P. N. BHAGWATI, J. M. SHELAT, J.

( 1 ) IN this Reference the petitioners own two units of textile mills in Ahmedabad which were purchased some years ago as going concerns. In recent years the petitioners company embarked upon a programme of modernising its machinery and as part of that programme the company sold old looms carding engines and other machinery during the assessment period 1953-1954. There were in all 16 sales to different purchasers and the total price received by the petitioner company was Rs. 201 808 The petitioner company realised sales tax from the purchasers in respect of 12 sales out of the total 16 sales the sale price whereof was Rs. 58 308 in the aggregate. No sales tax was realised on the remaining 4 sales the sale price whereof aggregated to Rs. 1 43 500 During the assessment proceedings it was contended by the petitioner company that the remaining 4 sales of machinery in respect of which the petitioner company had realised the amount of Rs. 1 43 500 should be excluded from the total turnover and should not be subjected to sales tax. The contentions urged by the petitioner company were rejected by the Sales Tax Officer and an appeal against the Sales Tax Officers order was also dismissed by the Assistant Collector. A revision application filed by the petitioner company before the Additional Collector of Sales Tax was likewise dismissed and the petitioner company therefore filed a second revision before the Bombay Sales Tax Tribunal which was disposed of by the Gujarat Sales Tax Tribunal by its judgment dated the 14th of July 1960.

( 2 ) DURING the hearing before the Additional Collector the petitioner company produced its letter dated the 28th of September 1959 which is annexed as Exhibit 5 to the Statement of the Case. The Additional Collector held that that letter indicated that the sales were made by the petitioner company with the motive of making profit and relying on a previous judgment of the Bombay Sales Tax Tribunal in Ashoka Mills Ltd. v. State of Bombay dated the 18th of December 1958 that officer rejected the revision. The letter upon which reliance was placed by the Additional Collector stated that the two textile mills owned by the petitioner company had in all 73 796 spindles and 1325 looms and possessed up-to date processing machinery. It was also stated in that letter that the petitioner company had since its inception followed a progressive policy in the matter of manufacture of textile goods and in order to maintain its position in the industry the petitioner company had thought out A plan of renovation and modernisation of its two units and also its third unit at Baroda and that in accordance with that plan it had decided to replace old and obsolete machinery by new and modern machinery. During the replacement of the old machinery it was but incidental that the old and discarded machinery had to be sold and that too at the best available price. During the period 1953-1954 the company discarded 89 looms 28 carding engines two lathes and some other small machines. The letter further stated It is not possible and if possible it would be commercially imprudent to sell 89 looms and 28 carding engines to one party at one time. The machines must be sold and sold to the parties who are prepared to pay the highest price. In the circumstances it is very natural that the transactions of sale of one item of machinery would apparently appear more. The letter further stated that the procedure followed by the petitioner company in selling second-hand machinery was that delivery was effected against payment in cash or against payment in advance and therefore sale invoices used to be prepared when deliveries were effected. The result of this practice was that even though several machines were sold to one party since the delivery of the machinery was effected on different dates convenient to the purchasers different sale invoices had to be prepared and therefore there would apparently appear a number

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