Manufacture test for waste cotton conversion upheld; process created a distinct commercial product and supported exemption entitlement.

Conversion of waste cotton into marketable cotton was treated as manufacture because the process produced a new and different commercial commodity with a distinct name, character and use. Mere processing that leaves goods essentially the same was distinguished from manufacturing, but the material showed waste cotton as an industrial waste product and the end product as cotton with different commercial uses. The amended definition of manufacture in the Orissa Sales Tax Act was treated as declaratory. On that basis, the industrial unit was entitled to claim the exemption linked to manufacturing activity.

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Issues: Whether the conversion of waste cotton into cotton amounts to manufacture, and whether the industrial unit is entitled to exemption on that basis.

Analysis: Manufacture requires emergence of a new and different commercial commodity having a distinct name, character or use; mere processing which leaves the goods essentially the same does not satisfy that test. The amended definition of manufacture in the Orissa Sales Tax Act was treated as declaratory, and the uncontroverted material showed that waste cotton is an industrial waste product whereas the end product is marketable cotton with different uses. Applying the test of emergence of different goods in commercial parlance, the process adopted by the unit was held to be manufacturing.

Conclusion: The conversion of waste cotton into cotton involves manufacture, and the assessee was entitled to the exemption claimed.

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