Ramaswami, C.J:— The assessee is a dealer in mica, having its place of business at Domchanch in the district of Hazaribagh. For the four quarters of the year 1948-1949, the assessee submitted returns and its books of accounts were examined by the Sales Tax Officer, Hazaribagh. The returns of the assessee were not accepted as correct and the Sales Tax Officer made all assessment to the best of his Judgment under. Section 13(4) of the Bihar Sales Tax Act. The assessee preferred appeals before the Commissioner of Sales Tax, but these appeals were dismissed. The assessee then took the matter in revision to the Board of Revenue.
2. The ground taken by the assessee was that the process of mining mica cannot be said to be a process of production or manufacture within the meaning of S. 2(g) of Act VI of 1949. This contention was accepted by the Board of Revenue and the assessment of sales tax made upon the assessee for all the four quarters was set aurae. In the course of its order the Board of Revenue said:
“As regards the position of split mica it has to be remembered that there is practically no market, for crude mica. All the mica that is exported is split mica so that the conclusion is irresistible that the splitting of mica is an essential process for making, the commodity marketable. On the due consideration of the matter, I am of opinion that the splitting, of mica does not constitute a process of manufacture, the constitution of the mica remaining just the same, there being only a change in the dimension, particularly, in thickness, of individual pieces. As mining of mica cannot be regarded as a, process of manufacture, I may mention that the despatch of split mica outside Bihar cannot be taxed under Section 2(g) of the amended Act.”
3. Thereafter the Commissioner of Sales Tax filed an-application under S. 25(1) of the Act on behalf of the State of Bihar for making a reference to the’ High Court on the question of law involved. Accordingly, the Board of Revenue has stated a case on the following question of law for the opinion of the High Court.:
“Whether on the facts and circumstances of the case the process of mining mica involves the-production or manufacture of goods within the meaning of Section 2(g) of the Bihar Sales Tax Act, 1947, as amended by Bihar Act VI of 1949.”
4. It is admitted by the learned Government Advocate that for the two quarters covering 1st of April, 1948, to the 30th of September, 1948, the assessee was not liable to be taxed since the amendment of S. 2(g) made by the Bihar Act VI of 1949 came into effect only on the 1st of October, 1948. There is hence no dispute between the parties so far as the first two quarters of 1948-1949 are concerned and it is necessary, therefore, to reframe the question in the following manner so as to bring out the real point in controversy between the parties:—
“Whether the assessee has been rightly taxed under the newly added proviso to Section 2(g) of the Bihar Sales Tax Act for the two quarters from the 1st of October, 1948, to the 31st of March, 1949.”
5. On behalf of the assessee Mr. Dutt raised, a preliminary objection that the reference made by the Board of Revenue under S. 25(1) was not competent since the application was made not by the Commissioner but by the State of Bihar. It was-argued that the jurisdiction of the Board of Revenue to state a case under S. 25(1) was dependant upon a proper application made by the Commissioner of Sales Tax. It was contended that the preliminary conditions mentioned in S. 25(1) was the essential foundation of the jurisdiction of the Board of Revenue to make a reference; and unless those preliminary conditions were complied with, the reference made by the Board of Revenue was not legally competent. In support of this argument Mr. Dutt referred to a decision of a Bench of this Court, State of Bihar v. Arthur Butler, & Co. Ltd., Misc. J.C No. 574 of 1953 D/- 24-4-1956: (AIR 1957 Pat 182) (A). I am, however, unable to accept the argument of Mr. Dutt as valid, in the present case the application to the Board of Revenue for making a reference under S. 2-5(1) was signed by the Commissioner of Sales Tax himself. It is true that the State of Bihar is mentioned as the petitioner at the top of the petition. But the learned Government Advocate pointed out that the Commissioner of Sales Tax is an authorised agent, ex-officio for the State of Bihar. The learned Government Advocate has also referred to the provisions of order 3, rule 1 and order 27, rule 2 of the CPC, by way of analogy.
6. It is manifest that the provisions of S. 25(1) have been strictly complied with because the Commissioner of Sales Tax has actually signed the application and the name “State of Bihar” at the top of petition is a superfluity and may be ignored. The principle of the decision in misc. Judicial Case No. 574 of 1953: (AIR 1957 Pat 182) (A), has no application to this case. The material facts of that case were different. In that case a petition under S. 25(1) was signed by the Commissioner of Sales Tax, but it was rejected by the Board of Revenue. Thereafter the State of Bihar made an application under S. 25(2) to the High Court against the refusal of the Board, of Revenue to state a case.
7. The application to the High Court under S. 25(2) was not signed by the Commissioner of Sales Tax; it was signed, on the other hand, by one Ramanugrah Narain, Head Assistant of the Bihar Secretariat, and the application was filed on behalf of the State of Bihar. In the present case the material facts are different and I hold that there has been no breach of the provisions of S. 25(1) and the reference made by the Board of Revenue is legally competent.
8. I shall then proceed to consider the question of law presented for determination in this case. The Government Advocate made the submission that the process of making split mica was a process of manufacture within the meaning of Section 2(g) of the amended Bihar Sales Tax Act. It is necessary at this stage to quote the language of Section 2(g) of the amended Bihar Sales Tax Act.
“‘Sale’ means with all its grammatical variations and cognate expressions, any transfer of property in goods for cash or deferred payment or other valuable consideration, including a transfer of property in goods involved in the execution of contract but does not include a mortgage, hypothecation, charge or pledge:—
Provided that a transfer of goods on hire-purchase or other instalments system of payment shall, notwithstanding the fact that the seller retains a title to any goods as security for payment of the price be deemed to be a sale:
Provided further that notwithstanding anything to the contrary in the Indian Sale of Goods Act, 1930 (III of 1930) the sale of any goods.
(i) which are actually in Bihar at the time when, in respect thereof, the contract of sale as defined in S. 4 of that Act is made, or
(ii) which are produced or manufactured in Bihar by the producer or manufacturer thereof, shall wherever the delivery or contract of sale is made, be deemed for the purposes of this Act to have taken place in Bihar.:
Provided further that the sale of goods in respect of a forward contract, whether goods under such contract are actually delivered or not, shall be deemed to have taken place on the date originally agreed upon for delivery.”
9. What is the construction of the word “manufactured” in the second proviso of the section? According to the Oxford Dictionary, the word “manufacture” means “to work up (material) into forms suitable for use” or “make or fabricate from material; to produce by labour (now especially on a large scale).” As a noun the word connotes “the action or process of making articles or material (in modern use on large scale) by the application of physical power” or “an article produced by the application of physical labour or mechanical power”. Etymologically “to manufacture” means “to make by hand”. But these meanings are not of much assistance in this case. I think that the proper approach is to ascertain the meaning of the expression “manufacture” in the context or the subjecta materies of the Act. That is, I think, the correct approach in the matter of construction. The starting point is the title of the Act, “An act providing for the levy of a tax on the sales of goods in Bihar”. I shall then refer to S. 2(e) which defines a “dealer” to mean “any person who sells or supplies any goods (including goods sold or supplied in the execution of a contract) whether for commission, remuneration or “otherwise”. Section 2(d) defines “goods” to mean all kinds of moveable property other than actionable claims, stocks, shares or securities and includes all materials used in the construction, fitting out, improvement or repair of immoveable property”. If the language of Section 2(g) is construed in the context of the other provisions of the Act, particularly, S. 2(c) and S. 2(d) it is clear that the manufacture of goods referred to in S. 2(g) must be the manufacture of goods for the purpose of sale in the course of the dealers business. “To manufacture” in this context must mean “to bring into being something in a form in which it will be capable of being sold or supplied in the course of business”. 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 articles must lose its character or identity or it should become transformed in its basic or essential properties. For example, a goldsmith may take a piece of gold and make an ornament out of it; a sculptor may cut a statute out of marble, or carpenter may make a doorframe out of a plank of wood. In all these examples the substance remains the same, but by process of manufacture the article made is commercially different from the raw material from which it is made. It is also necessary to remember that the object of the legislature in amending S. 2(g) was to supply a territorial connection or a territorial nexus between the taxing authority and the transaction by sale which may take place outside the State frontiers. It is in this context also that the language of the proviso to S. 2(g) must be interpreted. As have already said, the word, “manufacture” in S. 2(g) in its context means that something is brought into existence which is different from that originally existing in the sense that the thing produced is itself a commercial commodity which is capable as such of being sold or supplied.
10. This view is supported by a decision of the Calcutta High Court in North Bengal Stores Ltd. v. Member, Board of Revenue, Bengal, 1946-1 STC 157 (B). It was held in that case that a dispensing chemist manufactures goods for sale within the meaning of S. 4, sub-s. (5), Cl. (a) of the Bengal Finance (Sales Tax) Act (Act 6 of 1941). At page 163, Das, J. (as he then was) states:
“When a dispensing chemist mixes different drugs according to the prescription of a Physician,.the drugs may or may not be transformed into a different matter. The mixture may become a chemical compound in which the drugs used may Slave been transformed into a totally different thing in their character and properties or it may result in what is called a mechanical or physical mixture, an which each drug retains its original properties. But in either case the resulting mixture is a distinct product brought into being in a particular form suitable for the particular use for which it is intended and capable of being sold or supplied for a price.
When a man goes into a chemist's shop with a prescription he does not ask for this, that or the other drug mentioned in the prescription, but he really wants the finished product in a form in which as a medicine it will be suitable for the use of the patient and when the chemist compounds the drugs according to the prescription he produces that medicine and sells, not so many different drugs of different quantities or measures, but the finished product. The selling of the finished product is his business and he brings it into being for sale in his business.”
11. On behalf of the assessee Mr. Dutt relied upon three cases, Christie v. Davies, (1945) 26 Tax Cas 398 (C), Commissioners of Inland Revenue v. Williamson Brothers, (1950) 31 Tax Cas 370 (D), Commissioner of Income-tax, Madras v. S.L Mathias, 5 ITR 435 : (AIR 1937 Mad 745) (FB) (E). But I do not think that the ratio of any of these cases has any bearing on the question presented for determination on the present case. In (1945) 26 Tax Cas 398 (C), the question at issue was whether the appellant should be assessed to income-tax under Case of Schedule D in respect of his profits as a timber merchant, or whether he should be assessed under Schedule B in respect of ownership and occupation of the land.
12. The appellant admitted that lie was assessable to income-tax under Case 1 of Schedule D in respect of the profits of his sawmill so far as they arose from timber purchased outside, and contended only that the profits arising from timber grown on his own estate were not so assessable. This argument was accepted by the High Court and it was held that the appellant was not assessable under Case 1 of Schedule D in respect of his sawmill profits so far as arising from timber grown on the estate.
13. In (???) 31 Tax Cas 370 (D), a similar question was at issue, namely, whether the income said to be derived was from business or properties, in other words, whether it fell within Schedules A or B in respect of ownership or occupation of land or it fell within Schedule D, namely, profits from business unconnected with occupation or ownership of land. The problem of classification in these two English authorities was quite different and I am unable to see how these two English decisions throw any light on the question at issue in the present case.
14. In 5 ??? 435 : (AIR 1937 Mad 745) (FB) (E), also the question was as to the correct interpretation to be placed on Section 2(1)(b)(ii) of the Income-tax Act. Section 2(1)(b)(ii) defines “agricultural income” to mean “any income derived from such land by (i) agriculture, or (ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market.
15. The question in that case was whether the process of picking, drying and curing raw coffee beans for making it marketable was in the nature of “manufacture” or only process “ordinarily employed by the cultivator to render the produce fit to be taken to the market” within the meaning of S. 2(1)(b)(ii). It was held by the Madras High Court that in the circumstances of that case the assessee was entitled to exemption under S. 2(1)(b)(ii) in respect of the whole of the price realised by the sale of the coffee. It is manifest that the question at issue in the present case is totally different.
16. It is admitted in the present case that the assessee carried on mica mining operations, and the crude mica which was taken out of the mine was sorted and processed into split mica which is, a commercial commodity. It is also admitted that the crude mica was split into thinner plates and cut into commercial sizes. There is a more detailed description of the process given by the Mica Enquiry Committee 1944-1945 in their report. At page 6 of the report the Committee state:
“Mica is found imbedded in the pegmatite vein in the form of what are known as ‘books’ of mica. These are crystals of mica and comprise the mineral in its crude form. They may vary in size from a few cubic inches to big blocks, measuring two to three hundred square inches in the plane of the laminations and one foot or more across it. For preliminary treatment, the books are rifted into slabs, varying from eight to thirty mils in thickness and the worst flaws are then cut away.
17. This work is usually done with sickles and the mica at this stage is described as sickle-dressed block, or more shortly as S.D.B of recent years, small dealers and some of the bigger producers are using knives for the initial cutting before passing the slabs to the sickle-dressing department; it is claimed that this involves less waste. After sickle-dressing the mica goes to the grading department, where the mica is graded according to size.
18. Finally the mica passes to the sorting department, which is the most important stage. The principal qualities upon which sorting depends are clearness, hardness, flatness, colour, and the size and number of ‘air’ inclusions and ‘vegetable’ and mineral stains. The different degrees of these qualities are not capable of exact measurement, and it takes years of experience to make a good sorter. Besides possessing the capacity to classify mica, the sorter must be an expert with the knife, and be well acquainted with the value of different qualities of mica. A block of mica consists of a large number of adhering films.
19. It may be that the defects which affect the quality of the block are confined to one or two of these films. A skilful sorter by removing a film, from the surface, or by spatting a thick block into two thinner blocks and removing a defective film between them, may raise the quality of the resultant blocks and make a big increase in the selling value of the mica. On the other hand, a mistake in judgment on his part will affect the weight and therefore, the value of the mica which can be sold as block.
20. After the sorting stage the mica is in three forms, block mica, chillas and waste. Block mica is the dressed graded and qualified product, varying in thickness from eight to thirty mils. The superior qualities of the block mica and the bigger sizes of the inferior qualities are largely exported as such. The chillas are thin sheets of mica less than eight mils, thicks, removed in the course of processing and qualifying mica. With the block which is not exported as such they undergo further proceeding into splittings, wrappers, condenser films, condenser plates, washers and discs.”
21. I would also refer in this connection to Section 2 of the Bihar Mica Act, 1947, where there is a definition of “manufactured mica”, “crude mica” and “block mica”. Section 2(j) defines “manufactured mica” to mean “mica in any form other than the form of crude mica, block mica, chillas or splittings”. Section 2(a) defines “block mica” to mean “ant mica, other than chillas, splittings and waste mica, obtained from crude mica by any process of trimming”. Section 2(b) definiens “chillas” to mean “thin laminations or clearings of mica not more than .008 inch thick obtained from crude or block mica”. Section 2(d) defines “crude mica” to mean “mica in its rough state before it has been trimmed or subjected to any process”.
22. It is manifest that in the facts and circumstances of the present case the process of mining mica is tantamount to manufacture of goods within the meaning of Section 2(g) of the Bihar Sales Tak Act, 1947 as amended by Bihar Act 6 of 1949.
23. In my opinion the view taken by the Board of Revenue is not correct and the question of law as reframed must be answered against the assessee and in favour of the State of Bihar. The assessee must pay the costs of this reference.
24. Hearing fee Rs. 250/-.
25. Raj Kishore Prasad, J.:— I entirely agree and have nothing to add.
H.G.P
26. Reference answered against assessee.
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