Manufacture and exemption under sales tax law: conversion of peas into dal was taxable, while the inter-State sales challenge failed.

Conversion of whole peas into peas dal was treated as manufacture under the amended U.P. Sales Tax Act because crushing and splitting created a different commercial product. On that basis, the exemption notification under section 8(5) of the Central Sales Tax Act did not apply, and the peas dal turnover remained taxable. The challenge concerning supply of matar to ex-U.P. principals failed because the record contained no factual foundation to show non-compliance with section 6-A, so the finding on that turnover was left undisturbed.

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Issues: (i) Whether conversion of whole peas into peas dal attracted the exemption notification issued under section 8(5) of the Central Sales Tax Act, 1956; (ii) Whether the turnover relating to supply of matar to ex-U.P. principals was liable to be treated as inter-State sales in the absence of proof under section 6-A of the Central Sales Tax Act, 1956.

Issue (i): Whether conversion of whole peas into peas dal attracted the exemption notification issued under section 8(5) of the Central Sales Tax Act, 1956.

Analysis: The exemption applied only to sale of peas satisfying the statutory conditions. The later definition of "manufacture" in section 2(e-1) of the U.P. Sales Tax Act, 1948 treated altering, processing and adapting goods as manufacture. On that footing, crushing and splitting whole peas into dal brought into existence a different commercial product. The earlier view that split and unsplit foodgrains were the same commodity could not govern the assessment year in question in the light of the amended statutory scheme.

Conclusion: The peas dal sold by the dealer was not covered by the notification and was liable to tax.

Issue (ii): Whether the turnover relating to supply of matar to ex-U.P. principals was liable to be treated as inter-State sales in the absence of proof under section 6-A of the Central Sales Tax Act, 1956.

Analysis: A claim that movement of goods was otherwise than by way of inter-State sale had to be established in the manner prescribed by section 6-A. However, the record disclosed no finding by the authorities below that the required declarations had not been filed, and there was no such averment in the revision petition. In the absence of a factual foundation, the revenue could not successfully agitate the point.

Conclusion: The challenge to the finding on this turnover was rejected.

Final Conclusion: The revision succeeded only on the first turnover, and the turnover of peas dal was held taxable under the Central Sales Tax Act, 1956, while the finding on the second turnover was left undisturbed.

Ratio Decidendi: Where statutory amendments define processing or alteration of goods as manufacture, conversion of an agricultural commodity into split dal may create a different taxable commodity and defeat an exemption confined to the original goods; a challenge based on section 6-A of the Central Sales Tax Act, 1956 must rest on a pleaded and found factual basis.

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