A product composed of two petroleum products does not cease to be a petroleum product simply because it is produced through a complex process.

A. P. RAVANI, J. - This sales tax reference is at the instance of the Revenue under section 69 of the Gujarat Sales Tax Act, 1969. The opponent-assessee is a corporation (a Government of India undertaking). It is a dealer registered under the Gujarat Sales Tax Act, 1969, as well as under the Central Sales Tax Act, 1956. The opponent-assessee has a plant for manufacturing linear alkyl benzene (hereinafter referred to as "LAB'). The assessee sold LAB to Ms. Paramount Chemical Industries, Baroda. On the basis of this sale, the opponent-assessee submitted an application dated February 16, 1979, under section 62(1)(e) of the Gujarat Sales Tax Act, 1969, to the Commissioner for determination of the rate of tax payable on such sale. The question arose under which of the following two entries, which were in force at the relevant time, the article LAB was failing. Entry 9 of Schedule II, Part A read as under :

"9. Dyes and chemicals other than those specified in any other entry in this or any other Schedule."

Entry 32 of Schedule II, Part A reads as follows :

"32. Petroleum products, including light diesel oil but excluding lubricants, kerosene, solvent oil, furnace oil and also excluding motor spirit declared tax-free under entry 39 in Schedule I."

2. The application was heard and decided by the Deputy Commissioner of Sales Tax (Audit) by his detailed order dated April 16, 1980. As held by him, the article in question was failing within entry 9. He further held that it was a chemical other than those specified in any other entry in Schedule II or in any other Schedule to the Act. The assessee felt aggrieved by the said decision and preferred appeal before the Tribunal. The Tribunal, after hearing the parties, came to this conclusion that LAB was a petroleum product and it was falling within entry 32 to Schedule 11, Part A to the Act. The Tribunal bar, decided the appeal as per its judgment and order dated September 3, 1981.

3. Thereafter the State preferred an application for making reference to this Court. The Tribunal has drawn up the statements of facts and made reference to this Court as per its order dated January 13, 1983. The following question is referred to this Court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right or correct in holding that the produce 'linear alkyl benzene' (LAB) sold by the appellant is a petroleum product covered by entry 32 of Schedule 11, Part A to the Gujarat Sales Tax Act, 1969 and, therefore, the sales thereof are liable to be taxed accordingly ?"

4. Our answer to the aforesaid question is in the affirmative, in favour of the assessee and against the Revenue. Our reasons for this answer are as follows :

5. It is an undisputed posit ion that the two components of LAB are kerosene and benzene. Both, kerosene and benzene are petroleum products. On this point there is no dispute. It is also not in dispute that when these two articles, namely, kerosene and benzene are mixed together in certain proportion, the product LAB comes into existence. It is also not in dispute that LAB does not contain any other ingredients other than kerosene and benzene. Therefore, simply because on account of the mixture of two petroleum products, the third product which has come into existence does not cease to be a petroleum product. It is not a sub-product of petroleum product as is sought to be argued. Even if it may be considered to be a sub-product of one main petroleum product, it would not cease to be a petroleum product. It is not a case of mixing of one petroleum product with something else which is not a petroleum product. In the instant case, only two petroleum products are being mixed in certain proportion and by carrying on certain process thereon, the article called LAB comes into existence. In this view of the matter, the short question is 'that when admittedly two petroleum products are mixed together and third product comes into existence, would it cease to be a p