1. The respondents were registered as dealer under the Bombay Sales Tax Act, 1953, with effect from 10th June, 1954. They are also registered as dealers under the Bombay Sales Tax Act, 1959. The respondents carry on the business of processing exposed films brought to them by their customers.
2. This reference deals with the assessment period 1st April, 1954, to 9th June, 1954. The respondents were also assessed to tax in respect of subsequent periods, and in respect of the assessment period in question as also the subsequent periods certain questions arose in their assessments, all of which were decided against the respondents by the sales tax authorities. The respondents ultimately went to the Sales Tax Tribunal, and the revision applications in respect of the periods under the Bombay Sales Tax Act, 1953, and their second appeal under the Bombay Sales Tax Act, 1959, were all heard together and disposed of by the Tribunal by a common judgment, deciding all those questions in favour of the respondents. Therefore, the applicant made separate applications for reference in each of these eight matters. The Tribunal framed three questions of law as asked for by the applicant in all the eight matters and referred them by separate orders to this High Court. The questions so referred to us by the Tribunal are :
'(1) Whether, having regard to the facts and circumstances of the case, the Tribunal erred in holding that the impugned sales in question of hypo water effected by the respondents were covered by the entry pertaining to bullion, namely, entry 23 of Schedule B in case where the Bombay Sales Tax Act, 1953, applies, and entry 1 of Schedule e in case where the Bombay Sales Tax Act, 1959, applies
(2) Whether, having regard to the facts and circumstances of the case, the Tribunal erred in holding that the sales of waste material in question were no sales in the course of business of the respondents and as such not liable to sales tax
(3) Whether, having regard to the facts and circumstances of the case, the Tribunal erred in holding that the sales of raw films were not sales in the course of business of the respondents and as such not liable to sales tax ?'
3. So far as the present reference is concerned, as it deals with the question arising only under the Bombay Sales Tax Act, 1953, the first question requires to be reframed and, accordingly, with the consent of parties, we reframe it as follows :
'Whether, having regard to the facts and circumstances of the case, the Tribunal erred in holding that the sales in question of hypo water effected by the respondents were covered by entry 23 of Schedule B to the Bombay Sales Tax Act, 1953 ?'
4. So far as question No. (2) is concerned, Mr. Sanghavi, the learned counsel for the applicant, has stated before us that he does not desire us to answer that question inasmuch as the sale of waste material, namely, scrap films, made during the period in question amounted to only Rs. 36. Similarly, with respect to question No. (3), Mr. Sanghavi has stated that he does not desire us to answer that question inasmuch as during the period in question there was no sale of raw films by the respondents.
5. The facts necessary to understand how the first question arises for our determination are very few. For the purpose of proceeding the films the respondents used hypo water which is a silver nitrate compound. In respect of hypo water which had been used by the respondents for proceeding films the respondents entered into certain contracts with the firm of Messrs. Dattaram Balkrishna and Company. Under these contracts, the respondents granted to the said firm a licence to extract silver from the waste hypo water lying in their laboratories, and in consideration of the grant of the said licence the said firm agreed to pay to the respondents royalty at a certain rate per gallon of such hypo water. The following conditions, which occur in all these contracts and also admittedly occur in the contract which pertains to the assessment period in question, are material :
'5. That you will remove the waste hypo water from our laboratory at Dadar and from the Silver town Film Laboratory at your own cost and will not allow the tanks containing the waste hypo water to overflow. You will have no right to the waste hypo water after carrying out the silver extracting process and you will place the waste hypo water at our disposal for destruction after the said process is carried out.
6. That you will remove the waste hypo water in barrels having distinctive numbers and having their capacities in gallons marked on them. You have furnished us with the list of these barrels with their distinctive numbers and their respective capacity by your letter to us dated 31st December, 1954, and will report to us in writing from time to time any change in the distinctive numbers and/or the respective capacities in gallons of the said barrels or the introduction of new barrels. We shall have the right to check the capacity of the said barrels at any time, before or after they are filled with the waste hypo water from our storage tanks.'
6. It was the respondents' contention that there was no sale of hypo water by them to the said firm, but what was being done was that a licence was granted by the respondents to the said firm to extract silver from hypo water in consideration of a certain amount to be paid by way of royalty by the said firm to the respondents. In the alternative, the respondents contended that assuming there was a sale, the sale was of silver and not of hypo water, and these transactions of sale were, therefore, taxable under entry 23 of Schedule B to the Bombay Sales Tax Act, 1953, which prescribed the rate of tax on sales of bullion and species. According to the department, these transactions of sale were taxable under entry 80 of Schedule B to the said 1953 Act, which was the residuary entry. The rate of tax under the said entry 23 was lower than under the said residuary entry. The Tribunal rejected the respondents' contention that there was no sale. It pointed out that even though the conditions of the contracts provided that after extracting silver the said firm was to place the waste hypo water at the disposal of the respondents for destruction, in fact, it was admitted that waste hypo water was at no time returned to the respondents. The Tribunal further held that the respondents had sold hypo water only for the purpose of extracting silver and after extraction of silver the water was thrown away and, accordingly, the sale of hypo water should be considered as sale of bullion and taxed as such under the said entry 23.
7. In this reference we are not concerned with the question whether there was a sale. The Tribunal has found that there was a sale, and that part of the Tribunal's finding has not been sought to be challenged and no question is raised thereon. The only question with which we are concerned is whether the sale was of bullion or of hypo water. We are unable to accept the conclusion reached by the Tribunal that merely because hypo water was sold for the purpose of extracting silver therefrom it was a sale of bullion. The word 'bullion' is very well understood in common parlance. When a material is sold and if by some process another material can be extracted therefrom, to say that the sale is of the material extracted is to our mind doing violence to common-sense and logic. If such an argument were true, it would amount to saying that when a person sells a silver mine what he is really selling is silver because the mine is purchased for the purpose of extracting silver therefrom. The said firm purchased hypo water. They took it away in gallon. They paid for it at a particular rate per gallon of hypo water. Thus, all the incidence of the contracts between the respondents and the said firm show that this was a sale of liquid, namely, hypo water. The rate that was fixed depended upon the quantity of hypo water and did not depend upon the quantity of silver which could be extracted therefrom. What the respondents did writ hypo water after they purchased it was their look out.
8. For the reasons set out above, we answer question No. (1), as reframed by us, in the affirmative.
9. In view of the statement made by Mr. Sanghavi with respect to questions Nos. (2) and (3), we decline to answer these two questions.
10. Though questions Nos. (2) and (3) did not arise in respect of this assessment period, in its application for reference, the department also asked those two questions to be raised and submitted to us. In view of this fact, we think that a fair order for costs would be that each party should bear its own costs.
11. Reference answered accordingly.