The judgment of the court was delivered by

MADON, J. - The respondents carry on the business of selling what is known as "French Coffee". The activities of the respondents consist of purchasing coffee seeds, roasting and grinding them and preparing coffee powder out of these seeds. The respondents also purchase ready-made chicory powder and thereafter mix and blend the coffee powder prepared by them with chicory powder purchased by them and produce a mixture commercially known as "French Coffee". The proportion in which coffee powder and chicory powder are mixed is equal. The tins in which the respondents' French Coffee is sold bear labels carrying the legend that coffee is blended with chicory and that the mixture consists of 50 per cent coffee and 50 per cent chicory.

By their letter dated 3rd February, 1966, the respondents produced a bill for the sale of French Coffee to one of the their customers in which they had not recovered from the customer sales tax on such sale, treating the said sale as a resale. By the said letter, after setting out in what manner French Coffee was prepared by them, they applied to the Commissioner of Sales Tax to determine under section 52(1