COMMISSIONER OF SALES TAX Vs. HASTIMAL RATANLAL

JUDGEMENT

(1.) THIS is a reference under Section 44 of the M. P. General Sales Tax Act. The dealer purchases white cotton yarn and he dyes it into different colours and then sells the coloured yarn. Under Section 2 (r) of the Act the words "taxable turnover" have been defined and under Section 6 of the Act sales tax is payable on the taxable turnover of a dealer. The relevant part of Section 2

(2.) THE contention of the department in the present case, therefore, was that when the dealer purchases uncoloured yarn and dyes it, he consumes uncoloured yarn and manufactures coloured yarn out of it. Since he is exempt from sales tax on the sale of uncoloured yarn, he is liable to pay purchase tax under Section 7.

(3.) THE contention of the dealer before the lower tribunals was twofold. In the first place, he contended that by merely dyeing the yarn he did not utilize any manufacturing process and that the product of this process remained cotton yarn and, therefore, no purchase tax was payable. He also contended that in any case this was one of the "declared goods" under the Central Sales Tax Act and it could not be taxed twice or at a rate more than two per cent. These contentions were not accepted by the assessing officer or by the first appellate authority. But in the Board of Revenue the first contention of the dealer was accepted and the second contention was not decided because the dealer was held not liable to pay the tax as demanded by the department on the first contention. The Commissioner of Sales Tax then made an application for a reference to this court on the first question decided by the Board of Revenue. Upon that application the following question had been referred to this court: