' RUSTAM S. SIDHWA, J.---This is an appeal filed by the Central Cotton Committee, Karachi, calling in question the judgment of a learned Judge of the Lahore High Court dated 27-6-1977.
2. The short matter involved in this appeal is whether raw cotton, which has been ginned, and has been consumed by a mill is liable to cotton cess or whether such cotton which been consumed in the finished product, excluding the cotton waste thrown up by it, is so liable.
3. In August, 1964, the Pakistan Central Cotton Committee, the present appellant, wrote a letter to the Thal Textile Mills Limited, the present respondent No, 1, pointing out that under section 3 of the Cotton Cess Act, 1923, cotton cess was leviable on all cotton consumed by the mills and that the arbitrary deduction of 17% by them for alleged 'waste' from the total liability, was not permissible under the Act. Respondent No, 1 was asked to make the payment immediately. The Collector, Mianwali, the present respondent No, 2, vide letter dated 7-7-1964 reminded respondent No 1 of its liability to the payment of Rs,9,739.25 on account of cotton cess for the period from March, 1962 to June, 1964. Instead of paying the aforesaid amount, respondent No, 1 challenged the demand by means of a writ petition (W.P. No, 2013 of 1964) filed in the High Court in December, 1964. This writ petition came up for hearing in the year 1977 before a learned Single Judge of the Lahore High Court on 23rd June, 1977. The learned Single Judge accepted the writ petition vide judgment dated 27-6-1977, and held that the cotton which was converted into yarn could alone be considered as cotton consumed in a mill, within the meaning of section 3 of the Act, and cotton cess was only leviable on the cotton which was so consumed. Hence this appeal.
4. Mr. Fazal-i-Hussain, A.O.R., appears on behalf of the appellant Committee. On behalf of the appellant it is submitted that under section 3 of the Cotton Cess Act, 1923, cotton cess is levied on all cotton either exported from the Provinces of Pakistan to another place outside Pakistan or consumed in any mill in the Provinces of Pakistan and since "cotton" has been defined in section 2(c) of the said Act as "raw cotton, whether baled or loose, which has been ginned", what is taxable is the raw ginned cotton which is consumed or brought under process and not that which ultimately through consumption has produced any finished or unfinished product. It is submitted that by the very wording of section 3 of the Act, raw ginned cotton which is to be exported from Pakistan and raw ginned cotton which is to be consumed by any mill within Pakistan should be at par and not that one which is to be exported should be liable to a higher incidence of cess than that which has to be internally consumed. It is next contended that the note appearing in form "N', which happens to be the return which has to be submitted by the mills under section 6 of the Cotton Cess Act, 1923, which reads that "cotton imported from outside Pakistan and cotton waste are not liable to the cess" only means that if raw ginned cotton imported from outside Pakistan or any locally produced cotton waste is bought by a mill and consumed for the production of any yarn or cloth, the same will not be liable to the cess. It is submitted that sub-para (d) in the said form 'A', which refers to the "number of pounds of Pakistan cotta consumed or brought under process in the mill" is applicable in the context o section 3 of the Act to the raw cotton used or brought under process for the purposes of manufacture of yarn or cloth, irrespective of all questions as regards the quantity of raw cotton ultimately used in the manufacture of any finishe or coarse product or wastage arising therefrom.
5. Mr. Ayaz Hussain Advocate, appears on behalf of Colony Thai Textile Mills, respondent No, I. n behalf of the said respondent it is submitted that the word "consumed" appearing in section 3 of the Cotton Cass Act, 1923, means raw ginned cotton actually cons med by the mill during the process of manufacture of yarn or cloth, excluding co ton waste arising therefrom. It is submitted that the Note appearing under for "A", which is the return under section 6 of the Cotton Cass Act which has to be emitted by the Mills, which clearly states that cotton waste is not liable to the c s and also clause (d) of the said form, which refers to cotton consumed or brought t under process in the mill, it is clear that raw ginned cotton actually consume' , excluding cotton waste that is thrown out or discharged, is liable to cuss. For the proposition that the word "consumed" as appearing in section 3 of the Act, means that which is actually consumed in the product and not that which is thrown out or discarded, In re: Hull and Lady Meux (1905) 1 KB 588) London County Council v. Great Eastern Railway Company (1906) 2 KB 312) and Cal well v. Jones (1923) 2 KB 309) have been cited. For the proposition that taxing statutes should be interpreted in the light of what is expressly provided therein, M/s. Hirjina and Company v. Commissioner of Sales Tax (1971 SCM R 128) and Commissioner of Agricultural Income Tax v. B.W.M. Abdur Rahman (1973 SCR 445) have been referred. For the proposition that where there is ambiguity, t e same must be resolved in favour of the subject and not the State, Lieut.-Col. Muhammad Amir Khan v. The Controller of Estate Duty (PLD 1961 SC 119 is pressed. For the proposition that the dictionary meaning should be used in harmony with the context of a taxing statute, Rafhan Maize Products v. Commi Toner of Income Tax (PLD 1988 SC 398) has been referred.
6. We have given our anxious consideration to the arguments addressed by the learned counsel for the appellant and the respondent and have also perused the record. Before deali g with the arguments it is necessary to reproduce certain sections of the Cot on Cess Act, XIV of 1923, and form "A" provided by rule 16 of the Pakistan Cot n Cass Rules, 1950:-- Cotton Cess Act, 1923 "2(c) 'Cotton' means raw cotton, whether baled or loose, which has been ginned; 2(e) 'mill' means any place which is a factory as defined in section 2 of ' the Factories Act, 1934, and in which cotton is coverted into yarn or thread either for sale as such or for conversion into cotton goods as defined in section 3 of the Cotton Duties Act, 18%;
(3) Imposition of cotton cess. --(1) There shall be levied and collected on all cotton either exported from the Provinces of Pakistan to any place outside Pakistan or consumed in any mill in the Provinces of Pakistan a cess at such rate as the Central Government may fix by Notification in the official Gazette.
(6) Delivery of monthly returns. --(1) The owner of every mill shall furnish to the Collector, on or before the seventh day of each month, a return stating the total amount of cotton consumed or brought under process in the mill during the preceding month, together with such further information in regard thereto as may be prescribed: Provided that no return shall be required in regard to cotton consumed or brought under process before the commencement of this Act.
(2) Every such return shall be made in such form and shall be verified in such manner as may be prescribed."
FORM "A"
' Return under section 6 of the Cotton Cess Act, 1923 (XIV of 1923) for the month of 19
(a) Name of Mill..................
(b) Name of owner or Agents...............
(c) Average number of. Mule Spindles....... Spindles working during Ring Spindles month
(d) Number of pounds avoirdupois of Pakistan cotton consumed or brought under process in the Mill during month of.....
19.....
(1) Pressed Cotton.................
(2) Unpressed Cotton..............
Total...............
(e) Equivalent to bales of 400 lbs. Each................
(f) Cess Rupees Two per bale....... Rs, As. P.
(g) Amount remitted herewith ' Score out (g) if remittance does not accompany return) I hereby declare that I have compared the above particulars with the records and books of my mill, and that they are, in so far as I can ascertain, accurate and complete.
' Dated this day of.............. 19 (signed)
(To be signed by the Mill-Owner, Managing Agent, or other officer of the Mill)"
' Note.--Cotton imported from outside Pakistan and cotton waste are not liable to the cess. The expression "Pakistan" in section 3 of the Act includes acceded States.
7. Reading section 3 it is clear that what is to be taxed is cotton which is either exported from the Provinces of Pakistan to any place outside Pakistan or consumed in any mill in the Provinces of Pakistan. The word "cotton" is defined in section 2(c) to mean "raw cotton, whether baled or loose, which has been ginned". What is clear and which stands out a mile is that what is to be taxed is raw ginned cotton, whether baled or loose, as used in its normal generic sense. It is, therefore, not possible to divide this cotton into two parts: that part of the raw ginned cotton which is valuable to the mill concerned and results in the cloth or yarn which is ultimately produced and that part of the raw ginned cotton which is valueless to it ultimately and is thrown out or discarded as waste cotton, whether or not as a by-product. If such an interpretation were to be adopted, the charging section would lead to a discriminatory levy, for in the hands of the exporter the raw ginned cotton comprising both the useful and the unuseful part would be liable to the normal cess if it were to be exported, but in the hands of the textile mill it would be subject to the normal cess, less some rebate to cover the cotton waste excluded. This, is not the intention of the law, because a clear reading of section 3 of the Act shows that the exporter and the internal consumer are to be at par and that if 10 bales of raw cotton are to be exported from Pakistan and the same number of bales are to be consumed by any mill internally, both are to be liable for the same amount of cess.
8. The word "consumed" in section 3 now requires examination. The word "consumed" means to use, to eat, to utilise, to make use of, to use up, to devour. In the normal sense the word "consumed" in section 3 would mean the raw ginned cotton which a mill has used or utilised. The words "cotton consumed or brought under process in the mill" during a particular month, refer to the same idea.
The word "consumed" in section 3 cannot be interpreted according to its utility value e.g. That which goes into the manufacture of yarn or cloth and that which does not go into the ultimate product, but which is thrown up or discarded as waste byproduct. This would be breaking up the raw cotton into components--the original raw cotton in its normal ginned state and the normal raw cotton in its refined state, excluding the waste. Likewise, the word "consumed" in this section cannot be interpreted according to the stage of manufacture e.g. That part of the cotton first fed or initiated in the process and that part of the cotton utilised in the final product at the final stage, excluding the waste. The charging section admits of no such tortuous meaning and no such intent can be forced down the throat of the legislative draftsman. Since the date the Act was enacted, raw cotton consumed i.e, utilised by the mill in the manufacture of yarn or cloth, has been the subject of cess and the levy has never been reduced to compensate for any wastage. The decision of the High Court is the first deviation from the settled interpretation and somewhat startlingly innovative. The legislative draftsman had no intention to create any dichotomy, admits of no exeception. What was intended, like in statutes taxing raw materials utilised in the manufacture of a product, was to fix the charge on the consumption i.e, the raw cotton used up or utilised. The words "brought under process" appearing in clause (d) of Form "A" clearly point to this idea i.e, the total raw cotton that is used or fed or put through the machines at any stage, irrespective of natural or other losses arising from the breakdown of machinery or such losses arising out of the breakdown of the raw material into its various components. The actual consumption and not the effective consumption, is what is aimsed at. To read into the section any extraneous intent would be violative of the clear meaning so very apparent in the section itself.
9. I would not take up the rulings cited by the learned counsel for the respondent. In Hull and Lady Meux's case (supra), Lady Manx let out to Robert Hull and another a farm on yearly tenancy. The tenants agreed to manage and cultivate the whole of the land in a good and husband like manner, keeping the same in good heart and condition and to stack upon the premises all the crops of hay and corn arising from the farm, and to consume on the farm all the hay, straw, chaff and turnips and other green crops arising, therefrom, and to carry out and spread upon the farm in regular succession all the dung and manure arising, therefrom. The tenancy having been terminated, the tenants gave notice to Lady Meux regarding their claim for compensation in respect of the unexhausted improvements. Lady Meux also gave a notice to the tenants of a claim for compensation in respect of loss of the manurial value of hay and straw destroyed by fire. The learned Judge held that the claim of Lady Meux was not tenable, which decision was approved by the Court of Appeal. Vaughan Williams L.J., who delivered the judgment, held that what was intended was that if there was hay, chaff, etc. In existence, then they had to be used in a husbandlike manner where it was possible to apply them, and if there was no such hay or chaff which could be consumed by the mouths of the cattle, the clause did not impose any liability on the tenant. This case is, therefore, distinguishable and offers no guidance to the present case.
10. In the case of London County Council (supra), a railway locomotive engine using coal or similar fuel emitting smoke, under the law, had to be constructed on the principle of consuming its own smoke and a penalty was attached to the user of an engine not so constructed, by section 197 of Regulation of Railways Act, 1968, which was made an offence under section 114, if the engine, though constructed on the principle of consuming its own smoke, failed to do so as far as practicable through default of the company or its servants. An engine of the Great Eastern Railway Company, properly constructed on the principle of consuming its own smoke, emitted dark smoke for a short time while running on their railway on two occasions. The smoke was not emitted through any default in the engine. It was held that the engine had not failed to consume its own smoke as far as practicable through any default of the railway company, within the meaning of section 114 of the Railways Clauses Consolidation Act, 1845. It was also held that the law did not bind the railway company to use only anthracite coal, because that was the coal which gave off the least smoke, and that the statute was complied with if the railway engine was so constructed which would, if given the use of a coal in all circumstances reasonable to use, would consume, as far as practicable, the smoke which that coal would necessarily give off. This case is also distinguishable, as the dispute was whether the railway was committed to only use anthracite coal and not any other coal; the engine otherwise being constructed to consume its own smoke as far as possible.
11. In Caldwell's case (supra), the question was whether the respondents were guilty of violation of section 4 of the Licensing Act 1921 for consuming intoxicating liquor outside permitted hours in the licensed premises. On behalf of the respondents it was urged that since the whisky which they had consumed had not been at any time sold or supplied by the licensee or by the bar maid of the premises, but had been taken there in a bottle by the respondents when they entered the premises, the respondents were not liable. It was held that as they had drunk whisky in the licensed premises outside permitted hours, they were liable. In this case the word "consumed" was construed in its ordinary sense and the fact whether liquor which was consumed at the licensed premises was not sold or supplied there by the licensee, was treated as an irrelevant circumstance.
This case is helpful to explain the case in hand, and the observation of Lord Hewart, C.J., that it was not necessary to torture the word "consumed" into meaning something artificial, if its natural meaning was not repugnant to reason, would apply to the case in instance before us, because looking at section 3 of the Cotton Cess Act as a whole and the apparent object of the legislature, it is clear that the cess is intended to apply to raw cotton which is used or utilised by the mill.
12. The Note in Form "A" that "cotton imported from outside Pakistan and cotton waste are not liable to the cess", only mean that if any mill in Pakistan was to consume cotton imported from outside Pakistan or locally produced cotton waste for the production of any yarn or cloth, it would not be liable for the cess. Since locally produced raw -cotton is the subject of cess when used in the manufacture of yarn or cotton goods, the cotton waste which arises out of the first operation is good quality cotton waste, which can be used for production of coarse cloth. Since it could be the subject of cess again, waste cotton has been excluded from liability altogether. The "Note", therefore, does not deflect the meaning of the word "consumed" appearing in section 3 into unchartered channels.
13. For the foregoing reasons, this appeal is accepted and the decision of the Lahore High Court dated 27-6-1977 is set aside. However, there shall be no order as to costs.