Manufacture requires a new commercial commodity; polishing and sizing stone was only processing, so exemption was denied.

Polishing and cutting raw stone into sizes was not treated as manufacture for exemption purposes under the Karnataka Sales Tax Act notification. The decisive test was whether the processing created a new and distinct commercial commodity; mere enhancement of appearance and marketability was insufficient because the substance and identity of the stone remained unchanged. The activity was characterised as processing rather than manufacture, so the exemption available to goods manufactured in Karnataka was denied.

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Issues: Whether polishing and cutting stone into sizes amounts to manufacture so as to entitle the petitioners to exemption under the notification issued under section 8-A(1)(b) of the Karnataka Sales Tax Act, 1957.

Analysis: The exemption under the notification was available only to goods manufactured in Karnataka, and exclusion from the appendix did not by itself establish entitlement. The decisive test was whether the processing of raw stone brought into existence a new and distinct commercial commodity. Applying the settled principle that manufacture requires a transformation resulting in a commercially different article, the Court held that polishing and sizing of stone enhanced appearance and marketability but did not alter the substance or identity of the original material. The activity was found to be closer to mere processing than manufacture.

Conclusion: The petitioners' activity did not amount to manufacture and they were not entitled to the exemption.

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