly, allowed the appeal and granted the
    relief to the assessee by order dated 10.10.2000.
G      6. Aggrieved by the aforesaid o~der passed by the First
  Appellate Authority, the Revenue had carried the matter before
  the Rajasthan Tax Board, Ajmer (for short, "the Board"). The
  Board after considering the me;an'ing of the expression
  'manufacture' as defined under the Act and also placing reliance
H on the observations made by this Court in various decisions has
 MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT.          597
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

come to the conclusion that the surgical cotton manufactured        A
by the assessee is a new commercial commodity exigible to
tax separately at the rate of 4% under the Act and therefore,
set aside the orders passed by the First Appellate Authority and
restored the orders passed by the assessing authority for the
assessment Y.ears in question by order dated 28.06.2002.            B

      7. The assessee being aggrieved by the said order
passed by the Board had approached the High Court in S.B.
Civil Sales Tax Revision No. 932 of 2002. The High Court has
noticed Entry 16 of the notification F.4 (7) FD/Gr.IV/92-70 (S.O.   C
No. 993), dated 04.03.1992 for the assessment year 1992-93
and analysed the submissions of parties to the lis and thereafter
reached the conclusion that surgical cotton is amenable to be
taxed as an independent entity and accordingly, rejected the
tax revision cases and confirmed the orders passed by the Tax
Board by the impugned judgment and order dated 23.01.2003.          0

    8. It is the correctness or otherwise of the said judgment
and order is the subject matter of these appeals.

     9. We have heard .the learned counsel appearing for the        E
parties to the lis. We have also perused the documents on
record including the judgments and orders passed by the
Courts below.

Submissions:
                                                                    F
     10. Shri V. Giri, learned senior counsel for the appellant
submits th.at by the process of transformation of cotton into
surgical cotton no new commercial commodity comes into
existence as a result of such process, and therefore it cannot
be considered as "manufacture" of surgical cotton from cotton       G
and thus would not be liable to tax at the rate of 4% under the
Act. He would place reliance on the decision of this Court in
CST v. Lal Kunwa Stone Crusher (P) Ltd., (2000) 3 SCC 525,
to bring home the point, that, since the purpose of sales tax.is
                                                                    H
    598     SUPREME COURT REPORTS                 [2014] 2 S.C.R.

A to levy tax on sale of goods of each variety and not the sale of
  the raw materiai of Which they may have been made and
  therefore, where commercial goods, are merely subjected to
  some processing, they may remain, commercially the same
  goods which cannot be taxed again in a series of sales so long
B as they continue to retain their identity as goods of that
  particular variety.· He would further expfain the term
  "manufacture" in context of the Act a11d draw support from the·
  decisions of this Court in, inter alia, Sterling Foods v. Stat~ o~
  Kamataka, (1986) 3 SCC 469 and CST v. Pio Food Packers, '
c 1980 Supp    sec    174 and submit that that the essentialfeature
  of "manufacturing" is the utilization of. original commodity and
  its transformation into a different commodity wherein the original
  article stands distinguished from the end product as an entirely
  different commodity and since the aforesaid is not the case
0 herein, the process of transformation of cotton into surgical
  cotton would not be a manufacture for the levy of tax under the
  Act and therefore, the High Court has erroneously dismissed
  the case of appellants confirming the, levy of tax on surgical
  cotton under the Act. Alternatively, he would submit that even if
E surgical cotton is assumed to be a distinct commodity from
  cotton, the originally purchased raw cott.on has already suffered
  taxation at the outset and therefore, a set off has to be provided
   in light of the scheme of the Act and tHe CST Act.

        11. Per contra, learned counsel for the Revenue would
F   support the judgment and order passed by the High Court.

    Relevant Provisions

        12. Before we advert to test the correctness or otherwise
G of the aforesaid submissions, it is necessary to notice that the
  Entry prescribing the rate of tax on cotton for the assessment
  years in question, i.e., from 1992-1993 till 1998-1999. The entry
  has been amended vide series of', seven subsequent
  notifications issued by the State Government. The said Entry
H
 MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT.              599
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

for the aforesaid relevant years reads as under:                      A
Assessment   Notification           Entry      Entry
Year         Date         Number      Number
1992-93      04.03.92   F.4 (7)       16       Cotton, that is to
                        FD/Gr.                 say all kinds of
                        IV/92-70               cotton (indigenous     B
                        (S.O. No.              or imported),
                        993)                   whether ginned or
                                               unginned, baled,
                                               pressed or
                                               otherwise including
                                               Cotton waste.          c
1993-94      12.04.93   F.4 (56)     Amen-     "after the existing
                        FD/Gr.       ded       words "Cotton waste"
                        IV/82-2      only      .... the expression
                        (S.O.        Entry     "and Absorbent
                        No. 8)       16 with   Cotton wool LP."
                        (Amend-       imme-    shall be added."       D
                        ment          diate
                        notifi-       effect
                        cation)
1994-95      07.03.94   F.4 (8)      20        Cotton, that is to
                        FD/Gr.                 say, all kinds of
                        IV/94-46               cotton (indigenous or E
                        (S.O. No               imported), kil')ds of
                        176)                   Readymade
                                               garments, whether
                                               ginned or unginned,
                                               baled, pressed or
                                               otherwise including   F
                                               Absorbent cotton
                                               wool LP. and Cotton ,
                                               waste.
1995-96      27.03.95   F.4 (11)     25
                        FD/Gr.                                        G
                        IV/95-49
                        (S.O. No               Cotton as defined
                        399)                   in clause (iv) of
                                               Section 14 of the
1996-97      15.03.96   F.4 (69)     28        Central Sales Tax
                        FD/Gr.                 Act, 1956 including    H
    600       SUl')REME COURT REPORTS                 [2014) 2 S.C.R.

                                            .
A                          IV/95.32                 absorbent cotton
                           (S.O. No.                wool l.P. & cotton
                           267)                     waste.
    1997·98     12.0~.97   F.4 (1)     27
                           FD/Gr.
                           IV/97·101
B                          (S.O. No.
                           299)                 .


    1998"99     09.07.98   F.4 (14)    29
                           FD/Gr.
                           IV/98·16
c                          (S.O. No.
                           114)
    1999"2000   26.03.99   F.4 (4)     39
                           FD/Gr.
                           IV/99·126
                           (S.O.
D                          No. 423)

        13. The question which arises fdr our consideration and
  decision in these
                 I
                    appeals is whether the manufacturing process
  is involved in the production of surgiqal cotton from cotton in
E terms of definition mentioned in Section 2(27) of the Act and
  whether the same commodity in the same entry would be liable
  for taxation tWice specially when the scheme of Act suggests
                  a
  that cotton is commodity of special importance and must be
  taxed only once in terms of Section 15 of the CST Act. Since
F the relevant entry has been amended vide successive
  notifications for each Assessment Year, we would analyse it
  sequentially.

    Assessment Year 1992-93

G       14. For the Assessment Year 1992-93, Entry 16 as
  reproduced above prescribes that cotton of all kinds whether
  indigenous or imported and whether ginned or unginned, baled,
  pressed or otherwise including cotton waste is covered by this
  entry. This is a comprehensive inclusicm of all kinds of cotton
H for the purposes of taxing. A reading of this er.try means that
 MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT.           601
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

the commodity cotton in all its forms namely, indigenous,            A
imported, ginned, unginned, baled, pressed, non-pressed is
liable to be taxed at the rate of 4% alongwith cotton waste.
Since neither does "surgical cotton" find mention in the
aforesaid entry as a commodity nor does it suitably fit into the
description aforesaid, it becomes relevant to delve into the         B
question whether the commodity in question has undergone any
change in its characteristics so as to acquire a new commercial
identity, that is to say, whether surgical cotton remain as cotton
after having undergone transformation through various
processes. In other words whether the process of conversion          c
of cotton into surgical cotton be termed as "manufacture of
surgical cotton".

     15. It is therefore relevant to notice the definition of
'manufacture' as defined in the dictionary clause of the Act.
Section 2(27) of the Act defines the expression 'manufacture'        D
as under:

     "27. "Manufacture" includes every processing of goods
     which bring into existence a commercially different and
     distinct commodity but shall not include such processing        E
     as may be notified by the State Government."

The definition aforesaid is an inclusive definition and therefor~
would encompass all processing of goods which would produce
new commodity which is commercially different and distinctly
                                                                     F
identifiable from the original goods. The definition however
excludes all such mechanisms of processing of goods which
have been notified by the State Government to the said effect.
Admittedly, no such exclusion in respect of the process in
analysis for surgical cotton has been notified by the State
Government. Therefore, the process of transformation has to          G
be tested on the anvil of proposition whether surgical cotton is
processed such that it is commercially different and distinctly
identifiable than cotton.

     16. The essential test for determining whether a process        H
    602       SUPREME COURT REPORTS                     [2014) 2 S.C.R.


A   is manufacture or not has been the analysis of the end product
    of such process in contradistinction with the original raw
    material. In 1906, Darling, J. had subtly explained the
    quintessence of the expression "manufacture" in McNichol and
    Anor v. Pinch, [1906) 2 KB ·'352 as under:
B
          " ... I think the essence of making, or of manufacturing is that
          what is made shall be a different thing from that out of which
          it is made."

       17. In order to understand the finer connotation of the
C expression 'manufacture', it may be useful to refer to the
  decision of this Court in the case of Empire Industries Limited
  and Ors. v. Union of India and Ors.,(1'985) 2 SCC 314, wherein
  this Court after exhaustively noticing the views of the Indian
  Courts, Privy Council and this Court had stated as under:
D
          "'Manufacture' implies a change; but every change is not
          manufacture and yet every change of an article is the result
          of treatment, labour and manipulation. But something more
          is necessary and there must be transformation; a new and
E         different article must emerge having a distinctive name,
          character or use. "

  (CCE v. Osnar Chemical (P) Ltd., (2012) 2 SCC 282; Jai
  Bhagwan Oil & Flour Mills v. Union of India, (2009) 14 SCC
  63; Crane Betel Nut Powder Works v, Commr. of Customs &
F Central Excise, (2007) 4 SCC 155; .CIT v. Tara Agencies,
  (2007) 6 SCC 429; Ujagar Prints (II) v. Union of India, 1986
  Supp SCC 652; Saraswati Sugar Mills v. Haryana State
  Board, (1992) 1 SCC 418; Gramophone Co. of India Ltd. v.
  Collector of Customs, (2000) 1 SCC 549; CCE v. Rajasthan
G State Chemical Works, (1991) 4. SCC 4 73; CCE v.
  Technoweld Industries, (2003) 11 SCC 798; Met/ex (I) (P) Ltd.
  v. CCE, (2005) 1 SCC 271; Aman Marble Industries (P) Ltd.
  v. CCE, (2005) 1 SCC 279; Shyam Oil Cake Ltd. v. CCE,
  (2005) 1 SCC 264; South Bihar Sugar Mills Ltd. v. Union of
H India, (1968) 3 SCR 21; Laminated Packings (P) Ltd. v. CCE,
  MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT.            603
    COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

  (1990) 4 SCC 51; Dy. CST v. Coco Fibres, 1992 Supp (1)               A
  SCC 290; CST v. Jagann&th Cotton Co., (1995) 5 SCC 527;
  Ashirwad /spat Udyog v. State Level Committee, (1998) 8
  SCC 85; State of Maharashtra v. Mahalaxmi Stores, (2003)
  1 sec 70; Aspinwall & Co. Ltd. v. CIT, (2001) 7 sec 525;
  J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. STO, (1965) 1 SCR          B
  900; CCE v. Kiran Spg. Mills, (1988) 2 SCC 348 and Park
. Leather Industry (P) Ltd. v. State of UP., (2001) 3 SCC 135)

       18. The following observations by the Constitution Bench
 of this Court in Union of India v. Delhi Cloth & General Mills Co.
 Ltd., 1963 Supp (1) SCR 586 where the change in the                   C
 character of raw oil after being refined fell for consideration are
 also quite apposite:

      "14 .... T,he word 'manufacture' used as a verb is generally
      understood to mean as 'bringing into existence a new             D
      substance' and does not mean merely 'to produce some
      change in a substance."'

      19. For determining whether a process is "manufacture"
 or not, this Court in Union of India v. J.G. Glass Industries Ltd.,
                                                                       E
 (1998) 2 SCC 32 has laid down a two-pronged test. Firstly,
 whether by such process a differE;lnt commercial commodity
 comes into existence or whether the identity of the original
 commodity ceases to exist and secondly, whether the
 commodity which was already in existence would serve no
 purpose but for the said process. In light of the said test it was    F
 held that printing on bottles does not amount to manufacture.

       20. A Constitution Bench of this Court in Devi Das Gopal
 Krishnan v. State of Punjab, (1967) 3 SCR 557 observed that
 if by a process a different identity comes into existence then it     G
 can be said to be "manufacture" and therefore, when oil is
 produced out of the seeds the process certainly transforms raw
 material into different article for use.

      21. In CCE v. S.R. Tissues (P) Ltd., (2005) 6 SCC 310.
                                                                       H
    604         SUPREME COURT REPORTS                  [2014] 2 S.C.R.


A the issue for consideration was whether the process of
  unwinding, cutting and slitting to sizes of jumbo rolls into toilet
  rolls, napkins and facial tissue papers amounted to
  manufacture. While holding that the said process did not
  amount to manufacture this Court inter alia, held as under:
B
         "12 .... However, the end use of the tissue paper in the
       I
         jur:nbo rolls and the end use of the toilet rolls, the table
           ,.                                 '

      ·'.napkins an~ the facial tissues remains the same, namely,
         for.household or sanitary use. The predominant test in such
         a case is whether the characteristics of the tissue paper
c        in the jumbo roll enumerated above is different from the
         characteristics of the tissue paper in the form of table
          napkin, toilet roll and facial tissue; In the present case, the
         Tribunal was right in holding that the characteristics of the
         tissue paper in the jumbo roll are not different from the
D         characteristics of the tissue paper, after slitting and cutting,
          in the table napkins, in the toilet rolls and in the facial
          tissues."

                                                   (emphasis supplied)
E
         22. At this stage the discussion. of difference between
    "processing" and "manufacture" holds ·.much relevance to well
    appreciate the contention canvassed by Shri Giri that the
    transformation of cotton into surgical· cotton would be mere
    processing and not manufacture.
F
       23. According to Oxford English Dictionary one of the
  meanings of the word "process" is "a continuous and regular
  action or succession of actions taking place or carried on in a
  definite manner and leading to the accomplishment of some
G result". In Chambers 21st Century Dictionary, the term "process"
  has been defined as "1. a series of operations performed
  during manufacture, etc. 2. a series of stages which a product,
  etc. passes through, resulting in the development or
  transformation of it."
H
 MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT.          605
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

    24. In East Texas Motor Freight Lines v. Frozen Food            A
Express·, 351 US 49 the Supreme Court of United States of
America has held that the processing of chicken in order to
make them marketable but without changing their substantial
identity did not turn chicken from agriculture commodities into
manufactured commodities.                                           B

     25. A three-Judge Bench of this Court in Pio Food Packers
case (supra) has dealt with the distinction between
"manufacture" and "processing". Therein the appeals were filed
against the order of the Kerala High Court holding that the
turnover of pineapple fruits purchased for preparing pineapple      C
slices for sale in sealed cans is not covered by Section 5-
A(1 )(a) of the Kerala General Sales Tax Act, 1963. This Court
while-deciding whether such conversion of pineapple fruit into
pineapple slices for sale in sealed cans amounted to
manufacture or not has observed as follows:                         D

     "5 .... Commonly, manufacture is the end result of one [or]
     more processes through which the originai commodity is
     made to pass. The nature and extent of processing may
     vary from one case to another, and indeed there may be         E
     several stages of processing and perhaps a different kind
     of processing at each stage. With each process suffered,
     the original commodity experiences a change. But it is only
     when the change, or a series of changes, take the
     commodity to the point where commercially it can no
                                                                    F
     longer be regarded as the original commodity but instead
     is recognised as a new and distinct article that a
     manufacture can be said to take place. Where there is no
     essential difference in identity between the original
     commodity and the processed article it is not possible to      G
     say that one commodity has been consumed in the
     manufacture of another. Although it has undergone a
     degree of processing, it must be regarded as still retaining
     its original identity."

                                           (emphasis supplied)      H
    606     SUPREME COURT REPORTS                     [2014] 2 S.C.R.


A   This Court held that.when the pineapple fruit is processed into
    pineapple slices for the purpose of being sold in sealed cans,
    there is no consumption of the original pineapple fruit for the
    purpose of manufacture. Pineapple retains its character as fruit
    and whether c;:anned or fresh, it could be put to the same use
s   and utilized in similar fashion.

        26. In Sterling Foods case (supra) this Court has observed
  that processed and frozen shrimps, prawns and lobsters cannot
  be regarded as commercially distinct commodity from raw
  shrimps, prawns and lobsters. The aforesaid view has further
C been adopted and applied by this Court in Shyam Oil Cake
  Ltd. case (supra) wherein the classification of refined edible oil
  after refining was under consideration and on similar lines it was
  held that the process of refining of raw edible vegetable oil did
  not amount to manufacture. In Aman Marble Industries case
D (supra), this Court has held that the cutting of marble blocl<s into
  smaller pieces would not be a process of manufacture for the
   reason that no new and distinct commercial product came into
  existence as the end product still rem~ined the same and thus
   its original identity continued.
E
         27. This Court in Crane Betel Nut Powder Works case
  (supra) citing the earlier decision in Brakes India Ltd. v. Supdt.
  of Central Excise, (1997) 10 SCC 717 wherein the process
  of drilling, trimming and chamfering was said to amount to
F "manufacture", has reiterated that if by a process, a change is
  effected in a product and new characteristic is introduced which
  facilitates the utility of the new product for which it is meant, then
  the process is not a simple process, but a process incidental
  or ancillary to the completion of a manufactured product. In
  Kores India Ltd. v. CCE, (2005) 1 SCC 385 the cutting of duty-
G paid typewriter/telex ribbons in jumbo rolls into standard
  predetermined lengths was considered by this Court and it was
  held that such cutting brought into existence a commercial
  product having distinct name, character and use and amounted
  to "manufacture" and attracted the liability to duty. In Standard
H
 MAMTASURGICALCOTION INDUS., RAJASTHAN v.ASSTT.                 607
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

Fireworks Industries v. Collector of Central Excise, (1987) 1           A
sec   600 this Court held that cutting of steel wires and the
treatment of.paper is a process for the manufacture of goods
in question.

     28. In Lal Kunwa Stone Crusher case (supra), the decision
                                                                        8
relied upon by Shri Giri, this Court has considered that whether
on crushing stone boulders into gitti, stone chips and dust
different commercial goods emerge so as to amount to
manufacture as per the definition of "manufacture" under
Section 2(~1) of the U.P. Sales Tax Act, 1948 and observed
that even ifgitti, kankar, stone ballast, etc. may all be looked        C
upon as separate in commercial character from stone boulders
offered for sale in the r:narket, "stone" as under the relevant
Entry is wide enough to include the various forms such as gitti,
kankar, stone ballast. It is in this light, that the Court had opined
that stone gitti, chips, etc. continue to be identifiable with the      D
stone boulders.

    29. Having noticed the relevant Entries, the definition of
'manufacture' and judicial precedents, we would now notice, (a)
the process adopted by the assessee for the purpose of                  E
converting raw cotton into surgical cotton and (b) the utility and
commercial use of surgical cotton in contrast to cotton.

Process of conversion of cotton into surgical cotton

    30. The Project report on Surgical Absorbent Cotton,                F
December 2010 (pg. 3 and 4) prepared by MSME -
Development Institute, Ministry of Micro, Small & Medium
Enterprises, Government of India provides for the following
steps in manufacture of surgical cotton:
                                                                        G
      "al Opening and cleaning of Raw.s:;otton:

      Raw cotton received in bale or otherwise is opened in
      opener where it is loosened and simultaneously dusU
      foreign particles are also removed. Loosened cotton is
                                                                        H
    608      SUPREME COURT REPO.RTS                  [2014] 2 S.C.R.


A         then put into a keir where chemicals such as caustic soda,
          soda ash, detergent, etc. are added along with adequate
          water and steam boiled for about 3-4 hours. By this
          process most of the natural waJXes and oils are removed
          while remaining foreign matter get soften and
B         disintegrated. The treated cotton is transferred to washing
          tanks where it is washed thoroughly.

          bl Bleaching:

          Washed cotton is bleached to remove brownish colour
C         developed due to chemical treatment. Bleaching is done
          by using bleaching agent such as sodium-hypochlorite or
          hydrogen peroxide. The bleaching process improves
          whiteness, wetting properties and assists in disintegration
          of any remaining foreign materials.
D
          cl Removal of Chemicals:

          The bleached cotton is thoroughly, washed again to remove
          the chemicals. A little quantity of dilute hydrochloric acid
          or sulphuric acid is also added to'. neutralize excess alkali.
E         If required, again washed with water. The water of cotton
          is removed with the help of hydro'-extractor. It is then sent
          to a wet-cotton opening machine:

          d) Drying:
F
          The cotton so obtained is dried by passing through dryer
          or alternatively subjected to sun dtying where provision for
          dryer is not there.

          e) Lapping:
G
          The dried cotton is sent to blower room where it is
          thoroughly opened and made into laps.

          0 Carding:

H
 MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT.        609
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

    The laps are then fed into carding machine wherein cotton     A
    is warped around rollers in thin layers.

    g) Rolling:

    Cotton so obtained is compressed and rolled into suitable
    role size along with packaging paper.                         B

    h) Weighing and cutting:

    The rolls are then weighed and cut according to required
    weight and sizes and labeled properly before packing in       C
    polythene sheets and heat sealed."

      31. The admitted facts are the assessee purchases raw
cotton by paying tax at the rate of 4 per cent. After such
purchase, after ginning the cotton is put into boiler and its
roughage is separated from cotton. The Clean cotton thereafter D
is treated with caustic soda and acid slurry. After such treatment
with the aforesaid chemicals, the cotton is cut in small pieces.
These pieces are transferred to a tank where bleaching process
takes place. Such bleached cotton is then transferred into tanks
for washing. As noticed by the High Court, the cotton passed E
from four stages from raw cotton upto surgical cotton. First, it
is put into tanks for washing each step takes sufficient tim~.
Second, the treated cotton is transferred to a process known
as hydro process where it is dried. Third, the cotton is put in
the blower for cleaning the same. Fourth, such blowed out cotton F
is thereafter transferred to kier where rolls are prepared and
then cotton is cut into pieces with the desired level, width and
size. The process does not end here. The rolled out calibrated
pieces of cotton are then put in carding machine where thin
layers are framed and such layers are packed in bundle for G
marketing. The rolled and compressed cotton is sent for trading.

Utility and Commercial use:

     32. The aforesaid view is further fortified by the common
parlance test. It can be said when a consumer requires surgical   H
    610      SUPREME COURT REPORTS                   [2014] 2 S.C.R.

                                                ~




A   cotton, he would not be satisfied witl'.l cotton being provided to
    him c;ind the same principle would reversibly apply that a
    customer of cotton would not use surgical cotton as a substitute.
    Further the purposes for which cotton and surgical cotton are
    used are diametrically opposite. While surgical cotton finds
B   utility primarily for medical purposes in households,
    dispensaries, hospitals, etc, raw cottbn being, inter alia, non-
    sterlised and riddled with organic impurities cannot be used as
    such at all.

C      33. For both these commodities operational territories are
  different and both have a different consumer segments. For
  medical and pharmaceutical purposes, use of ordinary cotton
  is not permissible. The fixed medical standards for the quality
  of surgical cotton are definite and definable such that ordinary
  cotton would not suffice the purpose. Surgical cotton is only
D used in form of medicine or pharmaeeutical product, thus it
  cannot be said that use of commodity, is interchangeable and
  in that view of the matter, surgical cotton is a different
  commodity. It is a commodity which is,used with a completely
  distinct identity in itself. As what is used for medical purpose
E is perfectly sterilized disinfected purified cotton. If raw cotton
  is used for surgical purposes, it would be counter-productive.
  Surgical cotton is extensively used for making napkins, sanitary
  pads and filters, etc. The surgical cotton is exclusively
  consumed into medical field while ordinary cotton has so many
F uses. The main chemical properties ,desired in a surgical
  dressing are inertness and lack of irritation in use, which is
  provided by the surgical cotton only if manufactured as per the
  standards specified. Raw cotton is purified by a series of
  processes and rendered hydrophilic in character and free from
G other external organic impurities for use in surgical dressings.
  Surgical cotton is, thus, completely different from ordinary
  cotton.

        34. The surgical cotton is made sterile and fit for surgical
H   use a·nd it is not put to the same use to which the
  MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT.              611
    COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

unmanufactured cotton is put and vice versa. Therefore, when             A
unmanufactured cotton undergoes a manufacturing process, a
new product saleable into the market which is having a distinct
identity, comes into existence which is known in the commercial
market by a different name and use. Surgical cotton possesses
higher utility than the cotton in its un-manufactured state.             B

      35. It is trite to state that "manufacture" can be said to have
 taken place only when there is transformation of raw materials
 into -a new and different article having a different identity,
 characteristic and use. While mere improvement in quality does          C
 not amount to manufacture, when the change or a series of
 changes transform the commodity such that commercially it can
 no longer be regarded as the original commodity but
 recognised as a new and distinct article. In the instant case,
 after going through the various steps that are carried out by ttre
 assessee for getting surgical cotton from raw cotton, we ean            D
.certainly say that cotton has undergone a change into a new
 commercially identifiable commodity which has           a   different
 name, different character and different use. The process of
 transformation is not merely processing to improve quality or
 superficial attributes of the raw cotton. The cotton looses its         E
 original form and it marketed as a commercially different and
 distinct product. This aspect of the matter is rightly noticed by
 the High Court by relying upon the decision of this Court in
 Empire Industries case (supra) wherein this Court has explained
 the meaning of the expression 'manufacture" as when the result          F
 of the treatment, labour and manipulation a new commercial
 commodity has emerged which has a distinctive new character
 and use.

      36. Having carefully observed the process of transformation        G
of raw cotton into surgical cotton and having noticed that there
is distinctive name, character and use of the new commodity,
i.e., surgical cotton, we are of the considered opinion that
surgical cotton is a separately identifiable and distinct
commercial commodity manufactured out of raw cotton and
                                                                         H
    612     SUPREME COURT REP0RTS                    [2014) 2 S.C.R.

A   therefore, ceases to be cotton under Entry 16 of the said
    notification.

         37. The second limb of Shri Giri's contention that under the.
    scheme of the Act and the CST Act, since tax has already been
8   paid once on the original commodity, i.e., raw cotton, the
    appellants would be entitled to claim set-off for the
    manufactured surgical cotton fails to impress us. The High Court
    has noticed that the said question was not raised before the
    original assessing authority and consequently, the authorities
C   below have not considered the said question and such being
    the case, the High Court has declined to consider the same. In
    our considered opinion, the said question cannot be considered
    by us for the first time in these appeals and thus, the conclusion
    of the High Court in this regard stands affirmed. However, the
    appellant is at liberty to raise the said question before the
D   appropriate authorities in accordance with law.

         38. In view of the above, we cannot take any exception to
    the impugned judgment and order passed by the High court in
    so far as the Assessment Year 1992-93 is concerned.

E   Assessment Years 1993-94 to 1998~99:

        39. We would now proceed to examine the claim of the
    assessee for the Assessment Years. 1993-94 to 1999-2000.
    The Entry for the relevant years is reproduced in the preceding
F   paragraph no. 12.

          40. In the year 1993, by an amend.ment notification F.4 (56}
    FD/Gr.IV/82-2 (S.O. No. 8) dated 12.04.1993, the legislature
    has consciously included "absorbent cotton wool I. P."
G   immediately after the words "cotton waste" in Entry 16. By the
    notification dated 07 .03.1994, for the Assessment Year 1994-
    95, the entry stands as "Cotton, that is to say, all kinds of cotton
    (indigenous or imported}, kinds of readymade garments,
    whether ginned or unginned, baled, pressed or otherwise
H   including Absorbent cotton wool LP. and Cotton waste". From
 MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT. 613
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

the Assessment Year 1995-96, the State has amended the A
entry such that cotton means cotton as defined in clause (iv) of
Section 14 of the Central Sales Tax Act, 1956 but has
specifically included absorbent cotton wool LP. & cotton waste
in such entry. The relevant entry has remained unaltered for the
succeeding assessment years 1996-97, 1997-98 and 1998-99 B
numbered as Entries 28, 27 and 29, respectively.

     41. It is an admitted fact that the appellant herein
manufactures surgical cotton from the cotton purchased by him.
The assessing authority and forums below including the High C
Court have noticed that "cotton" and "surgical cotton" are
different commercial commodities and therefore, sale of
"surgical cotton" attracts sales tax under the provisions of the
Act. However, during the proceedings before the High Court it
was not brought to the notice of the Court that an amendment
to Entry 16 was made in the year 1993 whereby the meaning D
of the expression "cotton" has been expanded to include
"absorbent cotton wool LP." and thus, the High Court has only
analysed Entry 16 as it stands for the Assessment Year 1992-
1993.
                                                                  E
     42. Therefore, the question that falls for our consideration
is whether in terms of the relevant entries for aforesaid
Assessment Years "surgical cotton" is liable to tax or not.

     43. It appears to us that the commodity "absorbent cotton
wool 1.P." as included in the relevant entries is the same as     F
"surgical cotton" which the assessee manufactures. The
absorbent cotton wool l.P. is a technical name of the cotton
which is sold in the market and commonly known as surgical
cotton.
                                                                  G
    44. The Project Report on Surgical Absorbent Cotton
(supra) at page 1 states that "absorbent cotton" is also known
as "surgical cotton or cotton wool" and mainly used for
medicinal purposes in hospitals, nursing homes, dispensaries
and at home (for first aid) etc. The report thereafter uses the   H
    614      SUPREME COURT REPORTS                  [2014] 2 S.C.R.


A   term "surgical absorbent cotton" uniformly to refer to the
    commodity in question before us.

          45. The lexicographers have also expressed the same
    medicinal use and properties of surgical cotton in terms of
    definition of absorbent cotton. The Collins English Dictionary
8
    defines "cotton wool/absorbent cotton/surgical cotton"' as
    '.'.absorbent cotton, purified cotton,· bleached and sterilized
  · cottor:i form." The Oxford Dictionary of English explains the
    meaning of "absorbent cotton" as cotton which is used for
C cleaning the skin or bathing wounds. In Encarta dictionary
    "absorbent cotton" is defined as under:

          "Cotton that has had the natural wax removed, making it
          absorbent and suitable for medical and cosmetic use as
          dressings or swabs".
D
          46. In fact, the Rajasthan High Court in the case ot,burga
    Cotton Industries Vs. State of Rajasthan and Ors., 1994 (1)
    WLC 696 had an occasion to look irito the meaning of the
    expression "absorbent cotton wool 1.P." while considering
E   notification dated 27.6.1990 which provided the rates of tax for
    cotton in Item No. 16 (the same as Entry 16 for Assessment
    Year 1992-93). The Court on consideration of the relevant
    literature had come to the conclusion that "absorbent cotton
    wool 1.P." is commercially known as surgical cotton. In our
    considered opinion, the view of the Rajasthan High Court
F   appears to be correct and consonant with the common jargon
    by which the commodity is recognised.

          46. In fact, the Rajasthan High Court in the case of Durga
    Cotton Industries Vs. State of Rajasthan and Ors., 1994 (1)
G . WLC 696 had an occasion to look into the meaning of the
    expression "absorbent cotton wool 1.P." while considering
    notification dated 27 .6 .1990 which provided the rates of tax for
    cotton in Item No. 16 (the same as Entry 16 for Assessment
    Year 1992-93). The Court on consideration of the relevant
H literature had come to the conclusion that "absorbent. cotton
 MAMTA SURGICAL COTTON INDUS., RAJASTHAN v. ASSTT.           615
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

wool 1.P." is commercially known as surgical cotton. In our A
considered opinion, the view of the Rajasthan High Court
appears to be correct and consonant with the common jargon
by which the commodity is recognised.

    47. Having noticed the commodity in question, we would
                                                                     8
now analyse the import of the expression "including" as
contained in the relevant entries.

     48. The expression "include" is used as a word of
extension and expansion to the meaning and import of the
preceding words or expressions. The following observation of C
Lord Watson In Dilworth v. Commr. of Stamps, (1.899) AC 99
in the context of use of''include' as a word of extension has
guided this Court in numerous cases:

    '. .. But the word "include" is susceptible of another
                                                                0
    construction, which may become imperative, if the context
    of the Act is sufficient to show that it was not merely
    employed for the purpose of adding to the natural
    significance of the words or expressions defined. It may
    be equivalent to "mean and include", and in that case it E
    may afford an exhaustive explanation of the meaning which,
    for the purposes of the Act, must invariably be attached to
    these words or expressions.'

    49. The meaning of the said expression has been
considered by a three Judge bench of this Court in the case of       F
the South Gujarat Roofing Tiles Manufacturers Association
and Anr. v. State of Gujarat and Anr., (1976) 4 SCC 601,
wherein this Court has observed:

    "Now it is true that 'includes" is generally used as a word      G
    extension, but the meaning of a word or phrase is extended
    when it is said to include things that would not properly fall
    within its ordinary connotation."

    50. Principles of Statutory Interpretation (12th Edn., 2010)
                                                                     H
    616      SUPREME COURT REPORTS                     [2014] 2 S.C.R.


A   by Justice G.P. Singh, at p. 181, has discussed in detail the
    connotations of the word "include~· and emphasized on the
    exhaustive explanation of the word ''inclusive" thus:

          " ... The word "include" is very generally used in
          interpretation clauses in order to enlarge the meaning of
B
          words or phrases occurring in the body of the statute; and
          when it is so used those words or phrases must be
          construed as comprehending, not only such things, as they
          signify according to their natural import, but also those
          things which the interpretation clause declares that they
c         shall include."

         51. In RBI v. .Peerless General Finance & Investment Co.
    Ltd., (1987) 1 SCC 424 this ~ourt has followed the
    observations in the Dilworth case (supra) and explained the
D   purpose and expanse of the "inclusive definitions" as under:

          "32. We do not think it necessary to launch into a
          discussion of either Dilworth case or any of the other cases
          cited. All that is necessary for us to say is this: legislatures
          resort to inclusive definitions (1) to enlarge the meaning
E
          of words or phrases so as to take. in the ordinary, popular
          and natural sense of the words and also the sense which
          the statute wishes to attribute to it; (2) to include meanings
          about which there might be some dispute; or (3) to bring
          under one nomenclature all transactions possessing
F         certain similar features but going .under different names.
          Depending on the context, in the process of enlarging, the
          definition may even become exhaustive."

          52. In Kamataka Power Transmission Corpn. v. Ashok
G   Iron Works (P) Ltd., (2009) 3 SCC 240 this Court after
    analyzing the afore-cited decisions has observed as follows:

          "17. It goes without saying that interpretation of a word or
          expression must depend on the text and the context. The
H
 MAMTA SURGICAL COTION INDUS., RAJASTHAN v. ASSTI.          617
   COMMNR. (ANTI-EVASION), BHILWARA, RAJASTHAN

    resort to the word 'includes' by the legislature often shows    A
    the intention of the legislature that it wanted t.o give
    extensive and enlarged meaning to such expression.
    Sometimes, however, the context may suggest that word
    'ineludes' may have been designed to mean 'means'. The
    setting, context and object of an enactment may provide         B
    sufficient guidance for interpretation of the word 'includes'
    for the purposes of such enactment."

     53. The word "include" is generally used to enlarge the
meaning of the words or phrases occurring in the body of the        C
statute; and when it is so used those words or phrases must
be construed as comprehending, not only such things, as ttiey
signify according to their natural import, but also those things
which the interpretation clause declares that they shall include.
That is to say that when the word "includes" is used in the
definition, the legislature does not intend to restrict the         D
definition: it makes the definition enumerative .but not
exhaustive. That is to say, the term defined will retain its
ordinary meaning but its scope would be extended to bring
within it matters, which in its ordinary meaning may or may not
comprise.                                                           E

Commr. of Customs v. Caryaire Equipment India (P) Ltd.,
(2012) 4 SCC 645; U.P. Power Corpn. Ltd. v. NTPC Ltd.,
(2014) 1 SCC 371; Associated lndem Mechanical (P) Ltd. v.
W.B. Small Industries Development Corpn. Ltd., (2007) 3             F
SCC 607; Dadaji v. Sukhdeobabu; Mahalakshmi Oil Mills v.
State of A.P.; Bharat Coop. Bank(Mumbai) Ltd. v. Employees
Union, (2007) 4 SCC 685)

     54. By introducing the word "including" immediately after
detailing the definition of cotton, the legislature has expanded    G
the meaning of the expression "cotton" for the purposes of the
Act. While the natural import suggests and prescribes only
unmanufactured cotton in all forms, the commodities "absorbent
cotton wool l.P." and "cotton waste" manufactured out of
                                                                    H
    618       SUPREME COURT REPORTS                [2014] 2 S.C.R.


A   "cotton" are intentionally and purposefully included in the
    relevant entries alohgwith cotton in its ordinary meaning.

           55. In light of the aforesaid,. we are of the considered
    opinion that "surgical cotton/absorbent cotton wGol l.P." is also
8   "cotton" for the purposes of the relevant entries in the
    notifications for assessment years 1993-94 to 1998-99 and
    therefore is liable to exemption from le'!Y of tax under the Act.
    In light of the same, we cannot sustain the judgment and order
    passed by the High Court for the assessment years 1993-1994
C   to 1998-1999.

         56. In the result, the appeals are allowed in part and the
    judgment and order passed by the High Court is confirmed for
    the assessment year 1992-93 and the judgment and order of
    tlQ High Court so far as it relates for the assessment years
D    1993-94 to 1998-99 is set aside. No order as to costs.

           Ordered accordingly.

    R.P.                                    Appeals partly allowed.