1. The Sales Tax Tribunal has referred the following questions of law for the opinion of this Court under Section 30(1) of the Saurashtra Sales Tax Ordinance No. XVIII of 1950 :
(1) Whether Section 6 of Ordinance XVIII of 1950 read along with proviso to Sub-section (3), Rule 1, 'can be interpreted to make it incumbent on the Sales Tax Officer to examine how much quantity of by-products containing soda ash is sold or supplied by the opponents ?
(2) Whether the said section can be construed to mean that utilization does not make soda ash liable to taxation ?
(3) Whether the assessment made on the price of the quantity of soda ash utilised is not lawfully made ?
(4) Whether the assessment order passed by the Sales Tax Officer was not according to the said provisions of law, and whether for that reason it should be set aside ?
(5) Whether the utilised soda ash can be taxed only on the basis of the sale or supply of by-products?
2. The opponents are the manufacturers of soda ash and its by-products such as silicate of soda, soda-bicarb, etc., some of which are liable for assessment while some are exempt. Some of the soda ash produced by them is also utilised by the opponents in the further manufacture of soda ash. The opponents are registered with the Sales Tax Officer, Jhalawad District, Surendranagar, under No. ZDH/6. Their registration certificate mentions soda ash but not any by-products in the manufacture of which soda ash is utilized by them. The Sales Tax Officer had assessed the opponents to tax for a total sum of Rs. 4,565-14-0 on the taxable turnover of Rs. 1,46,109-4-0 for two quarters between 1st June, 1950, and 30th September, 1950. This taxable turnover, which included the price of soda ash utilised for purposes other than those mentioned in the registration certificate, was taken into account by the officer and assessed accordingly. The opponents preferred an appeal to the Deputy Commissioner of Sales Tax against the above order of assessment. The Deputy Commissioner of Sales Tax partially allowed their appeal and held that they should be taxed only on the quantity of soda ash which was utilised in the manufacture of by-products, other than soda ash, and that soda ash consumed in the further manufacture of soda ash should be allowed as tax-free. Against this decision the opponents approached the Commissioner of Sales Tax in revision. In that revision it was urged on their behalf that the use of soda ash in the process of manufacture was not a sale but so much less production. That 'sale' as definedened in the Ordinance contemplated two parties to the transaction and therefore in utilising their own product for further processing and converting it into another by-product they did not 'sell' it and consequently its price should not be taken into account in calcalating their taxable turnover. This contention was rejected by the learned Commissioner of Sales Tax after a consideration of the relevant sections of the Sales Tax Ordinance. He held that even if the utilisation of soda ash in the manufacture of other by-products did not amount to a sale, it amounted to a supply for the manufacture of goods and consequently the price of soda ash so utilised could not be held to be exempt. He further held that as the registration certificate granted to the opponents mentioned soda ash, soda ash supplied in the manufacture of soda ash should be exempt under Rule 1(i) of Section 6(3), but as the certificate did not mention any other article, soda ash utilised in the manufacture of by-products was liable to assessment. The opponents approached the Sales Tax Tribunal in revision against the above order of the Sales Tax Commissioner. The Tribunal differed from the Sales Tax Commissioner and held that mere utilisation did not make soda ash liable to taxation but the selling or supplying made it so liable. The Tribunal accordingly ordered that the amount assessed by the Deputy Commissioner of Sales Tax and upheld by the Commissioner of Sales Tax should be refunded to the opponents and a fresh assessment made by the Sales Tax Officer, by calculating the price received or receivable by the opponents of soda ash utilised in those by-products, which contained soda ash and which was sold or supplied to other persons and the sales tax should be charged accordingly subject to just reductions. The Tribunal thus ordered a fresh assessment on the basis that only the price of soda ash utilised in the manufacture of taxable by-products, which the opponents sold or supplied to others, should be considered in assessing sales tax. The Commissioner of Sales Tax being aggrieved by this decision requested the Tribunal to make a reference to this Court, which it has accordingly done.
3. Before we proceed to consider the actual points for determination, it will be necessary to set out material portions of the relevant sections of the Ordinance relating to the incidence and levy of the tax as frequent references will have to be made to them in discussing the points. Section 5 which deals with the incidence of the tax is as follows :-
5. (1) Subject to the provisions of Section 6 and with effect from such date as the Government may, by notification in the Official Gazette appoint, being not earlier than thirty days after the date of the said notification, every dealer whose gross turnover during the year immediately preceding the commencement of this Ordinance, in respect of sales or supplies of goods exceeds-(a) in the case of a dealer who brings any goods into the United States of Saurashtra from any territory other than that notified by the Government in the Official Gazette, whether by land, water or air, Rs. 10,000 provided the value of such goods is not less than Rs. 1,000; (b) in the case of a manufacturer or processor, Rs. 10,000, and (c) in the case of any other dealer, Rs. 15,000, shall be liable to pay tax under this Ordinance on his turnover in respect of sales or supplies of goods effected after the date so notified.
* * *Section 6 which deals with the levy of the tax is as follows :- '6. (1) The tax payable by a dealer under this Ordinance shall consist of a general tax at the rate of one half of an anna in the rupee levied on his taxable turnover in respect of sales or supplies of goods. Provided that the tax payable by a dealer on his taxable turnover in respect of sales or supplies of goods which are despatched or removed by him or on his behalf or by the purchaser of such goods to such place outside the United States of Saurashtra as may be notified by the Government in the Official Gazette within such period and subject to such terms and conditions as may be prescribed shall be levied at such rate not exceeding half the rate of the tax leviable under this section as the Government may by notification in the Official Gazette specify, and subject also to provisions of Article 286 of the Constitution of India when it comes into force.
* * *(3) The 'taxable turnover' for the purposes of Sub-section (1) shall be determined in accordance with the following rules :-
Rule 1 :-From the gross turnover of the dealer in respect of all his sales or supplies of goods during any period of his liability to pay the tax, there shall first be deducted his turnover during that period in respect of
(i) sales or supplies to a registered dealer of goods certified by him as being intended for re-sale by him or of goods specified in the purchasing dealer's certificate of registration as being intended for use by him in the manufacture or processing of any goods for sale or supply, or sales or supplies to a registered dealer of containers- and other materials for the packing of such goods:
Provided that where such goods are utilised by him for purposes other than those specified in his certificate of registration, the price of goods so utilised shall be included in his taxable turnover ; * * *
These sections clearly lay down that the tax is payable by a dealer on his taxable turnover to be determined according to the provisions of Section 6(3). The contention of the Commissioner for Sales Tax as appears from the Tribunal's statement of the case accompanying the reference was that if the goods were utilised for purposes other than those specified in the registration certificate of a dealer, then according to the proviso to Rule 1 of Section 6(3) the price should be so added to the taxable turnover and the department was not concerned whether any of the by-products, which was not liable to sales tax and in the manufacture of which soda ash was used, was sold or supplied to other persons by the opponents and the order of the Tribunal ordering fresh assessment on that basis was bad in law. He also contended that the said proviso could not make it incumbent on the Sales Tax Officer to examine how much quantity of by-product containing soda ash was sold or supplied by the opponents. The opponents on their part argued that the use by them of soda ash manufactured in the works in the manufacture of other by-products did not amount to a sale or supply as contemplated by Sections 5 and 6 and consequently soda ash so utilised by them should be exempted altogether from the tax. The applicant's reply to this argument was that the use by the opponents of soda ash in the manufacture of their by-products amounted to a supply within the meaning of the Ordinance and should be charged to tax according to the provisions of the Ordinance. The real points that arise for determination therefore are (1) whether soda ash utilised by the opponents in the manufacture of by-products not mentioned in the registration certificate renders the soda ash so utilised liable to assessment for sales tax, and (2) whether soda ash so utilised by the opponents amounts to a supply within the meaning of the Ordinance so as to be liable to assessment for sales tax.
4. It will be more convenient to take up the second point for consideration first. The Tribunal has expressed the view that it is the sale or supply of soda ash to a third party which attracts the incidence of the tax and its direction to the Sales Tax Officer to make a fresh assessment was based on this view. We agree with this view of the Tribunal. A sale, it cannot be diputed, requires two parties, vix., the buyer and the seller. There cannot be a sale of goods by the seller to himself and a transaction which is to be assessed as a sale requires at least two parties to it. In the case of a supply also there is no doubt that there should be two parties, viz., the person supplying the goods and the person to whom they are supplied, and the dealer's taxable turnover is to be calculated on such bilateral transactions of supply only. The definitions of 'dealer' and 'turnover' as well as Sections 5 and 6 relating to the incidence and levy of the tax speak of 'sales' or 'supplies' and there is no reason to suppose that while a sale should be a bilateral transaction, a supply was intended to mean other than a transaction between two parties. This is clear from the definition of 'dealer' in Sub-section (b) of Section 2 which defines the dealer as a person engaged in the business of selling or supplying goods 'whether for commission, remuneration or otherwise'. The words 'whether for commission, remuneration' in the definition contemplate the existence of two parties, viz., the person supplying the goods and the person to whom they are supplied and who pays consideration in the form of commission or remuneration. The words 'or otherwise' in the definition must be construed ejusdem generis with the words 'commission' and 'remuneration' and should be taken to mean payment of consideration in any other form and presuppose the existence of two parties. Indeed the principle underlying the Sales Tax Ordinance is to levy tax on a dealer whose business it is to sell or supply goods to another for consideration. The contention of the Sales Tax Commissioner that the utilisation by a manufacturer of goods produced by himself in further processing or converting them into a by-product amounts to a supply of the goods must be rejected. We therefore hold that the price of the soda ash utilised by the opponents in the manufacture of any byproducts, whether taxable or otherwise, and whether such by-products are sold or supplied by them to others, is exempt from sales tax.
5. It was pointed out to us that the proviso to Rule 1 of Sub-section (3) of Section 6 uses the word 'utilisation'. The use of this word, it was suggested, was deliberately made in order to meet cases like the one before us and to forestall the argument that utilisation of goods by the manufacturer himself in the manufacture of other goods was not liable to be taxed. We do not agree with this contention for mere use of the word 'utilisation' in the proviso cannot be construed to mean that the legislature intended by the proviso to depart from the basic principle underlying the Ordinance that only bilateral transactions of sales or supply of the goods of a dealer should be taxed.
6. Turning now to the first point for determination, viz., whether soda ash utilised by the opponents in the manufacture of by-products not mentioned in the opponents' registration certificate renders the soda ash utilised liable to assessment for sales tax. It is sought to be taxed by virtue of the proviso to Rule 1 of Sub-section (3) of Section 6. The proviso however comes into operation only if it is first shown that such utilisation amounts to a supply which is liable to the tax. But in this case that question does not arise because as held by us utilisation by the opponents of soda ash in the manufacture of other by-products does not amount to a supply which could be taxed and therefore the proviso does not apply to such cases.
7. We shall now proceed to answer the questions referred by the Tribunal.
Question No. 1.-This question is not happily worded and the Tribunal is not clear whether it wants our opinion in respect of supplies made by the opponents to third parties or in respect of soda ash utilised by themselves in manufacturing their own by-products. But as the Tribunal's order in revision is clear that the Sales Tax Officer should examine how much quantity of by-products containing soda ash is sold or supplied to others, we take it that the Tribunal wants our opinion in respect of soda ash sold or supplied to others. But we have held above that soda ash utilised by the-opponents in the manufacture of the byproducts is not at all liable to assessment for sales tax and therefore this question does not arise and we express no opinion on it.
Question No. 2.-In the affirmative.
Question No. 3.-Assessment was not lawfully made.
Question No. 4-First part in the affirmative.-Second part in the affirmative.
Question No. 5.-Soda ash utilised by the opponents in manufacturing their own by-products cannot be taxed at all.
8. I agree.