1. The respondents carry on the business of selling what is known as "French Coffee". The activities of the respondents consist of purchasing coffee seeds, roasting and grinding them and preparing coffee powder out of these seeds. The respondents also purchase ready-made chicory powder and thereafter mix and blend the coffee powder prepared by them with chicory powder purchased by them and produce a mixture commercially known as "French Coffee". The proportion in which coffee powder and chicory powder are mixed is equal. The tins in which the respondents' French Coffee is sold bear labels carrying the legend that coffee is blended with chicory and that the mixture consists of 50 per cent coffee and 50 per cent chicory.
2. By their letter dated 3rd February, 1966, the respondents produced a bill for the sale of French Coffee to one of the their customers in which they had not recovered from the customer sales tax on such sale, treating the said sale as a resale. By the said letter, after setting out in what manner French Coffee was prepared by them, they applied to the Commissioner of Sales Tax to determine under section 52(1) of the Bombay Sales Tax Act, 1959, whether the sale of French Coffee by them constituted resale of the goods purchased by them. The argument advanced on behalf of the respondents before the Deputy Commissioner was that when they sold French Coffee they resold goods without there being any manufacture or processing of any goods by them. Rejecting this contention the Deputy Commissioner held that the mixing of pure coffee powder with chicory powder amounted to a process and was covered by the definition of the term "manufacture" contained in clause (17) of section 2 of the Bombay Sales Tax Act, 1959. The respondents thereupon filed an appeal to the Sales Tax Tribunal. The Tribunal came to the conclusion that though the character of coffee was changed because 50 per cent chicory powder was added to it, there was no alteration so far as the goods were concerned. The Tribunal further observed :
"No doubt, by mixing up coffee with chicory what has resulted is the new mixture, in which some of the original components might have been merged, but there is no alteration and, accordingly, there is no manufacture as has been defined in the Act."
3. Arising out of this order of the Tribunal, a case has been stated and the following question referred to us at the instance of the assessee :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the process of mixing and blending of coffee powder with chicory powder so as to obtain the product known as French Coffee does not amount to 'manufacture' within the meaning of the definition of 'manufacture' under section 2(17) of the Bombay Sales Tax Act, 1959 ?"
4. In our view, this question is not properly worded because the question as framed would appear to answer itself. The definition of "manufacture" contained in clause (17) of the said section 2 includes processing goods. According to the judgment given by the Tribunal, mixing and blending of coffee powder and chicory powder did not amount to a process. If, however, it was a process, the only answer which could be given would be that it constituted "manufacture" within the meaning of the said definition. Both the learned counsel are agreed upon this position and, accordingly, we reframe the question as follows so as to bring out the real controversy between the parties :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the mixing and blending of coffee powder with chicory powder so as to obtain the product known as French Coffee does not amount to 'manufacture' within the meaning of the definition of 'manufacture' contained in clause (17) of section 2 of the Bombay Sales Tax Act, 1959 ?"
5. The terms "manufacture" and "process" with their grammatical variations and cognate expressions are to be found in the sales tax legislations of several States. They occurred also in the Bombay Sales Tax Act, 1953. However, there does not appear to be any specific definition of these terms or either of them in the other Sales Tax Acts to which our attention has been drawn in the course of arguments nor in the Bombay Sales Tax Act, 1953. The definition of the term "manufacture" was introduced in the sales tax legislation of this State for the first time by clause (17) of section 2 of the Bombay Sales Tax Act, 1959. That definition is as follows :
" 'Manufacture', with all its grammatical variations and cognate expressions, means producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed."
6. Under clause (21) of the said section 2 "prescribed" means "prescribed by rules". Rule 3 of the Bombay Sales Tax Rules, 1959, is headed "Processes not included in 'manufacture'" and the relevant provisions of this rule are as follows :
"For the purposes of clause (17) of section 2 'manufacture' shall not include the following manufactures and manufacturing processes, namely.......
(iv) the roasting or grinding of coffee seeds;
(v) the blending of different varieties of tea."
7. According to the said rule 3, therefore, since the blending of different varieties of tea has been expressly excluded from the definition of "manufacture", it would follow that blending of other commodities would constitute a manufacturing process. Rule 3, however, cannot govern the definition of the term "manufacture" given in the parent statute under which the said rule was made a position conceded before us by Mr. Cooper, the learned counsel for the applicant. We have, therefore, to consider whether the mixing and blending of coffee powder with chicory powder constitute a process, irrespective of the fact that according to the rule-making authority, blending of commodities, apart from tea, is a manufacturing process.
8. The definition of the term "manufacture" contained in clause (17) of section 2 of the said Act is very wide and it includes within its scope certain activities which, in ordinary parlance, may not be considered as manufacture. For instance, it is difficult to consider, in ordinary parlance, altering or ornamenting or finishing of goods as manufacture. None the less, the definition of the term "manufacture", in the Bombay Sales Tax Act, 1959, states that these activities constitute manufacture. Relying upon the wide definition of the term "manufacture", Mr. Cooper, the learned counsel for the applicant, submitted before us that whenever anything was done to the goods, the activity amounted to manufacture. Mr. Patel, the learned counsel for the respondents has, on the other hand, submitted before us that what the definition comprehends is the bringing into being of a different commodity and that any alteration in the goods or anything done to the goods, unless it resulted in a different commercial commodity, cannot constitute manufacture.
9. The term "manufacture" used in the sales tax legislations of different States has several times come up for interpretation before courts. In North Bengal Stores Ltd. v. Member, Board of Revenue, Bengal ( 1 S.T.C. 157), the question which the Calcutta High Court had to consider was whether dispensing of medicines by a chemist was a manufacture. Under the Bengal Finance (Sales Tax) Act, 1941, where the turnover of a dealer who himself manufactured or sold any goods exceeded Rs. 10,000, he was liable to pay tax under the said Act. The court came to the conclusion that the dealer in that case was liable to pay tax. Gentle, J., did not give any finding whether dispensing of medicines constituted a manufacture, but he held that dispensing resulted in a new mixture and thereby the chemist produced goods for sale. He observed (at page 160) :
"When dispensing has taken place, but not before, the chemist has the goods with which to supply his customers and which he has agreed to sell to them. The resultant mixtures, after dispensing prescriptions, are the goods sold by a dispensing chemist to his customers; the process of dispensing is to produce those goods for sale, without which process sales of mixtures or compounds cannot be effected by chemist. Even if that process is not the manufacture of goods, as articles of furniture, mechanical appliances and paints are made from raw materials, nevertheless, since it is the production of goods for the purpose of selling to customers, the chemist who dispenses prescriptions thereby produces goods for sale."
10. Das, J., however, held that the activity of dispensing constituted a manufacture. He observed :
" 'To manufacture goods' in common parlance means 'to bring goods into being'. To manufacture or produce goods for sale means to bring into being or to produce something in a form in which it will be capable of being sold or supplied in course of business. The essence of manufacturing, I apprehend, is that something is produced or brought into existence which is different from that out of which it is made, in the sense that the thing produced is by itself commercial commodity which is capable as such of being sold or supplied. It does not mean that the materials with which the thing is manufactured must necessarily lose their identity or become transformed in their basic or essential properties."
11. Subsequent decisions show that the test laid down by Das, J., has been accepted by various High Courts as also the Supreme Court. In State of Bihar v. Chrestien Mica Industries Ltd. ( 7 S.T.C. 626), the question was whether the process of mining mica was tantamount to manufacture of goods within the meaning of section 2(g) of the Bihar Sales Tax Act, 1947. The Patna High Court held that to manufacture must mean to bring into being something in a form in which it was capable of being sold or supplied in the course of business. The court observed :
"The essential point to remember is that something is brought into existence which is different from that originally existing, in the sense that the thing produced is by itself a commercial commodity and is capable as such of being sold or supplied. It is not necessary that the stuff or material of the original article must lose its character or identity or it should become transformed in its basic or essential properties."
12. The same test was reiterated by the Allahabad High Court in Badri Prasad Prabha Shanker v. Sales Tax Commissioner, U.P., Lucknow ( 14 S.T.C. 208). In that case it was held that the crushing and sieving of tobacco leaves was a manufacturing process.
13. In Commissioner of Sales Tax, U.P., Lucknow v. Harbilas Rai and Sons ( 21 S.T.C. 17 (S.C.)), the facts were that the assessees in that case, who dealt in pig bristles, bought bristles plucked by Kanjars from pigs, boiled them, washed them with soap and other chemicals, sorted them out according to their sizes and colours, tied them in separate bundles of different sizes and despatched them to foreign countries for sale. The Supreme Court held that the sales made in foreign countries were not taxable as the bristles were not manufactured goods within the meaning of that expression contained in the U.P. Sales Tax Act, 1948. The Supreme Court approved the following observations of the Calcutta High Court (sic) in that case :
"All that it (that is, the assessee) does to the bristles bought from Kanjars does not amount to manufacturing. It does not result in the production of a commercially different article; what is bought by it from Kanjars is bristles and what it exports for sale is also bristles. It is not possible to say that the assessee manufactures pig bristles out of pig bristles; cleaning and arranging into different groups of different sizes and different colours does not convert them into something essentially or commercially different."
14. The Supreme Court in that case observed (at page 20) :
"In our view, the word 'manufacture' has various shades of meaning, and in the context of sales tax legislation, if the goods to which some labour is applied remain essentially the same commercial article, it cannot be said that the final product is the result of manufacture."
15. Thus, the test accepted by the Supreme Court is also that in order to constitute manufacture, what must come into being is a commercially different article.
16. Mr. Cooper, the learned counsel for the applicant, relied before us upon another decision of the Supreme Court in Anwarkhan Mehboob Co. v. State of Bombay (now Maharashtra) . That case arose under the old article 286(1)(a) of the Constitution. Under that clause no State could levy tax on the sales of goods which had taken place outside the State. The explanation to the said clause provided that a sale or purchase should be deemed to have taken place in the State in which the goods had actually been delivered as a direct result of such sale or purchase for the purpose of consumption in that State, irrespective of the fact that the property in such goods had passed in another State. In Anwarkhan Mehboob Co.'s case , the Supreme Court had to consider what was meant by the term "consumption" in the explanation to article 286(1)(a). The Supreme Court held (at page 704) :
"Except at the final stage of consumption which consists in using the finished commodity as an article of clothing, there will be noticed at each stage of production the bringing into existence of a commercial commodity different from what was received by the producers. This conversion of a commodity into a different commercial commodity by subjecting it to some processing, is consumption within the meaning of the explanation to article 286 no less than the final act of user when no distinct commodity is being brought into existence but what was brought into existence is being used up."
17. Though this case is not a direct authority on the question of what is manufacture for the purposes of sales tax legislation, it does furnish a guide that in such cases the test should be the bringing into existence of a different commercial commodity.
18. Mr. Patel, the learned counsel for the respondents, however, relied upon the decision of a Division Bench of this High Court in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay ( 10 S.T.C. 500). In that case the assessees purchased in bulk different brands of tea and without the application of any mechanical or chemical process mixed up the brands of tea so purchased and sold the tea as tea mixture. In reference the High Court held that there was neither processing nor alteration in any manner of the tea purchased by the assessees and they were, therefore, entitled to deduct from their turnover the value of the tea purchased by them. Under section 8(a) of the Bombay Sales Tax Act, 1953, a dealer was entitled to deduct from his turnover of sales, sales of goods which had been purchased from a registered dealer provided the sale of goods so purchased by him was made without the goods having been "processed or altered in any manner after such purchase". What, therefore, the High Court had to consider in that case was whether the mixing of different brands of tea leaves constituted processing or altering of the tea leaves. The High Court observed (at page 507) :
"In our view, the quantities of tea purchased by the assessees cannot since the date of the purchases be regarded as processed within the meaning of the proviso to clause (a) of section 8 of the Act. There is not even application of mechanical force so as to subject the commodity to a process, manufacture, development, or preparation. The commodity has remained in the same condition. It is true that in the preparation of the tea mixture which is marketed, there may be some skill involved. But that, in our judgment, cannot be regarded as processing within the meaning of the proviso.
"...It cannot however be said that in the preparation of the tea mixture there is any alteration in the goods. Undoubtedly by mixing up the different varieties of tea purchased by the assessees there resulted a mixture in which the individuality of the components was obscured, but that, in our judgment, is not alteration within the meaning of the Act. The alteration contemplated by the legislature is some alteration in the nature or character of the goods."
19. It is pertinent to note that in that case what was bought was tea leaves and what was sold was also tea leaves. There was no plea that this was a commercially different article. In fact, the High Court has expressly pointed out that the commodity remained in the same condition.
20. Another decision relied upon by Mr. Patel, the learned counsel for the respondents, was a decision of the Court of Appeal in McNicol v. Pinch ( 2 K.B. 352). The Finance Act, 1901, of the United Kingdom provided for the levy of duties of excise on saccharin made in Great Britain or Ireland and on a licence to be taken out annually by a manufacturer inter alia of saccharin. There were certain conditions required to be complied with by a manufacturer of saccharin. The appellants purchased what was known as "330 saccharin", that is, saccharin 330 times as sweet as sugar. They then subjected it to a chemical process, the result of which was that in some cases "550 saccharin", that is, saccharin 550 times as sweet as sugar, was produced and in others a mixture sweeter than 330, but not so sweet as 550 saccharin and, in a few cases, a mixture less sweet than 330 saccharin. The appellants were prosecuted for manufacturing saccharin without a licence and without complying with the other provisions of the Finance Act, 1901, and the Revenue Act, 1903, and were convicted. The Court of Appeal by a majority judgment (Ridley, J., dissenting) held that the appellants did not manufacture saccharin and therefore did not require a licence. In deciding that question Bray, J., after describing the process by which the appellants produced the saccharin which they sold observed (at page 360) :
"...it was always saccharin; it was saccharin before it was treated, and it was saccharin after it was treated."
21. Darling, J., who concurred with Bray, J., observed in the course of his judgment (at page 361) :
"I think the essence of making or of manufacturing is that what is made shall be a different thing from that out of which it is made."
22. The above discussion shows that the ratio of decided cases is that for an activity to amount to manufacture it must result in a different commercial article or commodity. It must not be a commodity which is commercially the same as it was before the activity was applied to it. In a given case, it may be that the ingredients are totally transformed and, in another given case, it may be that they undergo some change, alteration or transformation and yet retain their essential character and properties. The test in all cases, therefore, is to ascertain whether the result is commercially a different commodity and it is irrelevant whether this result is produced by a mechanical or chemical process or otherwise. Even under the very wide definition of "manufacture" to be found in clause (17) of section 2 of our Act the various activities set out therein must result in a different commercial commodity in order that such activities may amount to manufacture of goods. This definition must be interpreted bearing in mind the fact that it has been inserted in the setting and context of a sales tax legislation of which the pith and substance is a tax primarily on the sales of goods and subsidiarily on the purchases of goods. The various activities enumerated in the definition, namely, producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating or adapting, have been specifically mentioned, lest any contention might arise that one or the other of them would not, in ordinary parlance and according to the ordinary notions, constitute manufacture. Each of these activities, however, before it can amount to manufacture must result in a commodity commercially different from the commodity or commodities to which the activity was applied. Merely selling the goods purchased under a different label or trade name will not amount to manufacture even if such label or trade name is known in the market as a commercial commodity different from that by which the goods purchased are known in the market. A different commercial commodity must come into being as a result of one of the activities enumerated in clause (17) of section 2 before it can be said that such commodity has been manufactured.
23. Bearing in mind the test we have laid down above we will not turn to the facts of this case as found by the Tribunal. The activities of the respondents fall into three distinct stages : (1) the roasting of coffee seeds purchased by them, (2) the grinding of coffee seeds so roasted, and (3) the mixing and blending of coffee powder so obtained with chicory powder purchased by the respondents. The question whether roasting or grinding of coffee seeds by themselves would constitute manufacture as defined by clause (17) of section 2 of the said Act does not arise before us by reason of the express provisions of rule 3 of the Bombay Sales Tax Rules, 1959, which we have quoted above and under which, for the purposes of clause (17) of the said section 2, manufacture does not include roasting or grinding of coffee seeds. So far as the mixing and blending of coffee powder and chicory powder by the respondents is concerned, the Tribunal has found that the resultant mixture is what is commercially known as "French Coffee". The Tribunal has also found that it is in its characteristic different from pure coffee powder. The Tribunal has also found that coffee powder when mixed with chicory might change in colour and odour. The Tribunal has further held that what is produced is a new mixture in which some of the original components, namely, coffee powder and chicory powder, might have been merged. Applying the test we have laid down above to the facts so found by the Tribunal, there can be no doubt that the mixing and blending of coffee powder with chicory powder so as to bring into being a different commercial product known as "French Coffee" is a process which amounts to manufacture within the meaning of clause (17) of section 2 of the Bombay Sales Tax Act, 1959.
24. We accordingly answer the question reframed by us in the negative.
25. The respondents will pay to the applicant the costs of this reference.
26. Reference answered in the negative.