Refining groundnut oil is not manufacture where it only removes impurities and creates no new commodity, so tax entry liability fails.

Refining raw groundnut oil into refined groundnut oil does not amount to manufacture because the process only removes non-oily impurities and does not bring a new commodity into existence. The governing test applied was whether processing created a commercially distinct product; the Court held that purification leaves the oil as groundnut oil and nothing more. On that basis, entry 16B of the Karnataka Tax on Entry of Goods into Local Areas, for Consumption, Use or Sale Therein Act, 1979 was not attracted, and the clarification treating refined groundnut oil as taxable under that entry was quashed.

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Issues: Whether conversion of raw groundnut oil into refined groundnut oil constitutes manufacture so as to attract entry 16B of the Karnataka Tax on Entry of Goods into Local Areas, for Consumption, Use or Sale Therein Act, 1979.

Analysis: The clarification proceeded on the footing that refining raw groundnut oil amounted to manufacture. The governing test applied was whether the process brought into existence a new commodity. Referring to the settled principle that hydrogenation or similar treatment of oil does not produce a new commodity, the Court held that refining merely removes non-oily constituents such as free fatty acids, phosphotides and unsaponifiable matter. The process was treated as purification, by which the oil continues to remain groundnut oil and nothing more.

Conclusion: Conversion of raw groundnut oil into refined groundnut oil does not amount to manufacture and the entry is not attracted on that basis.

Final Conclusion: The clarification treating refined groundnut oil as taxable under entry 16B was quashed and the writ petition succeeded, leaving the assessee free to pursue objections in the assessment proceedings.

Ratio Decidendi: A refining process that only removes non-oily impurities from groundnut oil and does not bring into existence a new commodity is not manufacture for the purpose of tax entry liability.

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