Manufacture by processing grain into marketable goods supports tax levy under the charging provisions.

Paddy and other grains before dehusking were treated as raw material under the Act because they formed the starting goods used to produce marketable finished products. Dehusking paddy into rice and processing other grains into dal was held to amount to manufacture, since the process changed the original goods, destroyed their earlier identity, and resulted in distinct marketable commodities. On that basis, the levy of tax under the relevant charging provisions was held to be legally sustainable, and the reference was answered in favour of the taxing authority.

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Issues: (i) Whether paddy and other grains before dehusking are raw material within the meaning of the Act; (ii) Whether dehusking paddy into rice and processing other grains into dal amounts to manufacture; (iii) Whether levy of tax under the relevant charging provisions is legal on these facts.

Issue (i): Whether paddy and other grains before dehusking are raw material within the meaning of the Act.

Analysis: The expression defining raw material was considered in the context of the assessee's business of processing agricultural produce. Paddy and other grains, as purchased, were treated as the starting material from which the finished marketable products were obtained.

Conclusion: Paddy and other grains before dehusking are raw material within the meaning of the Act.

Issue (ii): Whether dehusking paddy into rice and processing other grains into dal amounts to manufacture.

Analysis: The statutory definition of manufacture was read broadly to include preparing or making goods marketable. By dehusking, polishing, and grinding, the original goods lost their earlier identity and emerged as distinct eatable marketable products, namely rice and dal. The process was therefore treated as one of manufacture and as consumption of the original goods in the manufacture of other goods for sale.

Conclusion: Dehusking paddy into rice and processing other grains into dal amounts to manufacture within the meaning of the Act.

Issue (iii): Whether levy of tax under the relevant charging provisions is legal on these facts.

Analysis: Once the processing activity was held to amount to manufacture, the levy under the charging provisions followed on the facts found by the taxing authorities.

Conclusion: The levy of tax under the relevant charging provisions is legal.

Final Conclusion: The references were answered in favour of the taxing authority, and the assessee's challenge to the assessment failed.

Ratio Decidendi: A process that changes the original goods into a distinct marketable commodity and destroys their former identity constitutes manufacture under the statutory definition, and the original goods are treated as consumed in that process.

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