Reversible impurity removal does not amount to manufacture of a new commodity for purchase tax purposes.

A reversible filtration and heating process that merely removed impurities from red oil was not treated as consumption or use of the goods in the manufacture of sandalwood oil for purchase tax purposes under the Kerala General Sales Tax Act. The material did not lose its identity, because sandalwood oil could be restored to red oil by adding impurities back, so no new and distinct commodity was produced. The alternative basis of use or disposal under section 5A(1)(b) also failed on the same reasoning. Purchase tax was therefore not attracted, and the assessee succeeded; the assessment could not be sustained.

---

---

Issues: Whether removal of impurities from red oil by filtration and heating amounts to consumption or use of the goods in the manufacture of sandalwood oil so as to attract purchase tax under section 5A of the Kerala General Sales Tax Act, 1963.

Analysis: The decisive inquiry was whether the raw material was subsumed into the final product. The process in question only removed impurities and was found to be reversible, because sandalwood oil could be restored to red oil by adding impurities back. On that basis, the raw material did not lose its identity in the manner required for manufacture, and the goods were not consumed or used in the manufacture of a different product. The alternative reliance on use or disposal under section 5A(1)(b) also failed for the same reason.

Conclusion: The process did not attract purchase tax under section 5A, and the assessee succeeded.

Final Conclusion: The assessment could not be sustained, and the High Court's interference with the Tribunal's order was set aside.

Ratio Decidendi: Where a processing activity merely removes impurities and the original material remains recoverable by a reversible process, the material is not consumed or used in the manufacture of a new and distinct commodity for the purpose of purchase tax.

---