Sales tax exemption for new industrial units requires manufacture of a distinct commodity; mere blending and packing of tea is insufficient.

A sales tax exemption confined to goods manufactured and sold by a new industrial unit required proof that the process produced a commercially new and distinct commodity. The Court treated the Government order and exemption notification as operating in the same field, but held that the statutory notification controlled entitlement and did not expand the exemption. It further held that blending, weighing, quality testing and packing of tea did not amount to manufacture, as tea remained tea. Promissory estoppel was unavailable absent a clear promise from the competent tax authority, and the Industries Department's eligibility certificate did not bind the assessing authority on manufacture. Reliance on the Commissioner's communication was not a valid statutory clarification.

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Issues: (i) whether the Government order and the sales tax exemption notification were to be construed conjointly so as to enlarge the scope of the exemption; (ii) whether blending and packing of tea at the Dharwar unit amounted to manufacture so as to attract the exemption; (iii) whether the appellants were entitled to relief on the basis of promissory estoppel and the eligibility certificate issued by the Industries Department; and (iv) whether the assessment orders were vitiated by reliance on the Commissioner's clarification dated April 2, 1992.

Issue (i): whether the Government order and the sales tax exemption notification were to be construed conjointly so as to enlarge the scope of the exemption.

Analysis: The exemption scheme in the Government order and the notification was held to operate in the same field, but the statutory notification under section 8A governed the exemption. The expression "output" in the Government order was treated as synonymous with the notification's requirement of "goods manufactured and sold by new industrial units". The earlier executive order did not, by itself, confer a wider exemption, and the later notification controlled the actual entitlement.

Conclusion: The issue was answered against the appellants and in favour of the respondents.

Issue (ii): whether blending and packing of tea at the Dharwar unit amounted to manufacture so as to attract the exemption.

Analysis: The term "manufacture" was applied in its commercial sense, requiring emergence of a new and distinct commodity. On the facts, the tea remained tea after blending, weighing, quality testing, and packing. The process did not transform the commodity into a commercially new product. The Court relied on the settled principle that mere blending or minimal processing, without production of a new commercial commodity, does not constitute manufacture.

Conclusion: The issue was answered against the appellants and in favour of the respondents.

Issue (iii): whether the appellants were entitled to relief on the basis of promissory estoppel and the eligibility certificate issued by the Industries Department.

Analysis: Promissory estoppel was held inapplicable because no clear and unequivocal promise from the competent sales tax authority was shown, and the appellants did not alter their position in reliance on any such promise before setting up the unit. The eligibility certificate issued by the Industries Department established only that the unit was a new industrial unit; it did not decide whether the goods were manufactured and sold by the unit, which remained within the assessing authority's domain.

Conclusion: The issue was answered against the appellants and in favour of the respondents.

Issue (iv): whether the assessment orders were vitiated by reliance on the Commissioner's clarification dated April 2, 1992.

Analysis: The Commissioner's reply was not a statutory clarification issued to subordinates under section 3A(2), nor a binding direction on the assessing authority. The assessment orders were therefore erroneous to the extent they relied on that communication. However, the assessments were independently sustainable on merits because the appellants' blended tea did not qualify for the exemption.

Conclusion: The issue was answered partly in favour of the appellants and partly in favour of the respondents.

Final Conclusion: The exemption claim failed because the unit's activity did not amount to manufacture of a distinct commercial commodity and the procedural materials relied upon by the appellants did not displace the statutory test for exemption. The appeals were therefore dismissed and the assessments were sustained on merits.

Ratio Decidendi: For a sales tax exemption confined to goods manufactured and sold by a new industrial unit, the claimant must show that the process undertaken results in a commercially new and distinct commodity; mere blending or packing of tea, without such transformation, does not amount to manufacture.

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