1. At the instance of the State, the following questions have been referred to us under section 69(1) of the Gujarat Sales Act, 1969 (hereinafter referred to as 'the Gujarat Act'), for our opinion :
'(1) Whether, on the facts and circumstances of this case, the Tribunal was right in law in holding that mixture of sopari, variyali, dhana-dal, sweet flavored powder, etc., as effected by the opponent and sold under the popular name of the relevant pan-masala did not amount to 'manufacture' within the meaning of that expression as defined in section 2(16) of the Gujarat Sales Tax Act, 1969 and accordingly in allowing the opponent to deduct the sales thereof as resales of goods purchased from registered dealers in terms of clause (ii) of section 7 of the said Act
(2) Whether, on the facts and circumstances of this case, the Tribunal was right in law in holding that the opponent's sales of pan-masala containing the mixture of sopari, chuna and tobacco were sales of a 'form of tobacco' within the meaning of item No. 4 of the First Schedule to the Central Excises and Salt Act, 1944, and that, therefore, they were sales of 'tobacco' within the meaning of entry 43 of Schedule I to the Gujarat Sales Tax Act, 1969, and that, therefore, they were free from all taxes ?'
2. A few facts need be stated, as found by the Tribunal, in order to appreciate the contentions urged on behalf of the State Government in support of this reference. The opponent-assessee is a registered dealer under the Gujarat Act and is carrying on business to sell pan, bidi, match-boxes, cigarettes, etc., in the city of Ahmedabad. The assessee also sells what is popularly known as 'pan-masala' which is a mixture of sopari (betel-nut), variyali, dhana-dal and sweet flavored powder. The assessee also sells another type of pan-masala which is again a mixture of tobacco, chuna and sopari.
3. In the course of the assessment for the period commencing from Kartik Sud 1 to Aso Vad 30 of S.Y. 2030, the Sales Tax Officer found that since there is mixing of these different articles, so far as the first type of pan-masala is concerned or some treatment, so far as the second type of pan-masala is concerned, there was some activity of processing or adapting and, therefore, the assessee was held to be liable to pay sales tax and general sales tax under entry 13 of Schedule III to the Gujarat Act on the sales of these two types of pan-masala. For purposes of assessing the liability, the Sales Tax Officer estimated the sales of pan-masala of both the varieties at 20 per cent of sales of all the goods of the assessee and accordingly worked out the turnover of sales of pan-masala of both the varieties in the sum of Rs. 17,360 and brought the said amount to tax under the aforesaid entry. The Sales Tax Officer also imposed a penalty under section 45(6) read with section 45(2)(c) of the Gujarat Act with which, however, we are not concerned in this reference.
4. The assessee, being aggrieved with the order of the Sales Tax Officer, carried the matter in appeal before the Assistant Commissioner of Sales Tax (Appeals). The Assistant Commissioner of Sales Tax partially allowed the appeal by reducing the estimates of the sales of pan-masala of both the varieties from 20 per cent to 10 per cent and accordingly estimated the turnover of the sales in that behalf in the sum of Rs. 8,673 and brought it to tax under the aforesaid entry 13 of Schedule III to the Gujarat Act.
5. The assessee, therefore, carried the matter in second appeal before the Gujarat Sales Tax Tribunal. The Tribunal, on consideration of the relevant evidence in that behalf, found that the constituent ingredients in both the varieties of pan-masala retain their original characteristics and form, and the mere fact that in the first variety of pan-masala there was a blending of different articles, or there was treatment of tobacco by application of chuna in the second variety, would not have any material bearing on the question since the original constituent articles retain their original form and characteristics and, therefore, the activity would not amount to a manufacture which would expose the assessee to the liability of payment of sales tax. The Tribunal, therefore, allowed the appeal and set aside the orders of the Sales Tax Officer and of the Assistant Commissioner of Sales Tax.
6. At the instance of the State Government, as stated, the aforesaid two questions have been referred to us for our opinion.
7. At the time of hearing of this reference, the learned Assistant Government Pleader, appearing on behalf of the State Government, contended that the assessee was not entitled to claim deduction on the turnover of sales of pan-masala of both the varieties as they would not be resale within the definition of the term 'resale' under section 2(26) of the Gujarat Act, inasmuch as the goods were not sold without doing anything to them which did not amount to, or result in, a manufacture. In other words, the submission of the learned Assistant Government Pleader is that since there was some process, treatment or adaptation of the different articles constituting pan-masala of both the varieties, there was an element of manufacturing involved in it and, therefore, the assessee was not entitled to claim deduction of the turnover of sales of pan-masala of both the varieties as resales under section 7 of the Gujarat Act.
8. The learned Assistant Government Pleader, however, conceded that the case of the State Government rests on the definition of the term 'resale' read with the definition of the term 'manufacture' in section 2(26) and section 2(16) respectively of the Gujarat Act. We will, therefore, read the said two sections for purposes of answering the questions referred to us.
9. The material part of section 2(26) reads as under :
'2. (26) 'resale' for the purposes of sections 7, 8, 10, 13 and 15 means a sale of purchased goods :-
(i) in the same form in which they were purchased, or
(ii) without doing anything to them which amounts to, or results in, a manufacture, or
and the word 'resell' shall be construed accordingly.'
10. The term 'manufacture' has been defined in section 2(16) of the Gujarat Act which provides as under :
'2. (16) 'manufacture' with all its grammatical variations and cognate expressions, means producing, making, extracting, collection, altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed.'
11. We have therefore to examine whether the contention urged on behalf of the State Government is warranted in the definition of the term 'resale' read with the definition of the term 'manufacture'. It cannot be urged successfully that purchased goods are sold after doing anything to them which amounts to or results in manufacture. If there is any processing, treating or adapting of any goods, the sale of such treated, etc., goods cannot be classified or claimed as 'resale' so as to quality for deduction under section 7 of the Gujarat Act. It is also true that in order to claim deduction under section 7 of a sale of purchased goods, the goods must be sold in the same form in which they were purchased. This legal position is apparent on mere reading of section 2(26)(i) and (ii) of the Gujarat Act. So far as the form of the goods is concerned, the Tribunal has found as a matter of fact that the constituent elements of pan-masala of both the varieties even after their mixture did not change their original form. The Tribunal has, in the statement of case, in paragraph 9, stated as under in connection with the pan-masala of the first variety consisting of sopari, variyali, dhanadal and sweet flavoured powder :
'9. ............... In that connection, the Tribunal had stated that the addition of the above ingredients would not at all affect their original forms in which all those articles were originally purchased and, therefore, the constituent ingredients brought together in the above mixture would continue to retain the same forms in which the opponent would have originally purchased them and the mere fact that they were put or brought together under one mixture and sold as pan-masala would not affect the original forms of the constituent ingredients at all.'
12. Similarly, in respect of the second variety of pan-masala which was predominantly a mixture of tobacco along with sopari and chuna, the Tribunal has, in paragraph 13 of the statement of case, found as under :
'13. ..........On those facts, we had also stated that the purpose for which a customer purchases that pan-masala form a dealer is to eat tobacco in that form and as treated with chuna and accompanied with sopari just as he would eat tobacco without any other ingredient like chuna and sopari. Therefore we had stated that the purpose for which the customer would eat tobacco as such would continue to remain the purpose for which the customer would also eat pan-masala of the second variety because that was also a form of tobacco. Accordingly, we had observed that the form of tobacco in pan-masala did not change in spite of the fact that it was treated with chuna or accompanied with sopari.'
13. The only question which remains to be considered is, whether either by the mixture of these different constituent articles and adding flavour in the first variety of pan-masala, or by the treatment of the tobacco with the application of chuna in the second variety, can it be said that something has been done to the goods which amounts to or results in a manufacture The learned Assistant Government pleader has urged that this would be processing; or, in any case, treating or adapting the goods for the purposes of making them palatable to different types of customers who are inclined to take different varieties of pan-masala. In support of this contention, the learned Assistant Government Pleader relied on the definition of the term 'manufacture' where, in the latter part of the definition, the term has been defined so as to mean the activities of processing, treating or adapting any goods so as to make them suitable for a given purpose. It is no doubt true that the legislature has defined the term 'manufacture' in the widest term by taking in besides the activities of production, making, extracting, collecting, altering, ornamenting or finishing the activities of processing, treating or adapting any goods so as to make them suitable for a given purpose. But merely because the legislature has defined the term in such a wide term, it would be too spacious to contend that any processing, treating or adapting of goods would amount to, or result in, a manufacture. Any and every process, treatment or adaptation will not amount to, or result in, a manufacture. It would cease to be a resale only if something is done to the goods which would amount to, or result in, a manufacture. In other words, where some transformation in a sense of a new and a different article emerging as a result of the processing, treatment or adaptation having different name, characteristic or use so that the end-product does not retain a continuing substantial identity that it can be said that manufacturing has taken place.
14. The Supreme Court in Deputy Commissioner of Sales Tax v. Pio Food Packers  46 STC 63 (SC) was concerned with the question, whether conversion of pineapple fruit, after washing and removing inedible portion, the end crown, the skin and the inner core with the addition of sugar would amount to consumption of pineapple fruit in the manufacture of those goods so as to be liable to purchase tax under section 5A of the Kerala General Sales Tax Act, 1963, and it was held as under :
'...................Commonly, manufacture is the end-result of one or more processes, through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity.'
15. The Supreme Court, in that connection, referred to the decision of the American Supreme Court in Anheuser-Bush Brewing Association v. United States 52 L Ed 336 (338) where what is manufacturing as well as what is the distinction between a processing and a manufacturing has been succinctly indicated. The passages relied upon by the Supreme Court read as under :
'Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary ............... There must be transformation; a new and different article must emerge, 'having a distinctive name, character or use'.
............ At some point processing and manufacturing will merge. But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been 'manufactured'.'
16. This principle of law has been reaffirmed by the Supreme Court in its subsequent decision in Chowgule & Co. Pvt. Ltd. v. Union of India  47 STC 124 (SC). Our attention has been invited to the decision of the Bombay High Court in Commissioner of Sales Tax v. Dunken Coffee Manufacturing Co.  35 STC 493 where a Division Bench of the Bombay High Court as concerned with a similar question as to what would constitute 'manufacture' which is defined in section 2(17) of the Bombay Sales Tax Act, 1959, which definition is in pari materia with the definition of the term 'manufacture' in the Gujarat Act. The Division Bench of the Bombay High Court was concerned with the question as to whether the activities of roasting and grinding coffee seeds and preparing coffee powder out of these seeds amounted to activities of manufacture. The Division Bench has taken the same view as we are inclined to take in this matter and we are in respectful agreement with the same view of the Bombay High Court.
17. In view of this settled legal position, we do not think that the State Government can successfully assail the view of the Tribunal and particularly because the Tribunal has found as a matter of fact that the constituent articles composing both the varieties of pan-masala retain their original form and the substantial identity of those articles continues. It cannot be said that there is a transformation of these different constituent elements in the sense of a new or a different article emerging therefrom. The learned Assistant Government Pleader was at pains to emphasis that this mixture is known as pan-masala and, therefore, it has a distinct commercial name and characteristic. We are afraid we cannot agree with the learned Assistant Government Pleader for the obvious reason that though it may be popularly known as 'pan-masala', the constituent elements of mixture retain their substantial identity and neither as a result of the mixture in the first variety, nor as a result of some application of chuna in the second variety a transformation has taken place so that it can be said that a new and a different article has emerged having different name, characteristic or use. The collective compendious name given to the goods does not make them a distinct commercial commodity in view of what we have stated above. Instead of taking these different constituent elements separately if they are eaten together to have the ingredients more palatable, it cannot be urged that a transformation of articles has taken place and an end-product having different commercial character, use or name has come into being. In view of the above we answer the questions referred to us in the affirmative, that is, in favour of the assessee and against the State Government. The State Government shall pay the costs of this reference to the assessee.
18. Reference answered in the affirmative.