Civil Appeal No 807 of 1964
Appeal by special leave from the judgment and order dated December 10 1962 of the Gujarat High Court in Sales tax Reference No 8 of 1961
R Ganapathy Iyer and B R G K Achar for the appellant
I N Shroff for the respondent
The Judgment of the Court was delivered by Sikri J
This appeal by special leave is directed against the judgment of the Gujarat High Court in a Sales Tax Reference made to it by the Gujarat Sales Tax Tribunal
Two questions were referred by the said Tribunal to the High Court 1
Whether in the facts and circumstances of the case the purchase of the raw cotton by the applicant Mill 670 could be said to have been intended for use in the production of cotton seeds for sale within the meaning of clause ii of rule 6 of the Bombay Sales Tax Exemption Set off and Composition Rules 1954 2
Whether the applicant Mill is entitled under rule 121 to a refund of the purchase tax paid by it
 The facts set out in the statement of the case by the Tribunal are briefly as follows  The respondent is a manufacturer of cotton textile particularly of coarse and medium variety cloth
During the assessment period from April 1 1955 to March 31 1956 it purchased unginned cotton worth Rs 593266 from unregistered dealers and paid purchase tax of Rs 5932 under section 10a of the Bombay Sales Tax Act 1953
The cotton was ginned and pressed by the respondent the ginned cotton was used in the manufacture of cotton textiles while the cotton seeds were sold by it
During the course of assessment proceedings the respondent applied for refund of purchase tax paid on the unginned cotton under the Bombay Sales Tax Exemption Set off and Composition Rules 1954 hereinafter referred to as the Rules
The Sales Tax Officer refused to allow any refund on the ground that the conditions of r 12  1  read with r 6 ii of the Rules had not been fulfilled
The Assistant Collector of Sales Tax on appeal confirmed the order of the Sales Tax Officer on the ground that rule 6ii is not applicable when subsidiary or incidental product alone is sold and the main product is used in the manufacture of other goods
Looking the working of the aforesaid Rule all the products of the unprocessed goods should be sold
 The respondent filed a revision before the Deputy Commissioner of Sales Tax who also upheld the order of the Sales Tax Officer
The respondent then filed a revision before the Gujarat Sales Tax Tribunal
The Tribunal rejected the revision on the ground that the purpose underlying the applicant s purchases was primarily the production of ginned cotton for manufacture
The cotton seeds which form the bye product of the ginning process would no doubt have to be sold because the Mill has no use for them
But that does not mean that the purpose for which unginned cotton was purchased was the sale of cotton seeds
It is not reasonable to suppose that a textile mill purchases unginned cotton for the purpose of selling the cotton seeds
 At the instance of the respondent as already stated the Tribunal referred the case to the High Court
The High Court answered question 671 No 2 in the affirmative but did not answer question No 1 on the ground that the answer to the question was not relevant for the purpose of determining the matter in controversy
Mr Ganapathy Iyer the learned counsel for the appellant contends before us that the Sales Tax authorities were right in refusing to allow a refundto the respondent and that the High Court erred in answering the second question in favour of the respondent
In order to appreciate the contentions of the partiesit is necessary to set out ff
6 and 12 and the Schedule to the Rules
Classes of sales on which general sales tax shall not be payable
The general sales tax leviable under section 9 shall not be payable in respect of the following classes of sales i    ii Sales of any goods falling under any entry specified in column 1 of the Schedule hereto to a dealer who holds a licence under section 12 who furnishes to the selling dealer a certificate in Form 4 declaring that the goods sold to him are intended to be used by him in producing any goods falling under the corresponding entry in column 2 of the said Schedule for sale SCHEDULE Goods from which the goods specified Goods produced in Goods produced column 2 are produced 1 2 
1Cotton in pod unginned or unpressed cotton Unginned cotton ginned or pressed cotton cotton seeds
x x x x lm15 12
Refund and remission of purchase tax in certain cases 1 Where a dealer who has purchased any goods specified in clauses i or ii of rule 6 shows to the satisfaction of the Collector that they have been used by him for the purpose specified in the said clause the Collector shall on application for refund made by the 672 dealer in the manner specified in rule 25 of the Bombay Sales Tax Procedure Rules 1954 refund to such dealer the amount of purchase tax paid by him in respect of such purchase or where the amount of purchase tax payable under clause a of section 10 in respect of such purchase has not yet been p aid the Collector shall by order remit the amount so payable Mr Ganapathy Iyer contends that when r 12 speaks of the purpose specified in cl
ii of r 6 it means the purpose of producing any goods falling under the corresponding entry in column 2 of the said Schedule for sale
 In other words he says that the purpose must be producing unginned cotton ginned or pressed cotton or cotton seeds for sale and if any of these goods are produced but not sold then r 12 does not apply
Mr Shroff on the other hand contends that the words purpose specified in the said clause only mean the purpose of producing any goods falling under the corresponding entry in column 2 of the Schedule and he wants us to omit from consideration the words for sale
We agree with Mr Ganapathy Iyer that the purpose must be the purpose of producing goods unginned cotton ginned or pressed cotton cotton seeds for sale and the words for sale must be given effect to
But even if this contention of Mr Ganapathy Iyer is accepted the respondent would still in our opinion be entitled to refund under r 121
Rule 6 speaks of the intention at the time of the purchase but r 12 does not incorporate that intention by referring to the purpose specified in cl
6ii
The intention at the time of the purchase is irrelevant for the purpose of r 12
In r 6ii intention was relevant because the purchasing dealer had to furnish to the selling dealer a certificate in Form 4 declaring that the goods sold to him were intended to be used by him for producing any of the goods falling under the corresponding entry in Column 2 of the said schedule for sale
But when the respondent paid the purchase tax on unginned cotton under section 10a of the Act he paid it because he purchased the same from persons who were not registered dealers and there was no question of furnishing any certificate at that stage
As the High Court observed what is necessary is that goods should have been actually used for the purpose specified viz the production of any of the goods aforementioned for sale
 These conditions have been satisfied in this case because unginned cotton was used for the purpose of producing one of the goods specified in column 2 namely cotton 673 seeds
Consequently the respondent is entitled to a refund under r 12 and the High Court was right in answering the second question in the affirmative
We also agree with the High Court that in view of its answer to question No 2 it is not necessary to answer question No 1
In the result the appeal fails and is dismissed with costs here and in the High Court
Appeal dismissed


Summary:
The respondent a manufacturer of cotton Textiles purchased unginned cotton and paid purchase tax thereon
The cotton was ginned and pressed by the respondent the ginned cotton was used in the manufacture of cotton textile while the cotton seeds were sold by it
The respondent claimed refund of purchase tax paid on the unginned cotton under the Bombay Sales Tax Exemption Set off and Composition Rules 1954 which was disallowed by the Sales Tax authorities on the ground that r 6ii was not applicable when subsidiary or incidental product alone was old and the main product was used in the manufacture of the goods and looking at the working of the aforesaid Rule all the products of the unprocessed goods should be sold
In reference the High Court allowed the refund of the purchase tax under r 12i
HELD  The respondent was entitled to refund under r 12i
What is necessary under rule 12i is that the goods should have been actually used for the purpose specified viz the production of any of the goods aforementioned for sale
These conditions have been satisfied in this case because unginned cotton was used for the purpose of producing one of the goods specified in column 2 for sale namely cotton seeds
672 H