1981 (12) TMI 147 - HC - VAT and Sales Tax

Issues Involved:
1. Whether the process of separating ash from semi-burnt coal by sieving amounts to "manufacture" within the meaning of the Gujarat Sales Tax Act, 1969.
2. Whether the sales of ash, separated from kolshi, qualify as "resales" under section 7(ii) of the Gujarat Sales Tax Act, 1969, and thus are entitled to deduction from the turnover of sales.

Issue-Wise Detailed Analysis:

Issue 1: Whether the process of separating ash from semi-burnt coal by sieving amounts to "manufacture" within the meaning of the Gujarat Sales Tax Act, 1969.

The Tribunal held that the activity of separating ash from semi-burnt coal (kolshi) by sieving did not amount to manufacture. The Tribunal reasoned that kolshi is a composite article consisting of two commodities: half-burnt coal and ash. The process of sieving merely separates these two components without altering their inherent properties. Therefore, the Tribunal concluded that the process did not result in "manufacture" as defined under section 2(26) of the Act.

However, the High Court did not directly address whether the sieving process constituted "manufacture" under section 2(26). Instead, it focused on the definition of "resale" and whether the separated ash could be considered a resale of kolshi.

Issue 2: Whether the sales of ash, separated from kolshi, qualify as "resales" under section 7(ii) of the Gujarat Sales Tax Act, 1969, and thus are entitled to deduction from the turnover of sales.

The High Court analyzed the statutory definitions and conditions for "resale" under section 2(26) and section 7(ii) of the Act. The court noted that for a sale to qualify as a "resale," it must meet any of the following conditions:
1. The goods must be sold in the same form in which they were purchased.
2. The goods must be sold without doing anything to them that amounts to or results in manufacture.
3. The goods must be sold without doing anything that takes them out of their description in the relevant schedule.

The court emphasized that these conditions are disjunctive, meaning that failing to meet any one of them would disqualify the sale from being considered a "resale."

The court found that the sale of ash did not meet conditions (i) and (iii):
1. The sale of ash was not in the same form as the kolshi purchased. Kolshi is a composite of unburnt coal and ash, whereas ash is a distinct commodity with different properties.
2. The sale of ash took the commodity out of the description of "coal" in entry 1 of Schedule II, Part A. Kolshi, which includes unburnt coal, is combustible and used as fuel. In contrast, ash is the residue left after burning and is not combustible.

The court concluded that the sales of ash could not be considered "resales" of kolshi under section 7(ii). Consequently, the assessee was not entitled to deduct the sales of ash from its turnover of sales.

Conclusion:

The High Court answered the second question in the negative, ruling in favor of the revenue and against the assessee. The court determined that the sales of ash did not qualify as "resales" under section 7(ii) of the Gujarat Sales Tax Act, 1969, and thus were not entitled to deduction from the turnover of sales. As a result, the court did not find it necessary to answer the first question regarding whether the sieving process constituted "manufacture."

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