No new commodity emerges from soft wood to pencil slats, so purchase tax levy was unsustainable.

Conversion of soft wood into pencil slats was treated as a process that did not produce a commercially distinct new commodity. The Tribunal's finding that the slats were merely timber cut into smaller pieces was accepted, and that factual and legal conclusion was not disturbed in revision. On that basis, purchase tax under section 5A of the Kerala General Sales Tax Act, 1963 could not be levied on the purchase value of the soft wood. Revisional interference was also held unwarranted under section 41, so the tax levy was not sustainable.

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Issues: Whether purchase tax under section 5A of the Kerala General Sales Tax Act, 1963 could be levied on the purchase value of soft wood used for manufacture of pencil slats, on the footing that a new commodity emerged.

Analysis: The assessee was engaged in manufacture and sale of packing cases and pencil slats. The decisive question was whether conversion of soft wood into pencil slats amounted to a manufacturing process resulting in emergence of a commercially distinct commodity. The Tribunal had found that no new commodity emerged and that pencil slats were only timber cut into small pieces. That view was consistent with earlier judicial recognition that the transformation did not create a new product for purposes of purchase tax. In revision, the Court found no reason to disturb that factual and legal conclusion. Since no new commodity emerged, the turnover could not be subjected to purchase tax under section 5A. The revisional interference was also unwarranted under section 41.

Conclusion: The levy of purchase tax on soft wood used for making pencil slats was not sustainable and the revision failed.

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