Manufacture test for purchase tax applies where raw agarbathi becomes commercially distinct scented agarbathi after processing.

Purchase turnover of raw agarbathi from unregistered dealers was liable to tax where the material was further processed by dipping it in scented solution with scent and chemicals, resulting in scented agarbathi commercially known and marketed as a distinct product. Applying the test of manufacture, the Court treated the original agarbathi as having lost its commercial identity and been consumed in producing a new commodity. On that basis, section 6 of the Karnataka Sales Tax Act, 1957 was attracted, and the purchase turnover was rightly brought to tax.

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Issues: Whether the purchase turnover of raw agarbathi from unregistered dealers was liable to tax under section 6 of the Karnataka Sales Tax Act, 1957 on the footing that the raw material was consumed in the manufacture of scented agarbathi.

Analysis: The raw agarbathi purchased by the assessee was subjected to further processing by dipping it in scented solution with addition of scent and other chemicals, resulting in a product commercially known and marketed as scented agarbathi. Applying the test of manufacture, the material purchased did not retain its original commercial identity and emerged as a new and distinct commodity. On that footing, the raw agarbathi was consumed in the manufacture of the final product, attracting section 6.

Conclusion: The purchase turnover was rightly brought to tax and the assessee's challenge failed.

Ratio Decidendi: Where processing converts a purchased commodity into a commercially distinct product, the original material is treated as consumed in manufacture and tax liability under the relevant purchase turnover provision follows.

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