Manufacture under incentive schemes requires a new commercial commodity; mere gas conversion and bottling is insufficient.

Conversion of liquid oxygen or carbon dioxide into gaseous form, followed by bottling for sale, was held not to amount to manufacture because no new commercially distinct commodity emerged; the activity was only a change of form and storage, so the sales tax incentive under the Target-2000 scheme was unavailable. On cancellation of the incentive, promissory estoppel could not compel payment of tax never collected from consumers, especially where the scheme barred such collection. Recovery was therefore confined to amounts actually collected, and any tax liability could operate only prospectively from the date cancellation became effective.

---

---

Issues: (i) Whether conversion of liquid oxygen or carbon dioxide into gaseous form and bottling it for sale amounted to manufacture so as to qualify for sales tax deferment or tax holiday under the Target-2000 scheme; (ii) whether cancellation of the incentive could be resisted on the basis of promissory estoppel or on the ground that no tax had been collected from consumers.

Issue (i): Whether conversion of liquid oxygen or carbon dioxide into gaseous form and bottling it for sale amounted to manufacture so as to qualify for sales tax deferment or tax holiday under the Target-2000 scheme.

Analysis: The incentive scheme under G.O. Ms. No. 108 extended sales tax relief only to products manufactured in new industrial units. The expression "manufacture" was not defined in the scheme or the Act, and therefore had to be understood in its ordinary and commercial sense, requiring emergence of a new and different commercial commodity. Mere change in form does not amount to manufacture where the product retains the same character and properties. Applying that test, the conversion of gas from liquid to gaseous state, followed by bottling and sale, did not bring into existence a new product; the process was only a change of form and mode of transport or storage.

Conclusion: The activity did not amount to manufacture, and the petitioners were not entitled to the sales tax incentive under the scheme.

Issue (ii): Whether cancellation of the incentive could be resisted on the basis of promissory estoppel or on the ground that no tax had been collected from consumers.

Analysis: The authorities had issued final eligibility certificates and held out a clear promise under the scheme, so the petitioners had a legitimate basis to act upon the incentive. In taxation matters, however, estoppel cannot compel payment of tax that was never collected, especially where the scheme itself prohibited collection of tax from consumers. The proper consequence of cancellation was that any tax liability could arise prospectively from the date the cancellation became operative, and recovery could be made only if the petitioners had in fact collected tax during the incentive period.

Conclusion: The petitioners could not be made to pay tax not collected from consumers, though the State could recover amounts actually collected and could enforce tax liability from the date the cancellation became operative.

Final Conclusion: The common challenge to withdrawal of sales tax incentives failed on the manufacturing issue, but the demand could not extend to tax that was not collected, and recovery was confined to lawful prospective liability and any collected amounts.

Ratio Decidendi: For an exemption or incentive scheme confined to manufactured products, manufacture requires emergence of a commercially distinct commodity, and a beneficiary who was prohibited from collecting tax cannot be compelled to pay uncollected tax after cancellation of the incentive.

---