Commercial identity test for waterproof paper kept it as paper, so the sale qualified as a tax-exempt second sale.

Bituminised or wax-coated waterproof paper manufactured by coating or joining paper with bitumen or wax was held to retain its commercial identity as paper. Applying the test whether processing creates a new commercial commodity, the Court found that the product did not cease to be paper and that mere joining or finishing did not amount to transformation into a different taxable commodity. The sale was therefore treated as a second sale exempt from tax under the Tamil Nadu General Sales Tax Act, 1959, and the assessee succeeded.

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Issues: Whether bituminised or wax coated waterproof paper manufactured by coating/joining paper with bitumen or wax retained the identity of paper so as to constitute only a second sale exempt from tax under the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The relevant inquiry was whether the process produced a commercially different commodity or merely altered the form of the same commodity. Applying the principle that sales tax is attracted when a new commercial commodity comes into existence, the Court noted that the process here consisted mainly of joining together two sheets of paper with bitumen or wax and did not alter the essential identity of the paper. The Court distinguished cases where processing created goods treated in trade as entirely different commodities, and relied on the settled approach that mere processing or finishing, without loss of commercial identity, does not create a new taxable commodity.

Conclusion: The bituminised or wax coated waterproof paper remained paper in commercial identity, its sale was only a second sale, and it was exempt from tax; the assessee succeeded.

Ratio Decidendi: Where processing does not bring into existence a new commercial commodity and the article retains its commercial identity, its sale is not a fresh taxable event and remains a second sale for sales tax purposes.

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