JUDGMENT
S.D. Shah, J.
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. In order to answer the questions, it is necessary first to refer to the nature of the business of opponent and activity or process to which the goods are being subjected. Admittedly, the opponent is purchasing the crushed stones popularly known as grit. The opponent removes the dust therefrom, passes it through sieves of various sizes so as to get chips of stones of various sizes. These chips of stones which are obtained in various sizes are, thereafter, sold by the opponent. We may mention at this stage that considerable amount is being spent by the opponent on labour charges for process of sieving. Thus, this process of sieving helps the opponent in separating stone chips of uniform and smaller sizes in separate lots or separate grades, and such stone chips are, thereafter, sold as “stone chips” but not as “grit”.
4. We may mention at this stage that the commodity purchased by the opponent is known as grit. After subjecting the said commodity to the process or sieving the opponent obtains stone chips of smaller and more or less uniform sizes in different grades. These stone chips are distinct commodities and the same are sold by the opponent as stone chips and not as grit. The stone chips which are so obtained and sold by the opponent are admittedly used in manufacture of flooring tiles while the grit which is used by the opponent is being normally used for different purposes. It is submitted that grit is normally used as building material while the stone chips are essentially meant and in fact used for the purpose of manufacturing flooring tiles. The process of sieving to which the grit purchased by the opponent is subjected thus helps the opponent in bringing about a new and distinct commodity, distinct from original commodity, i.e., grit. The new commodity that emerges out of the process of sieving is that of stone chips. These stone chips are not only having distinct and separate commercial identity, but are, in fact, being put to altogether different use. The process of sieving, therefore, results into changing the name of commodity from that of grit to stone chips. It also results into getting new commodity which is being commercially put to different use, namely, stone chips, for the purpose of manufacturing flooring tiles. Thus, a distinct commercial commodity emerges out of the process of sieving.
5. 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).
6. With the above analysis of the definition of the word “resale” we may now turn to definition of the word “manufacture” as given in section 2(16) of the said Act, and the same is reproduced hereinbelow :
“2(16) ‘manufacture’ with all its grammatical variations and cognate expressions, means producing, making, extracting, collecting, altering, ornamenting, finishing or otherwise processing, treating or adapting any goods, but does not include such manufacture or manufacturing processes as may be prescribed.”
The definition is widely worded so as to include the activities of producing, making, extracting, collecting, altering or otherwise processing. In the context of fiscal statute, and more particularly, the sales tax laws, the activity of manufacture would include such activity which would bring out a change in the article as a result of some process, treatment, labour and manipulations. That process or treatment must further result into transformation, new and different article must emerge having distinct name, character or use. It is in this sense that we are required to find out as to whether the process of sieving to which the purchased goods are subjected by the opponent would amount to manufacture. As discussed hereinabove by the process of sieving the opponent is in position to obtain stone chips of smaller and more or less uniform size in various grades, and thereafter, said stone chips are sold by it. The commodity that emerges has a distinct name, namely, stone chips (kapchi) and is known as such in commercial parlance. The said commodity had distinct commercial use, namely, that of being used for manufacturing flooring tiles is distinct from use of grit. Grit is generally used a building material. Thus, the process to which the goods are subjected by the opponent undoubtedly brings about new and different article having distinct name and use.
7. Thus viewed, we are of the opinion that the transaction of sale of stone chips effected by the opponent cannot be said to be sale of purchased goods (grits) in the same form in which they were purchased. We are of the opinion that if correctly understood, the words “same form” connote a visible aspect in which the thing exists or manifests itself. Once the thing is subjected to a process or something is done, vis-a-vis, the thing and if visual appearance changed it cannot be said that the goods were sold in the same form. The transaction of sale of stone chips, therefore, would not fall within the definition of section 2(26)(i) or (ii) and as such the opponent would not be entitled to deduction thereof under section 10(1)(ii). The process to which the grit is subjected by the opponent also amounts to manufacture as observed by us inasmuch as the said process results into bringing about transformation of grit into stone chips which is a distinct and separate commodity having different name and use.
8. At this stage, we may mention that the learned Assistant Government Pleader invites our attention to the decision of the Division Bench of this Court in the case of State of Gujarat v. Bhikhubhai & Sons reported in [1982] 50 STC 243. In the case before the Division Bench the commodity, namely, kolshi, as such consists of two constituent elements, namely, unburnt coal and as. What was sold by the assessee in that case was “ash” which he obtained after subjecting kolshi to the process of sieving and after separating unburnt coal from ash, and it was that transaction of sale of ash which was the subject-matter for consideration. In fact, the Division Bench found that the unburnt coal and ash were two distinct commercial commodities. The Division Bench also found that even without the definition of the word “resale” as contained in section 2(26) it would not have been possible to hold that there was a resale of the same commodity which the assessee had purchased. Kolshi and ash are two different commercial commodities. In view of this observation of the Division Bench, and in view of the peculiar facts before the Division Bench in the same judgment, we do not think that the observations made in the said judgment run, in anyway, counter to what we have said. However, the observations of the Division Bench to the effect that if it is shown that anyone or some of the three conditions stated in section 2(26) is not satisfied there would be no resale as defined by section 2(26), we are of the opinion that the same are obiter inasmuch the Division Bench has clearly observed that even without the definition of word “resale” it would not have been possible to hold that there was resale of same commodity which the assessee had purchased because kolshi and ash were two distinct commercial commodities. This decision of the Division Bench, therefore, does not run counter to the proposition we have set out.
9. In the result, we answer both the questions in the negative, i.e., in favour of the State and against the assessee. There shall be no order as to costs.
10. Reference answered in the negative.