STATE OF GUJARAT Vs. LINA TRADERS

JUDGEMENT

(1.) ON being moved by the State under section 69 (1) of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as "the said Act"), the Gujarat Sales Tax Tribunal has referred the following two questions of law for our decision : " (1) Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in holding that the process of sieving the grit or stone chips as originally purchased, which the opponent had used for the purpose of obtaining stone chips or kapchi of different grades therefore, did not amount to manufacture of any goods within the meaning of the term 'manufacture' as defined in section 2 (16) of the Gujarat Sales Tax Act, 1969 ? (2) Whether, on the facts and in the circumstances of this case, the Tribunal was right in law in holding that on the facts abovestated and found, the disputed sales were resales of the goods originally purchased from registered dealers, within the meaning of the term "resale" as defined in section 2 (26) of the Gujarat Sales Tax Act, 1969 and that, therefore, the opponent was entitled to claim deduction of those sales from its turnover of sales in terms of clause (ii) of sub-section (1) of section 10 of the Gujarat Sales Tax Act, 1969 ?"

(2.) TO answer the said questions, it is necessary to refer to certain relevant facts which are as under : (i) The opponent carried on business to purchase grit or stone chips and to sell them as kapchi as known in Gujarati after cleaning and grading them into various sizes by passing them through sieves. During the assessment year being Samvat year 2029, the opponent sold various grades of stone chips and he treated those sales as mere resales of grit or stone chips, and had accordingly paid tax along with returns filed under the said Act. (ii) Before the Sales Tax Officer it was the case of the opponent that after purchasing the grit the same is subjected to process of sieving which would result into separating stone chips of different sizes and he has, thereafter, effected sales of such stone chips of different sizes. According to the opponent such transaction of sales were mere "resales" within the meaning of the term "resale" as defined under section 2 (26) of the said Act. Therefore, according to the opponent it was entitled to deduct resales of disputed goods from its turnover of sales under section 10 (1) (ii) of the said Act. This plea of the opponent was not accepted by the Sales Tax Officer on the ground that process of sieving the original grit or stone chips had resulted into "manufacture" of stone chips of various grades or sizes and such stone chips (kapchi) are different commercial commodities from the goods originally purchased, namely, "grit". The Sales Tax Officer, therefore, did not allow the claim of deduction on account of transaction being resales. (iii) Dissatisfied with the said order of the Sales Tax Officer, the opponent carried the matter in appeal to the Assistant Commissioner, Sales Tax, who dismissed the same and confirmed the order of the Sales Tax Officer. (iv) Opponent carried the matter further in second appeal before the Gujarat Sales Tax Tribunal and canvassed the very contentions which were raised before the Sales Tax Officer. After examining the definition of term "resale" as given under section 2 (26) of the said Act and that of the term "manufacture" as given under section 2 (16) of the said Act the Tribunal came to the conclusion that the process of sieving the grit from stone chips originally purchased in order to separate them into various sizes and to sell them thereafter did not result into production of a new or a different commercial commodity and, therefore, did not amount to manufacture. The Tribunal also found that by subjecting the grit or stone chips to the process of sieving there was no change in the form of original commodity, and therefore, the transaction of sales of such stone chips by the opponent could be regarded as resales of grit purchased by the opponent and accordingly it directed that the order of assessment should be modified and amount of tax, if paid, by the opponent to be refunded to it. (v) Dissatisfied with this judgment and order of the Tribunal, the State filed application under section 69 (1) of the said Act to the Tribunal to refer questions of law for our decision which have arisen out of the aforesaid judgment and order of the Tribunal. The Tribunal granted the said application and referred to us the aforesaid two questions of law for our decision.

(3.) HAVING thus examined the nature of business and the process to which the things purchased are subjected to by the opponent we may now turn to the definition of "resale" as contained in clause (26) of section 2 of the said Act : " (26) 'resale' for the purposes of sections 7, 8, 10, 13 and 15 means a sale of purchased goods : (i) in the same form in which they were purchased; or (ii) without doing anything to them which amounts to, or results in, a manufacture, or (iii) being goods specified in entries 1 to 3 in Part A of Schedule II and in entries 1 to 6 in Part B of Schedule II without doing anything to them which takes them out of the description thereof in those entries, and the word 'resell' shall be construed accordingly. " It shall have to be noted that this definition of word "resale" is for the purposes of sections 7, 8, 10. One of the sections under which the deduction is claimed by the opponent is section 10 (1) (ii ). Therefore, for the purpose of section 10 "resale" means, the sale of purchased goods in the same form in which they were purchased. In the present case, the opponent purchased grit, i. e. , crushed stones. He has not sold the grit as such by the transaction in question. Admittedly, he has subjected such grit to the process of sieving which has helped him in obtaining stone chips of smaller and more or less uniform sizes in different grades. Question, therefore, which is required to be answered is to whether the opponent has resold the goods in the same form in which they were purchased. That leads to the enquiry as to what is meant by the words "same form" as used in section 2 (26) (i ). The word "form" connotes visible aspect in which the thing exists or manifests itself. It is in this sense that the words "same form" are used in clause (i) of section 2 (26 ). If the visible appearance of the goods purchased does not change and the same are sold it can be said to be "resale" of purchased goods. From clause (ii) of the said definition the legislative intent becomes clear. If nothing is done to goods purchased and they are sold in the same visible appearance in which they manifest themselves at the time of their purchase, clause (i) is attracted so as to describe that transaction of sale of purchased goods as "resale". However, when such goods are subjected to any process which is sort of manufacture as defined in section 2 (16) of the said Act, it would still be "resale" of purchased goods. If the goods purchased are subjected to process which results into bringing about of new distinct commercial commodity known by distinct name having distinct commercial use then what is being sold is not the goods purchased, but that distinct commercial commodity with separate distinct name and use, and therefore, it would not be "resale" within the meaning of section 2 (26 ).