Commercial identity test: sawing logs into sized timber did not create a new commodity, so resale exemption was not defeated.

Conversion of round logs and timber into sized logs or sized timber in a saw mill did not, on the facts proved, amount to production of a distinct commercial commodity. A mere change in form, size or shape is insufficient where the goods remain commercially the same and usable as a substitute for the original commodity. The Tribunal record did not show that the sawn pieces had acquired a different identity or commercial use, and the revenue failed to discharge the burden of proving breach of the resale declaration. The proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947 was therefore not attracted.

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Issues: Whether conversion of round logs and timber into sized logs or sized timber in a saw mill amounted to production 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 answer depended on whether the processing brought about a real change in the identity and commercial character of the goods. The Court held that a mere change in form, size, or shape would not by itself amount to conversion into a new commodity if the goods continued to be accepted in trade as substantially the same and remained usable as a substitute for the original commodity. On the facts stated by the Tribunal, there was no material to show that the logs had been transformed into a distinct commercial product; the record did not establish that the sawn pieces had become articles meant for a different commercial use. The burden lay on the revenue to prove contravention of the declaration supporting resale within the State, and that burden had not been discharged.

Conclusion: Conversion of the logs into sized logs or timber did not amount to manufacture of a different commercial commodity on the facts proved, and the assessee did not become liable under the proviso to section 5(2)(A)(a)(ii) of the Orissa Sales Tax Act, 1947.

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