Blending tea leaves may qualify as production when it creates a commercially distinct product and supports exemption eligibility.

Blending tea leaves was treated as an activity that can amount to production or processing where it brings about a qualitative transformation into a commercially different product. On that basis, the HC held that the earlier exemption notification covered the petitioner's unit, because the refusal rested only on the view that blending was not manufacture or production. The later notification excluding blending of tea confirmed that no such exclusion existed under the earlier regime. The petitioner was therefore entitled to the eligibility certificate, and the refusal to issue it was not justified.

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Issues: Whether blending of tea leaves amounts to manufacture or production of a commercially new and distinct commodity so as to entitle the petitioner to an eligibility certificate and exemption under the notification issued under section 12 of the Madhya Pradesh General Sales Tax Act, 1958.

Analysis: The notification under section 12 granted exemption to specified dealers who had set up industry and commenced production, subject to stated conditions. The only reason for refusal was that blending tea leaves was treated as not amounting to manufacture or production. The Court applied the principle that where mixing or blending results in a qualitative change and a different commercial product comes into existence, the process can amount to processing or production. On that basis, blending tea leaves was held to fall within the intended scope of the exemption, and the later notification excluding blending of tea showed that no such exclusion existed in the earlier notification.

Conclusion: The petitioner was entitled to the eligibility certificate, and the refusal to grant it was not justified.

Final Conclusion: The petition succeeded, and the respondents were directed to issue the eligibility certificate under the earlier exemption notification.

Ratio Decidendi: Where blending of goods brings about a qualitative transformation resulting in a commercially different product, the activity may constitute production or processing for the purpose of exemption under the relevant sales tax notification.

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