Manufacture by stone crushing recognised where large stones become commercially distinct gitti or chips for tax exemption.

Crushing or grinding large stones into gitti or chips amounts to manufacture because the process brings into existence a commercially different commodity with a distinct name, use and market identity. Applying the commercial parlance and functional utility tests, the Rajasthan High Court noted that boulders and gitti/chips are treated in trade as separate building materials and that the distinction is reflected in mining laws and minor mineral rules. On that basis, the unit qualified for exemption under the New Sales Tax Incentive Scheme, 1989.

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Issues: Whether crushing or grinding large stones into gitti or chips amounts to manufacture so as to entitle the unit to exemption under the New Sales Tax Incentive Scheme, 1989.

Analysis: Manufacture under section 2(27) of the Rajasthan Sales Tax Act, 1994 includes processing of goods only where the process brings into existence a commercially different and distinct commodity. The decisive enquiry is whether the processed article acquires a distinct commercial identity, name and use in trade, applying the commercial parlance and functional utility tests. Large stones or boulders are commercially different from gitti or chips, which are recognised in trade as distinct building materials used for different purposes. The process of crushing or grinding changes the commodity into an item with distinct utility and market identity. The distinction is reinforced by the treatment of different stone forms in the mining laws and minor mineral rules, which recognise different stone products by their separate uses and nomenclature.

Conclusion: Crushing or grinding large stones into gitti or chips is manufacture, and the assessee is entitled to the benefit claimed.

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