S. K. MAL LODHA, J. - (1.) IN pursuance of the order dated September 6, 1976, passed by this Court in D. B. Civil Sales Tax Reference No. 216 of 1975, the Board of Revenue for Rajasthan, Ajmer ('the Board' herein) has referred the following question for our opinion: "whether the polishing of stones comes within the term 'manufacture' and, therefore, attracts concessional rate under S. 5 C of the Rajasthan Sales Tax Act?" The Assistant Commercial Taxes Officer, Ward 'a' Chittorgarh (A. C. T. O.) determined the tax liability of M/s. Sitaram Badrilal Manpura, Branch Station Road, Chittorgarh under s. 10 (3) of the Rajasthan Sales Tax Act, 1954 (for short 'the Act') for the assessment years 1967-68 and 1968-69 vide his assessment order dated May 6, 1969. The dealer-assessee was dealing in stones-during this period and his gross turnover was determined at Rs. 1,59,520. 46 p. After deducting from it, the turnover relating to goods not liable to tax and inter-state sales, the Assessing Authority determined the taxable turnover of the assessee at Rs. 23,640/ -. It may be mentioned that the assessee had purchased stones of Rs. 23,330. 09 p. and sand of Rs. 1575/- from the unregistered dealers. The sand was utilised for polishing the stones with the help of machines. IN the opinion of the Assessing Authority the dealer was a manufacturer and after making allowance for the stock of stones worth Rs. 3,420. 50 p. transferred to the account of the head office of the assessee, levied tax @ 1 % u/s 5c of the Act on the purchase of stones of Rs. 19,910/- and sand of Rs. 1,575/ -. The tax was thus levied on the dealer for the years of the assessment in question. The assessee filed an appeal and the Deputy Commissioner (Appeals), Commercial Taxes, Udaipur by his order dated April 13, 1970 reduced the taxable turnover by Rs 3, 420. 50 p. He also set aside the tax on purchase of sand of Rs. 1,575/- He further maintained the levy of tax at 1% on purchase of stones worth Rs. 19,910/ on the ground that polishing of stones was included in the definition of "manufacture" given in s. 2 (k) of the Act. A revision was preferred before the Board under s. 14 (2) of the Act against the order of the Deputy Commissioner (Appeals ). The learned Member of the Board sitting in single Bench was of the opinion that polishing of stones constitutes the process of manufacture and rejected the revision petition on February 26, 1973. A special appeal under s. 14 (4a) of the Act was preferred before a Division Bench of the Board and it by its order dated April 19, 1974 came to the conclusion that the identity of the so called polished stones sold by the appellants had not been changed from what it had been when they were originally purchased, it further opined that little polishing of the stones could not be described as a process of manufacture. It, therefore, set aside the order dated February 26, 1974 of the learned Member of the Board passed in revision and also set aside the levy of tax on purchase of stones at 1%. The Division Bench of the Board considered G. R. Kulkarni vs. The State (1), Tungabhadra INdustries Ltd. vs. Comml. Tax Officer (2), State of Gujarat vs. Sakarwala Brothers (3) and Ganesh Trading Co. vs. State of Harayana (4 ). An application was filed by the assessee under s. 15 (A) of the Act on September 16,1974. The application could not be disposed of within 180 days of the receipt of the order of the Division Bench of the Board and, therefore, it ordered on June 6, 1975 to stop further proceedings. Thereafter, a reference application under s. 15 3a) of the Act was filed in this Court for directing the Board to refer the question of law arising out of its order dated April 19,1974. This Court vide its order dated September 6. 1976 directed the Board to refer the aforesaid question. Hence, the aforesaid question has been referred.
(2.) WE have heard Mr. K. C. Bhandari, learned counsel for the Department and Mr. N. P. Gupta, learned counsel for the dealer-assessee. The expression 'manufacture' as it stood then has been defined in s. 2 (k) of the Act as under : "s. 2 (k ). 'manufacture' includes any process or manner of producing, collecting, extracting, preparing or making any goods. " In this case, we are concerned with 'process' or 'manner of preparing or making any goods. ' 'prepare' has been defined in Chambers Twentieth Century Dictionary as follows: "to subject to a process for bringing into a required state; to make, produce, to cook and dress:" The word 'make' has been defined in the same Dictionary as follows: "to fashion, frame, construct, compose or form, to create to bring into being, to produce, to conclude, to convert or turn etc. " 'process' as a noun has been defined as under: "a state of being in progress or being carried on, a sequence of operations or changes undergone. " Keeping these definitions in view, we have to consider whether for polishing of the stones, process involved is that of manufacture or not ? The meaning of the word 'manufacture' in connection with the question relating to the applicability of Explanation II (ii) to s. 2 (k) of the U. P. Sales Tax Act, 1948 come up for consideration before their Lordships of the Supreme Court in Commissioner of Sales Tax vs. Marbiles Rai & Sons (5 ). It was observed as under: "in our view, the word 'manufacture' has various shades of meaning, and in the context of sales tax legislation, if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of the manufacture. " One of the important test which is apparent from the aforesaid decision of their Lordships of the Supreme Court is that even if labour is applied to a particular commodity but if that commodity essentially remains the same commercial article then it cannot be said that the product which comes out after the application of the labour is the result of the manufacture. In Deputy Commissioner of Sales Tax V. Pio Food Packers (6), the question that arose was whether the turnover of pineapple fruit purchased for preparing pineapple slices for sale in sealed cansis not covered by s. 5-A (1) (a) of the Kerala General Sales Tax Act, 1963. It was held there-in that when pineapple fruit is processed into pineapple slices for the purpose of being sold in sealed cans, there is no consumption of the original pineapple fruit for the purpose of manufacture and the case does not fall within s. 5-A (l) (a) of the Kerala General Sales Tax Act, 1963. The dominant consideration in this regard was of essential identity of the two commodities and on that ground it was opined that there is no essential difference between pineapple fruit and the canned pineapple slices and the dealer and the consumer regard both as pineapple. It was concluded that the only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned it is capable of storage without spoiling. The additional sweetness in the canned pineapple arises from the sugar added as a preservative. On a total impression, the pineapple slices were held to possess the same identity as the original pineapple fruit. In East Taxes Motor Fraight Lines V. Frozen Food Express (7), it has been ruled as under : "killing, dressing and freezing a chicken is certainly a change in the commodity. But it is no more drastic a charge than the change which takes places in milk from pasteurizing, boroganizing, adding vitamin concentrates, standardising and bottling. " It was also observed: ". . . . . . . there is hardly less difference between cotton in the field and cotton at the gin or in the bale or between cotton seed in the field and cotton seed at the gin, than between a chicken in the pan and one that is dressed. The ginned and baled cotton and the cotton seed as well as the dressed chicken have gone through a processing stage. But neither has been 'manufactured' in the normal sense of the word. " We are tempted here to refer Anhouser-Busch Brewing Association V. United States (8), wherein the Court said: "manufacture implies a change, but every change is not manufacture and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary ___ There must be transformation: a new and different article must emerge, having a distinctive name, character or use. " And it was further stated: "at some point processing and manufacturing will merge. But where the commodity retains a continuing identity through the processing stage, we cannot say that it has been manufactured. " It may be stated that the comments made therein were applied by their Lordships of the Supreme Court in Deputy Commr. of Sales Tax's case (Supra ).
(3.) LEARNED counsel appearing for the Departament however, relied on G. R. Kulkarni's case (Supra , Commr. of Sales Tax V. Hastimal Ratanlal (9) and Commr. of Sales Tax V. Radha Dyeing & Printing Mills (10 ). G. R. Kulkarni's case (Supra) was considered in Commr. of Sales Tax's case (Supra ). In G. R. Kulkarni's case (Supra), the Madhya Pradesh High Court held that the breaking of boulders into matel (gitti) was 'manufacture' within the meaning of s. 2 (i) (a) of the M. P. Sales Tax Act, 1947. It was held that the essence of manufacture is the changing of one object into another for the purpose of making it marketable. It was observed as under: "the man who manufactures metal is manufacturing a new article which has got a different price includes labour which goes into its manufacture. " The rough stones purchased by the dealer after going through the process of polishing, retain the same identity i. e. in the form in which they are brought. Commr. of Sales Tax's case (I) is distinguishable on facts. In commr. of Sales Tax's case (Supra) the assessee purchased white cotton yarn, dyed it into different colours and sold the coloured yarn. The Department contended that when the assessee purchased uncoloured yarn and dyed it, he consumed the uncoloured yarn and manufactured coloured yarn out of it and that since the assessee was exempt from sales tax by virtue of s. 6 of M. P. General Sales Tax Act, 1958. on the sale of uncoloured yarn, he was liable to pay purchase tax under s. 7. The assessee contended that he was not liable to pay purchase tax as no manufacturing process was involved and that cotton being one of the declared goods under the Central Sales Tax Act, 1956, it could not be taxed twice or at a rate more than two percent. The Board of Revenue accepted the first contention of the assessee and did not consider the second contention. On a reference, the M. P. High Court hold that the dyeing of white cotton yarn was a process of manufacture within the meaning of s. 2 (j) of the M. P. Act. 'manufacture' has been defined in s. 2 (j) of the MP. Act. The definition was construed to be very wide and inclusive of any process or manner of producing or preparing any goods. The M. P. High Court opined that when uncoloured yarn is dyed, it is preparing dyed cotton yarn, and the use of dyed cotton yarn is necessarily different from that of uncoloured yarn and a person who wants dyed yarn will not be satisfied with undyed yarn. On the basis of this reasoning, it was held that it was a process of manufacture within the meaning of s. 2 (j) of the M. P. Act. Commr. of Sales Tax's case (9) is hardly of any avail to the learned counsel for the Department. In Commr. of Sales Tax's case (10), the question was whether on a true and proper interpretation of s. 41 (2) of the Bombay Sales Tax Act, 1959, read with the notifications issued thereunder, the Tribunal was justified in law in coming to the conclusion that a precise quantification of the tax is not possible thereunder and, therefore, that provision was unenforceable. While dealing with the question whether the dyeing and printing would be a process carried out on cloth and would results in a new marketable commodity coming into existence. D. P. Madon, J. (as he then was) with whom Sujata vs. Manohar J. agreed held that dyeing and printing cloth would be a manufacture within the meaning of s. 2 (17) of the Bombay Sales Tax Act. It may be stated that s. 2 (17) of the Bombay Sales Tax Act defines the term 'manufacture' as follows : " 'manufacture' with all its grammatical variations and cognate expressions, means producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed. " Hiralal Jitmal vs. Commissioner of Sales Tax (II) was referred, which was considered in Commissioner of Sales Tax's case (5) wherein their Lordships extracted the observations made in Hiralal Jitmal's case (11) and thereafter, observed that the word 'manufacture' has various shades of meaning and thereafter, they made the observations which have already been extracted hereinabove This decision Commissioner of Sales Tax's case (10) is not of much assistance. ;