TMI Blog1993 (2) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... verted into butter for sale?" 2.. The applicant, M/s. Poison Model Dairy, was at the relevant time engaged in the business of selling butter both locally as well as in the course of inter-State trade and commerce, and part of the butter was also despatched by the applicant on consignment basis to its branches outside the State of Gujarat for the purpose of sale. The butter so sold by the applicant was obtained and prepared from cream which it purchased either locally from registered dealers, as well as unregistered dealers, or prepared out of milk purchased by it. The reference to this Court has been made in respect of assessments regarding three calendar years, namely, 1967, 1968 and 1969. 3.. The following are the relevant facts regarding the long-drawn litigation the applicant had to pass through in order to claim set-off under the relevant provisions of the Act and the Rules: (i) The applicant which purchased cream as aforestated claimed that the said cream was being resold by it in the form of butter and so it was entitled to set-off on the sale of butter inasmuch as exemption from the payment of sales tax was denied to it on the ground that the preparation of butter out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner, and pointed out that the Sales Tax Officer had exceeded his jurisdiction and travelled beyond the orders of remand by stating that the applicant was neither a reseller nor a manufacturer. The Assistant Commissioner accepted this submission and allowed the appeals and again remanded the cases back to the Sales Tax Officer for redetermining the claim of set-off in accordance with the norms prescribed by the Tribunal. This order was passed by the Assistant Commissioner on January 13, 1977. (v) After the second remand, the Sales Tax Officer passed fresh orders of assessment on July 11, 1977, allowing the set-off for an amount of Rs. 58,037 for the year 1967, Rs. 23,749 for the year 1968, and Rs. 11,021 for the year 1969. (vi) The Deputy Commissioner of Sales Tax thereafter proposed to revise the said assessment orders suo motu under section 57 of the Act and after hearing the applicant he revised the three assessment orders and completely disallowed the set-off granted to the applicant by passing the orders dated January 17, 1978. (vii) The applicant, therefore, preferred three revision applications Nos. 10 of 1978, 11 of 1978 and 12 of 1978, challenging the Deputy Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically assigned to the term "manufacture" and manufacturing process the preparation of butter from cream would not be included in such a process and the question of granting any set-off available in the case of "manufacture" under rule 41, would not arise. Clause (26) of section 2 of the Act gives the meaning of the term "resale". "(26) 'resale', for the purposes of sections 7, 8, 9, 10, 12 and 13, 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 any entry in Schedule B, without doing anything to them which takes them out of the description thereof in that entry, and the word 'resale' shall be construed accordingly;". 4.. So far as the present case is concerned, sub-clause (ii) of the definition of "resale" will be applicable, as admittedly the purchased goods, namely, cream were not sold in the same form in which they were purchased as contemplated by clause (i), and the preparation of butter out of cream could not be said to be "manufacture" as per the exclusion contained in rule 3(xv). No doubt, this meaning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be, a refund of the aggregate of the following sums, that is to say- (a) to (d)................................. (e) a sum recovered from the manufacturing dealer by another registered dealer by way of sales tax or general sales tax or both as the case may be, on the purchase by him, of goods from such registered dealer.................... Provided that such goods are used by him in the manufacture of taxable goods sold or in the packing of such taxable goods sold or in the packing of such taxable goods." Since the process of preparing butter out of cream is taken out of the meaning of "manufacture" by rule 3, the benefit of rule 41 is not available to the applicant as "manufacturer". 5.. Mr. S.L. Mody, learned advocate appearing for the applicant, submits that, (i) Since the process of preparing butter from cream is excluded from the meaning of the term "manufacture" as per rule 3(xv) of the Rules, what was sold by the applicant was cream itself, and the sale thereof would be covered by clause (ii) of the definition "resale " contained in clause (26) of section 2 which specifically provides that sale of the purchased goods, i.e., cream without doing an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e", the sale of butter would amount to sale of cream, though not in the same form, since butter is prepared by separating buttermilk from the cream. 8.. The submission made on behalf of the Revenue that this definition of "resale" is in the context of sections 7, 8, 9, 10, 12 and 13 only, and not for any other purpose, does not help the case of the Revenue, inasmuch as section 12 itself speaks of exemption from payment of sales tax at the time of purchasing cream, if the applicant had issued a certificate in the prescribed form. Instead, the applicant paid tax on the purchase of cream even though the goods were purchased for "resale" in the course of inter-State trade or commerce, after converting it into butter without adopting the process of "manufacture". It, therefore, follows that the applicant who is an authorised dealer would be entitled to claim a set-off in respect of the amount which he had already paid by way of tax at the time of purchase of cream. 9.. The purpose of framing Rules for granting drawback, set-off or refund is well-expressed in Prabhat Solvent Extraction Industries Pvt. Ltd. v. State of Gujarat [1982] 49 STC 322 (Guj). The Division Bench of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed that they were entitled to deduction of such part of their turnover as represented the resale of goods purchased by them, from a registered dealer. The Supreme Court, therefore, had to consider the question whether the sale of batteries after electrolysis could be said to be resale of the goods which they have purchased from the manufacturers. The Supreme Court considered the definitions of "resale" and "manufacture" which we have referred to above, and held that where substantially the goods purchased are resold, there should be a deduction of the turnover on which purchase tax has already been levied if the provision of law is interpreted in the practical and workable manner. 10-A. Hence we also hold that the sale of butter by the applicant after purchasing cream was actually resale of cream and it would be entitled to setoff under rule 43 of the Rules because Legislature has provided that preparation of "butter" from "cream" is not a manufacturing process. For the purpose of Sales Tax Act it remains the same commodity. 11.. So far as the fourth submission of Mr. Mody is concerned, we hold that the Deputy Commissioner could not exercise powers of revision under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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