1. At the instance of the State Government, the following question is referred to us under section 69(1) of the Gujarat Sales Tax Act, 1969 (hereinafter referred to as 'the Gujarat Act') :
'Whether, on the facts and in the circumstances of the case, the sales of dyes after mixing it with gobar salt, soda-bi-carb and soda-ash amount to resales of goods within the meaning of section 2(26) of the Gujarat Sales Tax Act, 1969, in the same form or in a different form or amount to sales of goods manufactured within the meaning of section 2(16) of the Act and whether the deduction claimed by the opponent of resales of goods purchased from registered dealers is admissible ?'
2. The question arose in the course of the assessment of the assessee, a dealer reselling dyes and chemicals after diluting the concentration of the dyes by adding certain quantity of gobar salt, soda-bi-carb or soda-ash in the said dyes purchased by it from the registered dealers. The dyes with the reduced strength were resold at a reduced price. The question arose whether the opponent-assessee was entitled to claim deduction of the purchases from the registered dealers from his turnover of sales under section 7(ii) of the Gujarat Act.
3. The Sales Tax Officer disallowed the claim of deduction of the turnover of the purchases from the registered dealers since in his opinion reducing the strength of the dyes by mixing gobar salt, etc., amounted to manufacture of goods and, therefore, they cannot be treated as resales of goods as exempted from being included in the turnover of sales under section 7(ii) of the Gujarat Act. He, therefore, levied the tax on the sales of the opponent-assessee amounting to Rs. 1,01,683.
4. The assessee, therefore, carried the matter in appeal with no purpose. However, in further appeal before the Tribunal, it was able to convince the Tribunal that the reducing of the strength of the dyes by addition of gobar salt, etc., did not change the essential characteristic of the commodity so as to be liable to be excluded from the class of resales of the goods as defined in section 2(26) of the Gujarat Act since the process of addition would not amount to manufacture as defined in section 2(16) of the said Act. In the circumstances, at the instance of the State Government, the question set out above has been referred to us for our opinion.
5. We are of the opinion that in view of the two decisions of the Supreme Court in (i) Deputy Commissioner of Sales Tax v. Pio Food Packers  46 STC 63 (SC) and (ii) Chowgule & Co. Pvt. Ltd. v. Union of India  47 STC 124 (SC), there are no justifying reasons for us to interfere with the order of the Tribunal which cannot be assailed on the matter of principle or authority. In Chowgule's case  47 STC 124 (SC), one of the questions before the Supreme Court was, whether blending of iron ore from the different stock piles made at the harbour site in the course of loading in the ship by means of mechnical ore handling plant constituted manufacture or processing of ore for sale within the meaning of section 8(3)(b) of the Central Sales Tax Act read with rule 13 of the Central Sales Tax (Registration and Turnover) Rules. In that context, the Supreme Court, speaking through Bhagwati, J., referred with approval to the test laid down for distinguishing as to what act would constitute manufacture in its earlier decision in Pio Food Packers' case  46 STC 63 (SC). The test as laid down in Pio Food Packers' case  46 STC 63 (SC) was succinctly re-emphasised in the following terms in Chowgule's case  47 STC 124 at 130 (SC) :
'The point which arises for consideration under the first question is as to whether blending of ore in the course of loading it into the ship through the mechanical ore handling plant constituted manufacture or processing of ore. Now it is well-settled as a result of several decisions of this court, the latest being the decision given on 9th May, 1980, in Civil Appeal No. 2398 of 1978, Deputy Commissioner of Sales Tax v. Pio Food Packers  46 STC 63 (SC) that the test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity, but is recognised in the trade as a new and distinct commodity. This court speaking through one of us (Pathak, J.) pointed out : '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.' The test that it required to be applied is : does the processing of the original commodity bring into existence a commercially different and distinct commodity On an application of this test, it is clear that the blending of different qualities of ore possessing different chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve the process of manufacture, since the ore that is produced cannot be regarded as commercially new and distinct commodity from the ore of different specifications blended together. What is produced as a result of blending is commercially the same article, namely, ore, though with different specifications than the ore which is blended and hence it cannot be said that any process of manufacture is involved in blending of ore.'
6. In view of the settled legal position, therefore, we do not think that the Tribunal has committed an error on the matter of principle or in application thereof when it concluded that addition of gobar salt, etc., to the dyes purchased from the registered dealers having various qualities and concentration for purposes of reducing its strength and reselling them at a reduced price would not amount to any act of manufacturing. The learned Government Pleader appearing for the State Government urged that the addition of gobar salt, etc., for purposes of reducing the quantity would amount to application of some process and if as a result of the application of some process the strength and the concentration of a particular dye is reduced, a different commodity having different character would come into existence and, therefore, the Tribunal was not justified in concluding that this process of addition of gobar salt, etc., would not amount to manufacture. In that connection he invited our attention to the decision of the Supreme Court of United States in the manner of Anheuser-Busch Brewing Association v. United States 52 L Ed 336 and referred to in Pio Food Packers' case  46 STC 63 (SC). The observation which has been digested from the decision of the Supreme Court of United States reads 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'.'
7. We do not think that the principle which has been referred to by the learned Government Pleader as enunciated by the Supreme Court of United States and referred to in Pio Food Packers' case  46 STC 63 (SC) can be of much assistance to the cause of the State on the facts and in the circumstances of this case. It is no doubt true that with some treatment or manipulation (in the present case mixing of gobar salt, etc.), some change has taken place in the sense that the strength of the concentration of the dyes reduced. But it is not every change which will amount to manufacture. There must be transformation in the sense a new and a different article having a distinctive name, use and characteristic must come into existence. As tersely put by Bhagwati, J., in Chowgule's case  47 STC 124 (SC) the crux of the problem is whether the processing of the original commodity brings into existence a different and a distinct commodity commercially recognised. We do not think that the Tribunal was in any way in the wrong in answering that question against the State Government that mere reduction in the strength of the concentration of the dyes would not change the essential characteristic of the dyes and would bring into existence a new and a distinct commodity which is recognised as such in the commercial sense. Even after the reduction of the strength of the dyes the dyes remain the dyes and do not lose their essential characteristic. In that view of the matter, therefore, this reference must be rejected and the question must be answered by holding that the act of addition of gobar salt, etc., in the dyes purchased by the assessee of diverse quality and concentration is not an act of manufacturing and the reselling of dyes with reduced strength would amount to resales and, therefore, the assessee is entitled to claim deduction as claimed before the Sales Tax Officer. The reference is, therefore, rejected by answering that sales were merely resales, that is, in favour of the assessee and against the State Government. The State Government shall pay costs of this reference to the assessee.
8. Reference answered accordingly.