1. This reference has been made by the Gujarat Sales Tax Tribunal, Ahmedabad (hereinafter referred to as 'the Tribunal'), at the request of the State of Gujarat because the Tribunal allowed Second Appeals Nos. 365, 366, 367 and 368 of 1974 filed by the assessee, M/s. Nareshkumar & Brothers.
2. The assessee is a registered dealer under the Gujarat Sales Tax Act, 1969 (hereinafter referred to as 'the Gujarat Act'), carrying on the business of buying tear-waste of newsprint reels from the printing presses and after cutting them into reams of different sizes selling to printing presses or other dealers dealing in paper. While making the assessments for the four periods, which are financial years 1969-70 and 1st April, 1970, on 5th May, 1970 (both covered under the Bombay Sales Tax Act, 1959) (hereinafter referred to as 'the Bombay Act'), and 1st April, 1971, to 30th May, 1971, and 6th May, 1970, to 31st March, 1971 (both covered under the Gujarat Act), the Sales Tax Officer held that the activity of the opponent-assessee amounted to manufacture, and assessed the tax on the sales of reams of different sizes at the rate applicable under the residuary entry by disallowing the deduction of resales of goods purchased from the registered dealers as claimed by the assessee. The Sales Tax Officer also imposed a penalty under section 36(3)(a) of the Bombay Act and section 45(6) of the Gujarat Act.
3. The assessee approached the Assistant Commissioner by way of appeals. The learned Assistant Commissioner confirmed the finding that the activity of the assessee amounted to manufacture. He, however, reduced the penalty to a token amount considering that the assessee was under a bona fide impression about the nature of activity of being resales of papers.
4. Being aggrieved by the order of the learned Assistant Commissioner, the assessee approached the Tribunal by way of four different appeals. The Tribunal considered the short question, whether the sales of papers by the assessee amounted to resales of papers within the meaning of the Bombay Act and the Gujarat Act for the purpose of giving deduction of resales of the goods purchased from the registered dealers under section 8(i) of the Bombay Act and section 7(ii) of the Gujarat Act. Before the Tribunal two contentions were raised. First was that the case of the assessee was covered by clause (26)(ii) of section 2 of both the Acts inasmuch as there is resale of purchased goods without doing anything to them which amounts to, or results in, a manufacture. The second contention was that in any event, the case of the assessee is covered by sub-clause (i) of clause (26) of section 2 of the Acts inasmuch as the sale of papers by the assessee was a resale.
5. The Tribunal considered that the case of the assessee stood on a firmer ground on the second point and, therefore, proceeded to deal with it first. It is an admitted position that the assessee used to purchase tear-waste of newsprint reels from the printing presses, and that was cut into reams of different sizes. The Tribunal, therefore, considered that cutting of papers which were in greater lengths to the papers of smaller lengths would not amount to change in the form of the goods. The Tribunal relied on the decision of this Court in Vaiswaner Trading Co. v. State of Gujarat  15 STC 586, wherein the assessee purchased pieces of rolled steel sections and then were joined together by revetting. In that case this Court held that by joining together rolled steel sections by process of revetting the length was increased, but it cannot be said to be said to be a change in the form. Relying on this decision, the Tribunal came to the conclusion that there was no change in the form and whatever activity was done by the assessee was resale of the papers purchased by it and, therefore, allowed the appeals.
6. As the appeals were allowed, on behalf of the State request was made to make a reference to this Court. So, initially, the question to be framed and referred to this Court was as follows :
'Whether, on the facts and in the circumstances of the case, the Gujarat Sales Tax Tribunal was correct in law in allowing the second appeals and holding that the sales of papers in question by the opponent are treated as resales and deduction of resales of the goods purchased by the opponent should be allowed and setting aside the order disallowing the deduction of resales of papers and imposing penalty under section 36(3)(a) of the Bombay Sales Tax Act, 1959, and the order of granting set-off ?'
7. But the Tribunal, relying on the decision of this Court in the case of Vaiswaner Trading Co.  15 STC 586 did not think it necessary to refer the question to the High Court and, therefore, rejected the application. But the State of Gujarat made Sales Tax Applications Nos. 1, 2, 3 and 4 of 1977 before this Court against the order of refusal of reference and by an order dated 22nd August, 1977, this Court directed the Tribunal to draw up the statement of case and refer the following question of law to this Court for its opinion :
'Whether, on the facts and in the circumstances of the case, the Gujarat Sales Tax Tribunal was correct in law in allowing the second appeals and holding that the sales of paper in question by the opponent are treated as resales and deduction of resales of the goods purchased by the opponent should be allowed and the Tribunal was also correct in setting aside the orders of disallowing the deduction of resales of papers and imposing penalty under section 36(3)(a) of the Bombay Sales Tax Act, 1959, and the order of granting set-off ?'
8. Having heard the arguments of the parties, we feel that the question as framed above is not proper and, therefore, we have herd this reference on the following question by consent of the parties :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in setting aside the orders disallowing the deductions claimed on account of resales of papers and also orders of penalty and the consequential order of granting set-off under the relevant sections of the respective Acts, viz., the Bombay Sales Tax Act, 1959, and the Gujarat Sales Tax At, 1969 ?'
9. Mr. J. R. Nanavati, the learned Government Pleader, submitted before us that the finding of the Tribunal that this was a resale is not correct. He referred to us the definition of the word 'manufacture' given in section 2(17) of the Bombay Act, as well as in section 2(16) of the Gujarat Act. Both these definitions are in pari materia and, therefore, we will refer to it as a single definition, which is as under :
''manufacture' with all its grammatical variations and cognate expressions, means producing, making, extracting, collecting, altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed.'
10. Having referred to this definition, Mr. Nanavati could not show to us whether the action of the assessee could be covered by this definition.
11. Mr. Nanavati then referred to us the provisions of section 2(26), the material part of which concerning the dispute before us, is as follows :
'(26) 'resale', for the purposes of sections 7, 8, 10, 13 and 15 (so far as the Gujarat Act is concerned, and sections 7, 8, 9, 10, 12 and 13, so far as the Bombay Act is concerned) 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.'
12. Clause (ii) of sub-section (26) of section 2 refers to 'manufacture', and we have already considered that the action of the assessee would not be covered by 'manufacture' and, therefore, this clause (ii) of sub-section (26) of section 2 would not be applicable.
13. The question to be considered is whether the sale was in the same form in which the articles were purchased. The Tribunal considered that the assessee purchased the tear-waste of newsprint reels and then cut them into reams of different sizes and sold them and, therefore, it was a resale. Under rule 3 of the Gujarat Sales Tax Rules, 1970 (hereinafter referred to as 'the Gujarat Rules'), the processes not included in 'manufacture' are enumerated, and at clause (x) thereof, the cutting of paper from reels into reams and the ruling of papers is included and, therefore, it is not a process included in the manufacture. But Mr. Nanavati wanted to make a fine distinction, that 'paper' referred to in rule 3(x) would not cover the 'newsprint' as is the case in this reference. But this argument of Mr. Nanavati is misconceived if we refer to entry 31 in Schedule II, Part A, to the Gujarat Act, wherein 'paper' is shown to be including newsprint, straw boards and car boards. It should be noted that the provision of cutting of papers from reels into reams is not a manufacturing process under both the Rules as well as inclusion of newsprint in the paper as was in entry 31 of Schedule II, Part A, to the Gujarat Act and entry 24 of Schedule C to the Bombay Act. So, in both the Acts and the Rules newsprint can be considered to be a paper and it would not be a manufacturing process if such newsprint is cut. The Tribunal rightly considered the decision of this Court in Vaiswaner Trading Co.'s case  15 STC 586 as therein on page 590, the following observations are made :
'....... Rolled steel sections as they emerge from the rolling mills may be of diverse lengths that a dealer may purchase for the purpose of sale. It may be that rolled steel sections in certain lengths only may be required by the consumers and a dealer may, therefore, find that in order to be able to sell the rolled steel sections purchased he may have to cut them up into smaller pieces. When a dealer cuts up the rolled steel sections purchased by him from the rolling mills into smaller pieces and sells such smaller pieces in the lengths required by the consumer, can it be said for a moment that such pieces are not sold in the same form in which rolled steel sections are directly produced by the rolling mills The length of the rolled steel sections is not a part of their form and the mere cutting up of the rolled steel sections into smaller pieces or if the rolled steel sections are joined together by revetting, they do not in any way change the form. They still remain rolled steel sections as they emerged from the rolling mills with only this difference that instead of a particular length which they originally had, they now have a greater length. The form remains unchanged; merely the length changes .........'
14. This ruling would be more applicable to the instant case where there is no change in the form of paper. In the case referred to above there was at least revetting of the steel rolled sections. This Court in that judgment considered that the length of the rolled steel sections is not a part of their form and the mere cutting up of the rolled steel sections into smaller pieces, or if the rolled steel sections are joined together by revetting, they do not in any way change the form. Here it is a mere process of cutting newsprint reels into smaller reams and, therefore, it cannot be said to be any change in the form and, therefore, sale of those papers can certainly be said to be a resale to be covered under clause (i) of sub-section (26) of section 2 of the respective Acts.
15. In view of the above discussion, we answer the reference in the affirmative, i.e., in favour of the assessee and against the department. The department shall pay the costs of this reference to the assessee.
16. Reference answered accordingly.