Commercially distinct commodity test: processed surgical cotton was treated as manufactured and taxable separately from ordinary cotton.

Surgical cotton obtained from ordinary cotton was held to be a commercially distinct commodity because the processing-cleansing, chemical treatment, bleaching, drying, carding, rolling and packing-substantially transformed the original material into a product with a separate market identity and medical utility. Applying the commercial parlance test and the test of emergence of a new and distinct commodity, the Court found that the original cotton was consumed in the process in a meaningful sense and that the entry for cotton in its unmanufactured state did not cover the finished product. The product was therefore treated as manufactured and taxable as a separate commodity.

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Issues: Whether surgical cotton obtained by processing ordinary cotton is a commercially distinct commodity amounting to manufacture under the Rajasthan Sales Tax Act, 1994 and therefore taxable as a separate product.

Analysis: The processing of cotton involved cleansing, chemical treatment, bleaching, drying, carding, rolling and packing, by which the original commodity underwent substantial transformation. The Court applied the commercial parlance test and the test of emergence of a new and distinct commodity, noting that surgical cotton is used in a different field, namely medical use, and has a distinct market identity and utility from ordinary cotton. The Court also held that the original cotton was consumed in the process in a meaningful sense and that the final product could not be treated as the same commodity merely because both were forms of cotton. The broader entry relating to cotton in its unmanufactured state did not cover the processed product.

Conclusion: Surgical cotton is a commercially distinct product brought into existence by manufacture and is liable to tax as a separate commodity; the assessee's challenge fails.

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