STATE OF GUJARAT Vs. KOSAN GAS COMPANY

JUDGEMENT

(1.) THE Gujarat Sales Tax Tribunal at Ahmedabad has referred to this High Court the following question of law under section 69 of the Gujarat Sales Tax Act, 1969. " Whether, on the facts and in the circumstances of this case, the Gujarat Sales Tax Tribunal was right in law in holding that the process of transferring and/or collecting and/or filling liquid petroleum gas (L. P. G.) from a big container into cylinders was not a process of manufacture as defined under section 2 (16) of the Gujarat Sales Tax Act, 1969 and that the opponent is entitled to the deduction of resales of gas purchased from registered dealers on their turnover ?"

(2.) THE facts and circumstances under which the present reference has been made by the Tribunal at the instance of the Revenue may be noticed thus. THE assessee-company is carrying on the business of reselling liquid petroleum gas (hereinafter to as "l. P. G. " ). THE assessee is a registered dealer under the Gujarat Sales Tax Act, 1969. THE assessee used to purchase L. P. G. in bulk from M/s. Hindustan Petroleum Corporation Limited and fill in the same into cylinders and resell them. THE question, which had arisen at the time of the assessment orders for the three periods, of which reference shall be made immediately, was as to whether it was a resale or manufacture. THE Sales Tax Officer had reached the conclusion that it was a case of resale of the goods purchased from the registered dealers and accordingly deductions were allowed.

(3.) WHILE coming to the conclusion that the abovesaid small process cannot be said to be a manufacturing activity, the Tribunal had derived assistance from two Supreme Court decisions. Firstly the Tribunal had placed reliance on the principles laid down by the Supreme Court in the case of Commissioner of Sales Tax v. Harbilas Rai and Sons [1968] 21 STC 17. In that case it appears that the pig bristles were collected and later on they were boiled and washed with soap and other chemicals and were sorted out according to their size and colour and were tied in separate bundles for being despatched to foreign countries for sale. The question before the Supreme Court was as to whether the abovesaid activity can be branded as manufacturing process. The Supreme Court had taken the view that the abovesaid activities would not convert the pig bristles into something essentially and commercially different. The other decision is the case of Commissioner of Sales Tax v. D. S. Bist [1979] 44 STC 392. In this decision also the Supreme Court has laid down a touchstone on which the question can be examined. The facts before the Supreme Court were that the tea leaves sold by the assessee were subjected to a small process or some activity with a view to save the tea leaves from perishing and making them fit for transporting and marketing them. The Supreme Court had taken the view that even if the abovesaid process was done for the purpose of making fit the commodity for transport and market, such process would never change the character of the article. The question which was drawn by the Supreme Court was as to whether by the abovesaid process, the article undergoes such a vital change by which the article would lose its character which it was having before the abovesaid process.