SATISH CHANDRA, J. - (1.) THE Additional Judge (Revisions), Sales Tax, Agra, has submitted this statement of case under section 11(1) of the U.P. Sales Tax Act and has invited the opinion of this court on the following question of law : "Whether liquid gold was rightly taxed as chemical. If not whether it is taxable as an unspecified item or as bullion ?"
(2.) THE three connected references relate to the assessment years 1956-57 under the U.P. Sales Tax Act, and 1957-58 under the U.P. Sales Tax Act and the Central Sales Tax Act. The assessee manufactures and sells liquid gold. The assessee claimed that liquid gold was taxable either as bullion or specie or as an unclassified item. It was not a chemical. The assessing authority, however, did not accept this contention. He held that it was chemical and, as such, liable to tax at the rate of one anna per rupee and not at the rate of four annas per cent. either as bullion or specie or as an unclassified item. The Judge (Appeals) confirmed the finding and dismissed the assessee's appeals. The assessee filed three revisions but the same were also dismissed on the 12th August, 1964. Liquid gold is a dark viscous substance. It is extensively used for the decoration of glass and ceramic ware. It is manufactured by melting gold bullion in the shape of filigree which is then dissolved in acqua regia. The product is then treated in essential oils. Ultimately, the product called "liquid gold" is produced which contains about 12 per cent. gold and 88 per cent. of the oils and other chemicals. The gold is contained in this product in a colloidal state. The particles of gold are so minute that on being filtered through paper, they pass through it. The particles of gold cannot be seen even by an optical test. The process of manufacturing liquid gold is a highly guarded secret. For decoration purposes, the product called "liquid gold" is applied on the article. The article is heated at a temperature 600 degree to 650 degree C. The essential oils and organic matter burn off, leaving a lustrous adherent film of metallic gold on the article. According to the Text-Book of Inorganic Chemistry by J. R. Partington, Fifth Edition, at page 815, it is stated that if gold is dissolved in acqua regia, it forms a bright yellow solution, which on evaporation deposits deliquescent yellow crystals of chloric acid, soluble in water, alcohol or ether. Thereby it becomes auric chloride. According to the manufacturing process, this auric chloride, when heated at higher temperature, decomposes into chlorine and gold, which are also chemicals.
(3.) IT will thus be seen that liquid gold is the popular name of a product, which is not gold in liquid form. The product is obtained by chemically treating gold according to a set process. The gold contained in it cannot be recognised as metal. It is not used as bullion is. In the Encyclopaedia Britannica, 1968, Volume 10, page 536-B, it has been stated that by far the largest single use for gold is as the backing for the world's currency. This is the monetary use. But gold is also used for art purposes. Its inertness, malleability and pleasing bright yellow colour have made gold valuable as an artistic material. It has also industrial usage. Where high reliability, corrosion resistance and high electrical conductivity are needed in electrical and electronic circuits, gold is employed. It is used to plate contacts, terminals, printed circuits, and semi-conductor system. The gold in its metallic form is also used for gilding, in gold leaf or powder form. Admittedly, the liquid gold manufactured by the assessee is not put to any such uses. It has a specialised use of decorating glass bangles etc. or ceramic wares. The manner of using it for this purpose is not like the use of gold even for gilding. While gliding, the gold is put on the object in the form of gold-leaf or powder. It is not mixed in oils or heated. In our opinion, the liquid gold cannot be held to be within the meaning of the expression "gold" or "specie", and was rightly not taxed as such.;