SATISH CHANDRA, J. - (1.) THESE three references raise the same question. They relate to assessment years 1959-60, 1960-61 and 1961-62.
(2.) THE assessee is a central co-operative society. It has 46 members. Of these 11 are individuals while 35 members are primary co-operative societies. The assessee carries on the business of manufacturing and selling shoes. It obtains orders for the supply of shoes from the Government and, on receipt of these orders, the assessee places orders for manufacture of shoes with its members. The members select the raw materials from the market and inform the central co-operative society. The society purchases the raw materials from the market and supplies them to its members. At the time of supply it debits the exact cost of the raw materials in the account of each member to whom the raw material is supplied. The member, after manufacturing the shoes, supplies them to the assessee. The members prepare a bill in which, in addition to the price of the raw materials, Re. 1 to Rs. 2-8-0 per pair are charged. The assessee-society pays to its members the price mentioned in the bills less the cost of the raw materials. For the assessment years 1959-60 and 1960-61 the assessee was taxed on the turnover of the sale of shoes. Subsequently, the Sales Tax Officer took the view that the transaction of supply of raw materials by the assessee-society to its members also constituted a sale. Consequently, he issued a notice under section 21, U.P. Sales Tax Act, requiring the assessee to show cause why the turnover of the supply of raw materials be not taxed. The assessee claimed that the transaction was not a sale, but supply of goods for manufacture of shoes by the members on payment of remuneration. The Sales Tax Officer did not accept the assessee's claim. He held that the transaction was a sale and was liable to pay. The assessee went up in appeal and then in revision, but failed. At the instance of the assessee the Additional Judge (Revisions) Sales Tax, Agra, has referred the following question for the opinion of this court : "Whether, under the circumstances of this case, the supply of materials by the assessee to its constituent units for the manufacture of shoes and boots, is 'sale', and is liable to sales tax under the U.P. Sales Tax Act or no ?"
(3.) THE authorities below have found that in the books of accounts the assessee the transaction is entered as a sale. Further, the memorandum of association of the assessee shows that one of the objects of the society was to to purchase the stock of tools, implements and machinery and raw materials for sale to its members. Another object was to secure business for itself and its constituents and to arrange its supply according to plan and to act as a clearing house for supply and disposal of raw materials, tools, implements and machinery and goods. It has also been found that whenever the raw materials supplied to a particular member remains in surplus with it, it is either returned to the assessee or transferred to some other members at the direction of the assessee. None of the authorities below have found a single instance where the member of the assessee may have disposed of the raw material supplied to it by the assessee, itself. Further, there is no finding that there was any instance where the primary societies after using the raw material supplied by the assessee sold the manufactured shoes in the market or to any person other than the assessee. There is no finding that at the time of supply of the raw materials the member of the assessee actually paid for them. Only book entries are made by the assessee debiting the member the exact cost of the raw material supplied. The society did not make any profit on the transaction of the supply of the raw material.;