Manufacture test for fertiliser blending: NPK mixture was held not to be a new commodity, defeating entry tax levy.

Blending different chemical fertilisers to produce an NPK mixture does not amount to manufacture because the process does not create a commercially new and distinct commodity. The component fertilisers and the resultant mixture remain fertilisers used for the same purpose, so mere mixing or blending is only processing, not manufacture. On that basis, entry tax could not be levied on the fertilisers used to prepare the NPK mixture under the Karnataka Tax on Entry of Goods Act, 1979 and the relevant notification, and the levy was set aside.

---

---

Issues: Whether mixing different chemical fertilisers to produce NPK mixture amounts to manufacture of a new commodity so as to attract entry tax on the raw materials under the Karnataka Tax on Entry of Goods Act, 1979.

Analysis: For levy under item No. 80 of the First Schedule read with item No. 81 of the notification, the existence of manufacture of an intermediate or finished product is necessary. The controlling test is whether the process results in a commercially different and distinct commodity. Applying that test, the Court held that blending of various fertilisers does not bring into existence a new commercial product. The component fertilisers and the resultant NPK mixture remain fertilisers, used for the same purpose, and the mixture does not acquire a different commercial identity merely because different proportions are blended.

Conclusion: Mixing different chemical fertilisers to produce NPK mixture is not manufacture, and the entry of such fertilisers cannot be subjected to entry tax under the said provision and notification.

Final Conclusion: The revision petitions failed and the Tribunal's view was sustained, with the levy of entry tax on the fertilisers used for preparing NPK mixture set aside.

Ratio Decidendi: A process amounts to manufacture only if it results in a commercially new and distinct commodity; mere blending or mixing of fertilisers that remain commercially the same article is only processing and not manufacture.

---