Mere processing of fibre waste does not amount to manufacture when no new commercial commodity emerges.

Processing a purchased waste mixture of polyester and cotton fibres by cleaning, segregating, carding, drafting and winding did not create a new commercial commodity. The material remained fibres, did not become yarn, and continued to be sold as the same mixture in a cleaner and separated form. As no distinct commercial identity, name or use emerged, the activity did not amount to manufacture; the sales were treated as resale under the Act.

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Issues: Whether the processing of waste mixture of polyester and cotton fibres by cleaning, segregating, carding, drafting and winding resulted in manufacture of a new commercial commodity or merely in resale of the purchased goods.

Analysis: The purchased waste mixture remained fibres even after processing. The material was only cleaned, segregated by colour, carded into parallel lines, drafted into slivers and wound on bobbins. It did not emerge as yarn, nor did it acquire a different commercial name, identity or use. The goods continued to be sold as a mixture of polyester and cotton fibres, though in a cleaner and separated form and at a higher price. Such processing did not bring into existence a distinct commercial commodity within the meaning of manufacture.

Conclusion: The processing did not amount to manufacture, and the sales were covered by resale under section 2(26)(ii) of the Act. The answer was therefore in favour of the assessee and against the department.

Ratio Decidendi: Mere processing that cleans, segregates or prepares goods for sale, without bringing into existence a commodity with a new commercial identity, name or use, does not constitute manufacture; the transaction remains a resale.

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