A process that does not change the essential and commercial character of an article does not amount to manufacturing.

The judgment of the Court was delivered by

S. D. DAVE, J. - The Gujarat Sales Tax Tribunal at Ahmedabad has referred to this High Court the following question of law under section 69 of the Gujarat Sales Tax Act, 1969.

"Whether, on the facts and in the circumstances of this case, the Gujarat Sales Tax Tribunal was right in law in holding that the process of transferring and/or collecting and/or filling liquid petroleum gas (L.P.G.) from a big container into cylinders was not a process of manufacture as defined under section 2(16) of the Gujarat Sales Tax Act, 1969 and that the opponent is entitled to the deduction of resales of gas purchased from registered dealers on their turnover ?"

2. The facts and circumstances under which the present reference has been made by the Tribunal at the instance of the Revenue may be noticed thus. The assessee-company is carrying on the business of reselling liquid petroleum gas (hereinafter to as "L.P.G."). The assessee is a registered dealer under the Gujarat Sales Tax Act, 1969. The assessee used to purchase L.P.G. in bulk from M/s. Hindustan Petroleum Corporation Limited and fill in the same into cylinders and resell them. The question, which had arisen at the time of the assessment orders for the three periods, of which reference shall be made immediately, was as to whether it was a resale or manufacture. The Sales Tax Officer had reached the conclusion that it was a case of resale of the goods purchased from the registered dealers and accordingly deductions were allowed.

3. The assessment period can be divided into three parts. Firstly from 1st July, 1973 to 30th June, 1974 and secondly from 1st July, 1974 to 30th June, 1975. The last period would be from 1st July, 1975 to 30th June, 1976. It appears that the learned Sales Tax Officer had allowed deductions for the abovesaid three periods as under :

First period Rs. 19,54,545

Second period Rs. 56,17,869

Third period Rs. 40,56,828

It appears that the abovesaid matters were taken in suo motu revision by the Assistant Commissioner of Sales Tax. He had reached the conclusion that the deductions allowed on the basis of resale were not proper. He had taken the view that the process to which we will advert later on would amount to manufacturing process. His conclusion, therefore, was that there was no resale and therefore deductions could not have been allowed. The matter was carried before the Sales Tax Tribunal at the instance of the assessee. By order dated 29th January, 1982, the Tribunal had reached the conclusion that there was no process of manufacturing and that, therefore, the deductions were required to be allowed. In other words, the Tribunal has chosen to set aside the orders pronounced by the learned Assistant Commissioner in the proceedings. Later on at the instance of the Revenue, the present question has been referred to this Court.

4. The facts which are not in dispute may be mentioned first. The assessee who is a registered dealer used to receive L.P.G. in bulk containers and refill in small cylinders which can be provided to the customers. It appears that the abovesaid is the only activity which came to be carried out by the assessee before supplying the gas to the customers or the clients. The abovesaid process of filling L.P.G. in small cylinders was being performed with the help of air-compressor and automation.

5. While coming to the conclusion that the abovesaid small process cannot be said to be a manufacturing activity, the Tribunal had derived assistance from two Supreme Court decisions. Firstly the Tribunal had placed reliance on the principles laid down by the Supreme Court in the case of Commissioner of Sales Tax v. Harbilas Rai and Sons [1968] 21 STC 17. In that case it appears that the pig bristles were collected and later on they were boiled and washed with soap and other chemicals and were sorted out according to their size and colour and were tied in separate bundles for being