TMI Blog1992 (10) TMI 249X X X X Extracts X X X X X X X X Extracts X X X X ..... ess the goods so purchased are resold by the dealer" and what meaning can be ascribed to the word "resold". If the goods are purchased by a dealer from a person who is not a registered dealer and the said goods are specified in Schedule II or III and they are resold, then purchase tax is not to be levied. For considering as to what meaning can be ascribed to the word "resold" we have to refer to the meaning of "resale" as specified under section 2(26) of the Sales Tax Act, which reads as under: "2(26) 'resale' for the purposes of sections 7, 8, 10, 13, 15, 19A and 19B 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 'resale' shall be construed accordingly;" This definition of the word "resale" is given for the purposes of sections 7, 8, 10, 13, 15, 19A and 19B of the Sales Tax Act. In the present case, we are not concerned wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mixing, refining, alloying or stamping of bullion or the mixing of bullion with gold or silver derived from the melting of article of gold or silver; Explanation.-For the purpose of this clause 'bullion' shall be deemed to include also the goods specified in entry 2 in Schedule III; (x) the cutting of paper from reels into reams and the ruling of papers; (xi) the recovering of jewels and other components from old jewellery and ornaments; (xii) the preparing from betel leaves, of pan, tambul, bida or patti; (xiii) the grinding of chillies, turmeric or other condiments and the grinding of masala and its ingredients and the mixing or blending of condiments and spices; (xiv) the preparing of butter from cream or ghee from butter or cream without use of power; (xv) the rolling of bidies by hand; (xvi) any activity carried out in relation to goods specified in any entry in Schedule I as a result of which, the resultant product is not taken out from Schedule I; (xvii) any activity carried out in relation to any of the declared goods in any entry in Schedule II as a result of which, the resultant product is not taken out of the description thereof in that entry; (xvii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Sukhram Jagannath [1982] 50 STC 76 (Guj) this Court considered the definition of the word "manufacture" under the Sales Tax Act and held as under: "It is no doubt true that the Legislature has defined the term 'manufacture' in the widest term by taking in besides the activities of producing, making, extracting, collecting, altering, ornamenting or finishing the activities of processing, treating or adapting any goods so as to make them suitable for a given purpose. But merely because the Legislature has defined the term in such a wide term, it would be too spacious to contend that any processing, treating or adapting of goods would amount to, or result in, a manufacture. Any and every process, treatment or adaptation will not amount to, or result in, a manufacture. It would cease to be a resale only if something is done to the goods which would amount to, or result in, a manufacture. In other words, where some transformation in a sense of a new and a different article emerging as a result of the processing, treatment or adaptation having different name, characteristic or use so that the end-product does not retain a continuing substantial identity that it can be said that man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Supreme Court in the case of Collector of Central Excise v. Rajasthan State Chemical Works AIR 1991 SC 2222. The court dealt with the word "manufacture" as defined in section 2(f) of the Central Excises and Salt Act, 1944. The court observed that in determining what constitutes "manufacture" no hard and fast rule can be applied and each case must be determined on its own facts having regard to the context in which the term is used in the provision under consideration. The court pertinently observed that, whenever a commodity undergoes a change as a result of some operation performed on it and in regard to it, such operation would amount to processing of the commodity; each step towards production would be a process in relation to the "manufacture"; that the natural meaning of the word "process" is a mode of treatment of certain materials in order to produce a good result, a species of activity performed on the subject-matter in order to transform or reduce it to a certain stage. The court relied upon the following observations in the case of J.K. Cotton Spinning and Weaving Mills Co. Ltd. v. Sales Tax Officer [1965] 16 STC 563 (SC); AIR 1965 SC 1310: "In J.K. Cotton Spin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries from manufacturers were selling the said batteries in the same form or not so that they are entitled to get deduction from their turnover of such part thereof as related to resale of the batteries on the ground that the goods sold by them were the same goods as purchased from the manufacturers. The court considered the definition of the word "manufacture" along with the word "resale" and observed that the words used in the definition of "manufacture" are very wide, yet they should not be interpreted so widely as to render the provision practically meaningless and so as to treat the goods sold as different merely because some slight additions or changes are made in the goods which are purchased before they are sold. The court held as under ".....If such a wide interpretation is given there may be very absurd results flowing as a consequence thereof. For instance, the definition includes the word 'ornamenting'. If a dealer purchases certain goods and merely adds some decorative material thereto, according to the State's interpretation, there will be a 'manufacture'. For instance, if a car is purchased and some lights or some special gadgets are added thereto, the interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess. Clause (xvii) provides that any activity carried out in relation to any of the declared goods in any entry in Schedule II as a result of which, the resultant product is not taken out of the description thereof in that entry would not be included in manufacturing process. From these clauses it is clear that the Legislature has specifically provided that the process, which is carried out in relation to goods and which is such that the resultant product is not taken out of the description of the goods mentioned in various entries of Schedule I or II, would not be manufacturing process for the purposes of the Sales Tax Act. The court further referred to the decision of the Bombay High Court in the case of Nilgiri Ceylon Tea Supplying Co. v. State of Bombay [1959] 10 STC 500, and the observation that the words used by the statute, namely "processed or altered in any manner after such purchase" were very wide. The court read down the scope of this expression and considered that, for the purposes of the definition, there should be some alteration in the nature or character of the goods, and observed as under: "In our opinion, the interpretation of section 2(17) calls for a like l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ". However, in each case it would depend upon the fact whether there is some change in the character or nature of the goods. Further, as provided under section 2(16), the prescribed manufacturing processes are required to be excluded. Rule 3 of the Gujarat Sales Tax Rules, 1970, which provides an exhaustive list of processes which are not to be included in the manufacturing process, is quoted hereinabove. Clause (xvi) of rule 3 provides that any activity carried out in relation to goods specified in any entry in Schedule I as a result of which the resultant product is not taken out from Schedule I would not be included in the manufacturing process. Clause (xvii) of rule 3 provides that any activity carried out in relation to any of the declared goods in any entry in Schedule II as a result of which the resultant product is not taken out of the description thereof in that entry would not be included in manufacturing process. From these clauses, it is clear that the Legislature has specifically provided that the process, which is carried out in relation to goods and which is such that resultant product is not taken out of the description of the goods mentioned in various entries of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the process applied by the assessee on the tins resulted in manufacturing of a new article or it amounts to manufacture in the sense that there is alteration in the nature or character of the goods. The Tribunal decided the case solely on the ground that the tins are purchased as consumable stores, therefore, they can never be resold. For this purpose, the Tribunal has relied upon the decision in the case of Vasuki Carborundum Works v. State of Gujarat [1979] 43 STC 294 (Guj). In our view, the aforesaid approach is erroneous. In Vasuki's case [1979] 43 STC 294 (Guj) the court had not dealt with the provisions of section 15 read with section 2(16) and 2(26). The court considered section 13(1)(B) which prescribes that there shall not be deducted from the turnover of sales, sales of goods to a recognised dealer as provided in sections 7, 8 and 10 unless the recognised dealer certifies in the prescribed form, that the goods other than prohibited goods sold to him are. goods purchased by him for use by him as raw or processing materials or as consumable stores in the manufacture of taxable goods for sale by him. The court interpreted the phrase "consumable stores in the manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thereafter, the court has held that it is not possible in the very nature of things to lay down exhaustively or to suggest a straight jacket formula as to what would be the articles or goods required in a process or activity which though not strictly a manufacturing activity itself but is such an integral part thereof that in its absence the manufacturing activity may not be commercially expedient. Further, in the case of Collector of Central Excise v. Eastend Paper Industries Ltd. [1990] 77 STC 203 (SC); AIR 1990 SC 1893 the court considered the question with regard to wrapping paper which was used as packing material. The court has dealt with the question whether wrapping of finished product by wrapping paper is a process incidental and ancillary to the completion of manufactured product under section 2(f) of the Central Excises and Salt Act, 1944 and whether wrapping is used as a component part of finished excisable goods attracting the benefit of the Notification No. 18A/83-CE, dated July 9, 1983. The Supreme Court has considered the aspect that in order to take benefit of nonlevy of excise duty on wrapping paper it had to be established that the wrapping papers were consum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss the goods so purchased are resold by the dealer'. Moreover, such resale should be in conformity with the provisions of rule 42. He further submitted that the provisions of section 13(1)(B) which provides for deduction from turnover of sales in certain circumstances are not applicable and therefore not relevant for deciding the question. Learned Advocate-General conceded that the question is required to be answered by having regard to the facts and circumstances of the case and that the answer that may be given by the court would be operative only as regards the facts and circumstances of this case. In short it was conceded that as a general proposition it could not be laid down that the goods which might have been used as consumable stores in the manufacture of taxable goods, can never be subject-matter of resale in all cases." It is their contention that in all cases it cannot be held that empty tins and oil cannot be sold separately. It would depend upon the nature of the business carried out by the assessee. The assessee may be selling oil in loose; in bulk; it can be transported by a tanker; it can be sold in small packing or in a packing material of insignificant value. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price of the produce and the price of the container are shown separately may evidence that two separate transactions are envisaged, but that circumstance alone cannot be conclusive of the true character of the transaction; that it is not unknown that traders may, for the advantage of their trade, show what is essentially a single sale transaction of product and container, or a transaction of a sale of the product only with no consideration for the transfer of the container, as divisible into two separate transactions, one of sale of the product, and the other a sale of the container, with a distinct price shown against each. The Supreme Court further observed that the issue as to whether the packing material has been sold or merely transferred without consideration depends on the contract between the parties. The fact that the packing is of insignificant value in relation to the value of the contents may imply that there was no intention to sell the packing, but where any packing material is of significant value it may imply an intention to sell the packing material. Thereafter, the court laid down following criteria to find out as to whether a transaction for sale of packing mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al was not focussed on this aspect at all. However, the learned counsel appearing on behalf of the applicant pointed out that even with regard to this aspect the phrase "in the same form" has been considered by this Court in the case of Lina Traders, Sales Tax Reference No. 3 of 1981 decided on April 2, 1991*, wherein the court has observed that the word "form" connotes visible aspect in which the thing exists or manifests itself. It is in this sense that the Reported as State of Gujarat v. Lina Traders [1991] 82 STC 313 (Guj). 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. The court has further observed that from clause (ii) of section 2(26) the legislative intent becomes clear. That is, if nothing is done to goods purchased and they are sold in the same form of their purchase, clause (i) is attracted so as to describe that transaction of sale of purchased goods as "resale". In our view, as this aspect is not considered by the Tribunal it is not necessary to deal with it in these references, that is to say, whether the tins purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X
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