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1991 (4) TMI 380 - HC - VAT and Sales Tax
Issues:
Interpretation of "resales" under the Gujarat Sales Tax Act, 1969 regarding goods obtained from waste material purchased by the opponent-concern and subjected to processes. Analysis: The case involved a reference by the Gujarat Sales Tax Tribunal to the Gujarat High Court regarding the classification of sales made by an assessee dealing with waste mixture of polyester and cotton fibers. The Tribunal held that the sales of goods obtained by the assessee from waste material purchased by it, after undergoing cleaning, segregating, carding, drafting, and winding processes, constituted 'resales' of the original goods purchased. The Deputy Commissioner initially held that the processes amounted to manufacture, making the sales taxable. However, the Tribunal disagreed, stating that the processes did not result in the creation of a new commercial commodity, thus falling under the definition of "resale" as per the Act. The High Court analyzed the processes undertaken by the assessee on the purchased waste mixture. The waste material, a mix of polyester and cotton fibers with impurities, was cleaned, segregated by color, carded, drafted into slivers, and wound around bobbins before being sold. Despite the processes, the fibers retained their original character and were not transformed into yarn. The goods were sold as a mixture of polyester and cotton fibers, with the proportion remaining similar. The court noted that the processes did not result in a new distinct commodity with a different name or use in the market, indicating that the sales were indeed 'resales' under the Act's definition. In conclusion, the High Court answered the reference in favor of the assessee, affirming the Tribunal's decision. It was held that the processes undertaken did not amount to the manufacture of a new commercial commodity, and therefore, the sales were rightfully considered 'resales' under the Act. The judgment emphasized that despite the enhanced value and separate color-wise sales, the goods did not acquire a distinct identity or use, maintaining their original fiber nature. No costs were awarded in the reference, and the decision favored the assessee against the department.
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