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3. After the manufacture, for which the goods were so purchased, the assessee-company distributed some free samples of the manufactured articles to different persons. Therefore, the question which arose before the Sales Tax Officer was whether the goods which were covered by the certificate contemplated by form No. 15 of the State Act and 'C' form of the Central Act, were the goods which were utilised in manufacturing the articles "for sale". Since these samples were distributed free of charge, the Sales Tax Officer found that the goods utilised in manufacturing these free samples were not the goods meant for use in manufacture "for sale". In order to find out what was the actual quantum of such goods, the Sales Tax Officer estimated 3 per cent. of the total turnover of the manufactured articles to be the value of the total samples. Of this, 60 per cent. was taken to be the price of all the materials used during the process of manufacture. Of these 60 per cent., the Sales Tax Officer considered 50 per cent. to be the purchases of goods covered by form No. 15 of the State Act and 'C' form of the Central Act. In the opinion of the Sales Tax Officer, the applicant-assessee, by distributing these samples freely committed a breach of the conditions embodied in the certificate in form No. 15 declaration in 'C' form of the relevant statutes. The Sales Tax Officer, thereupon, came to the conclusion that in view of the breach of conditions embodied in these in these forms, the applicant-assessee had rendered itself liable to the payment of penalty under section 36(1) of the State Act and section 10-A of the Central Act. He, therefore, levied the penalty of Rs. 128.60 under section 36(1) of the State Act and Rs. 138.24 under section 10-A of the Central Act.

11. Now in cases where the goods are used contrary to the certificate given under form 15, the dealer in question incurs penalty contemplated by section 36. The relevant portion of this section 36 of the State Act says that where any dealer or commission agent purchases any taxable goods under a certificate given by him under section 11 or 12, and contrary to such certificate the goods are used for another purpose, or are not resold or despatched in the manner and within the period certified, then the Commissioner may, after giving such dealer or commission agent a reasonable opportunity of being heard, by order in writing impose on him, in addition to any tax payable, a penalty as prescribed by the different clauses of that section, to which reference is not necessary in these matters. It is thus evident from this sub-section (1) of section 36 that if the goods "are used for another purpose" contrary to the certificate given in form 15, the dealer in question would be liable to the penalty contemplated by that section. Therefore, the contention of the department in these cases is that since the applicant-assessee has used the manufactured goods not for sale but for distribution of free samples, such a use of these articles is contrary to the certificate, which says that the goods purchased at the time of giving certificate were goods meant to be used in the manufacture "for sale". The contention of the department, in other words, is that if a portion of the manufactured articles is used for distribution of free samples, then there is an infringement of the undertaking given by form No. 15 inasmuch as the said distribution of free samples does not amount to "sale".

16. Now the question which arises to be considered in both these references is whether the assessee-applicant has committed any breach of the undertakings given by it in form No. 15 of the State Act form 'C' of the Central Act by distributing free samples of the manufactured articles to others. Can it be said that the goods covered by the free samples were not the goods used in the manufacture "for sale" ? It would be obvious from the above provisions of both the statutes that the breach which invites penalty consists in using the goods, which are purchased in form No. 15 and form 'C' for any purpose other than the purpose of manufacture or for sale. It is not in dispute that the samples, which are distributed by the assessee free of charge to others, do belong to the lot of those articles in the manufacture of which, the goods purchased under form 15 and form 'C' were utilised. But the argument of the department is that since these samples were not sold for a price, it must be presumed that the goods, which were utilised in the manufacture of these articles and which were covered by the undertakings in form No. 15 and form 'C' were not the goods meant for sale.

19. The next point which now arises to be considered in view of what we have said above, is whether in case where samples of manufactured goods are supplied free of charge, in order to effect the sale of the whole lot of manufactured articles, can it be said that the goods covered by such samples were not manufactured "for sale". While appreciating this point, one important fact which should be borne in mind is that in an economy which recognises private enterprise where sale of marketable is based on competition, supply of samples is inevitable in certain circumstances. In certain types of business such samples are required to be supplied free of charge in order to effect the sale. In this case we are concerned with pharmaceutical articles, which are manufactured by the assessee-applicant and, therefore, we would concentrate our attention on the nature of the said articles. In our opinion, it cannot be gainsaid that pharmaceutical articles, which are used as medicines cannot reach a customer unless they are recommended by doctors. It cannot also be gainsaid that the doctors would not prescribe these articles to the patients unless they are sure that they would prove to be effective in curing the concerned ailment. Under these circumstances, the manufacturers of such pharmaceutical articles, which are used for medicines, cannot effect the sale of their products so long as free samples of such a product are not distributed amongst the doctors, who can test the potency and medical value of these articles. Therefore, speaking of the articles, which are manufactured by the assessee, we have no doubt in our mind that free supply of samples of these articles is an essential part of the sale of the rest of the articles of the lot manufactured. Unless the articles are thus supplied free of charge and unless the usefulness of the articles is proved, the rest of the articles of the lot manufactured cannot be sold in the market. In other words, in order that the sale of the lot manufactured with the aid of the goods covered by the undertakings contemplated by forms Nos. 15 and 'C' can be effectively made, distribution of free samples is quite essential. Such a distribution of free samples, therefore, forms an integral part of the process of sale. The sale of the rest of the articles, which are supplied on price, is generally dependent upon such distribution of free samples. Moreover, when a manufacturer supplies a portion of the goods as free samples, the cost which that manufacturer has incurred in manufacturing these samples is always taken into account by him is fixing the price of the rest of the articles of that lot manufactured by him. Therefore, when that part of the lot, which is supplied on payment of price, is sold in the market, the value of that lot so realised, includes within itself even the value of the samples supplied without charge. This value being the turnover of sales, it becomes liable to the payment of sales tax to the Government. Thus, albeit indirectly, the revenue does get sales tax even on the value of the samples, which are freely supplied by the manufacturers. This aspect of the case further emphasises our view that free supply of samples of a particular lot of manufactured articles, forms an essential and an integral part of the sale, and if that be so, it is not possible to say that the goods, which were utilised in manufacturing the free samples were not used for manufacturing articles "for sale". In our opinion, therefore, it is not possible to hold that by supplying some of the samples of the manufactured lot freely, the applicant-assessee has committed any breach of the undertaking given by him either in form No. 15 or form 'C' so as to attract the penal provisions of section 36 of the State Act and section 10-A of the Central Act.