1. This order will dispose of General Sales Tax References Nos. 9 to 12 of 1971. In all these references, the following two questions of law have been referred for our opinion :
(1) Whether the supply of goods to its employees by the assessee-company on hire and purchase basis without profit-motive is liable to sales tax ?
(2) Whether on the facts and in the circumstances of this case the sale of scrap iron and waste material resultant on the main business activity of the assessee, is liable to tax under the Punjab General Sales Tax Act?
2. The Financial Commissioner declined to refer the said questions of law and on an application made by the assessee under Section 22(2) of the Punjab General Sales Tax Act, 1948, this court directed the Sales Tax Tribunal to refer the said questions of law for the opinion of this court.
3. The assessee, Messrs. Atlas Cycle Industries Ltd., Sonepat, is engaged in the business of manufacture of cycles and their parts for sale. During the manufacturing process certain waste material, such as scrap iron, is produced. This material is sold by the assessee. In the returns for the assessment years 1957-58, 1958-59, 1959-60 and 1960-61, the assessee did not show in his gross turnover the sale of this waste material, on the ground that the sale of this material was not their regular business and that in the past also they were not showing such sales in their gross turnover.
4. In addition to this, the assessee is also running a provisions store from where they supply certain utility articles as well as provisions to their employees at 'no-profit-no-loss' basis. According to the assessee, they supply these goods on 'hire-purchase' basis. The assessee claims that the supply of the provisions and other articles to their employees on 'no-profit-no-loss' basis is not the business of the assessee. It is merely an amenity made available to the employees of the factory. Therefore, they have not been showing the said sales in their gross turnover because they are not dealers in that sense in these commodities. They also took shelter behind the plea that it was their practice not to disclose these items in the taxable turnover. The assessing authority did not accept the stand of the assessee and included the price of these items in the gross turnover of the assessee, so as to bring it to tax.
5. The assessee filed appeals against these assessments before the Deputy Excise and Taxation Commissioner. With regard to the supply of provisions and other articles to its employees, reliance was placed on Sections 49 and 50 of the Factories Act and also on the directive issued by the All India Manufacturers Organisation in circular No. 40/August, 1963.
6. The appellate authority rejected the contention of the assessee and affirmed the order of the assessing authority on these two matters.
7. Against the order of the Deputy Excise and Taxation Commissioner, the assessee filed a revision petition before the Joint Excise and Taxation Commissioner. The Joint Excise and Taxation Commissioner allowed the revision petition so far as the claim of the assessee with regard to the sale of scrap iron was concerned, but he rejected the contention of the assessee with regard to the sales of provisions.
8. The assessee then went up in further revision against the order of the Joint Excise and Taxation Commissioner with regard to the matter of sale of provisions to its employees. The Financial Commissioner took up the other matter regarding scrap iron suo motu. The revision petitions of the assessee were rejected and the order of the Joint Excise and Taxation Commissioner holding that the sale of scrap iron and waste material could not be taken into account in the gross turnover of the assessee was upset, with the result that the position of the assessee was relegated to that which was under the order of the assessing authority.
9. The assessee then moved applications under Section 22(1) of the Act requiring the Financial Commissioner to state as many as eleven questions of law for the opinion of this court. The applications of the assessee were rejected by the Financial Commissioner on the ground that no question of law in fact arose out of his order. The assessee then moved this court under Section 22(2) for requiring the Financial Commissioner to state the eleven questions of the law for the opinion of this court. This court, after hearing the parties came to the conclusion that only two questions of law, as already set out in the earlier part of this order, arose and directed the Tribunal to refer the same along with the statement of the case for the opinion of this court. That is how the matter has been placed before us.
10. So far as the first question is concerned, the matter is not res integra. There is no finding by the departmental authorities that any profit is made by the assessee when certain articles are sold on deferred payment basis or even on 'hire-purchase' basis, to its employees. The assessee took a clear stand before the departmental authorities that no profit was being made and the transfer of those articles was on 'no-profit-no-loss' basis. A similar matter fell for consideration before the Calcutta High Court in The Indian Iron & Steel Co. Ltd. v. Member, Board of Revenue, West Bengal  27 S.T.C. 373 under the Bengal Finance (Sales Tax) Act, 1941, and it was held that:
A person cannot be a 'dealer' under the Bengal Finance (Sales Tax) Act, 1941, unless he carries on the business of selling goods in a commercial sense. In other words, activity of a commercial character must be clearly established before a person can be brought into the net of taxation under the Act. If an employer sells without any profit-motive certain commodities of daily use to the employees to provide them with social amenities, it cannot be said that the employer is carrying on business with a commercial motive.
11. We entirely agree with the ratio of this decision. The provisions of the Bengal Act are more or less pari materia with the provisions of the Punjab Act. This view also finds support from the decision of the Supreme Court in the State of Gujarat v. Raipur .  19 S.T.C. 1 (S.C.)
12. For the reasons recorded above, we must answer the first question in the negative, i.e., in favour of the assessee and against the department.
13. So far as the second question is concerned, the facts are simple. Iron is the main commodity which is used in one form or the other for the manufacture of the bicycles. In the process of manufacture scrap iron is the resultant product. This scrap iron is, when sufficient quantities accumulate, sold regularly by the assessee. The question that arises is whether the sale of the scrap iron can be regarded as an allied or incidental to the business of the assessee which is the manufacture and sale of bicycles In Aryodaya Spinning and Weaving Co. Ltd. v. State of Bombay  11 S.T.C. 141, cotton waste produced in the course of manufacturing cotton textiles and yarn, was held to be allied or incidental to the business of the assessee and the sale proceeds were brought to tax in the taxable turnover of the assessee. This decision was approved by the Supreme court in The State of Gujarat v. Raipur .  19 S.T.C. 1 (S.C.) The ratio of the Supreme Court decision is that by-products or subsidiary products arising in the course of manufacturing process, if they are disposed of in a regular manner would form part of the business of the assessee, because to quote the words of the Supreme Court, 'when such subsidiary product is turned out in the factory regularly and continuously and is being sold from time to time, an intention to carry on business in that commodity may be reasonably attributed to the assessee.' Therefore, in every case what will have to be seen is, what is the main business of the assessee and what is the waste material, the sale proceeds of which are to be brought into the taxable turnover of the assessee. Can the waste material be said to be the subsidiary product of the manufacturing process Is it sold regularly If these conditions are satisfied, the sale proceeds of such material have to be included in the taxable turnover of the assessee, otherwise not. All the decided cases which were noticed by the Supreme Court stand on one side of this line or the other. For instance in most of the cases the waste material had nothing to do with the manufacturing process of the assessee. For instance, containers in which certain material for the purposes of manufacture was brought to the factory were held not to be part of the by-product of the manufacturing process and rightly so. In any case, on the facts of those cases, no intention on the part of the assessee to engage in the business of disposal of such waste materials could be attributed. The present case is, however, more in line with the Bombay decision in Aryodaya Spinning and Weaving Company's case  11 S.T.C. 141 and the Supreme Court decision in Raipur Manufacturing Company's case  19 S.T.C. 1 (S.C.). In the latter case kolsi, which is unburnt coal, and waste caustic liquor, which were resultant waste products during the process of manufacture of the assessee were held to be part of the business of the assessee and the sale proceeds of the same were included in the taxable turnover of the assessee.
14. Mr. Hira Lal Soni, learned counsel for the assessee, strenuously relied upon the decision of the Madras High Court in City Motor Service Private Limited v. The State of Madras  22 S.T.C. 485. That was a case of a body-builder. In the process of building of the bodies certain scrap aluminium came into being. The sales tax authorities brought the sale proceeds of the scrap aluminium to tax by including the same in the taxable turnover of the assessee. The Madras High Court held that it could not be done. It appears to us that this case is distinguishable. In the business of body-building no manufacturing process was involved in which the resultant waste was aluminium. It could not, therefore, be held that the resultant waste aluminium was the result of a manufacturing process. The Madras decision does not in any way support the contention of the learned counsel for the assessee.
15. For the reasons recorded above we answer the second question in the affirmative, that is, in favour of the department and against the assessee. In view of the divided success there will be no order as to costs.