Commercial identity test: sawing timber into planks and sleepers amounts to manufacture and triggers the taxing proviso.

Processing logs and timber into planks, rafters, beams and railway sleepers in a saw mill was treated as manufacture because, in ordinary commercial parlance, the original timber lost its identity and emerged as distinct commodities with different names and uses. The court applied the commercial identity test where the sales tax statute did not define the term, and distinguished mere sizing from a conversion that changes the nature of the goods. On that basis, tax-free purchase of timber for resale was treated as use for a different purpose, and the taxing proviso was attracted.

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Issues: Whether the conversion of logs and timbers into planks, rafters, beams, railway sleepers and other sized timber in a saw mill amounted to manufacture of a different commercial commodity so as to attract the proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947.

Analysis: The assessee had purchased logs and timber free of tax on the basis of its registration certificate for resale as timber in Orissa, but processed them in its saw mill into planks, rafters, beams, ribs and railway sleepers and sold them in that converted form. The relevant test was the ordinary commercial meaning of the goods, since the Act did not define the expression. In commercial parlance, timber in its original form is distinct from planks, rafters, beams and railway sleepers, which have different uses and are known by different names. The conversion was therefore not a mere sizing operation retaining the same identity of goods, but a process by which the original timber lost its commercial identity and emerged as different commodities. The proviso to section 5(2)(A)(a)(ii) was thus attracted.

Conclusion: The conversion amounted to manufacture and the proviso applied; the question was answered in favour of the Revenue and against the assessee.

Ratio Decidendi: Where goods purchased tax-free for resale are processed so that, in common commercial parlance, they emerge as a different commodity with a distinct identity and use, the original goods are treated as having been used for a purpose other than that specified in the registration certificate and the taxing proviso is attracted.

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