Manufacture for tax exemption: crushing raw bones into bone meal was held to be mere conversion, not eligible for exemption.

A taxing notification limited exemption to goods produced by manufacture and excluded mere conversion of one form of goods into another. Crushing, cleaning, drying and powdering raw animal bones into crushed bones and bone meal was treated as a physical change, not a commercially distinct manufacture, so the exemption claim failed. The Court also granted limited time for compliance and directed that proposed cancellation of registration be kept in abeyance for two months, subject to filing complete returns and paying tax with interest; failing compliance, proceedings could continue.

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Issues: (i) Whether crushed bones and bone meal produced from raw animal bones amount to manufactured goods entitled to sales tax exemption under Notification S.R.O. No. 1729 of 1993; (ii) Whether the proceedings proposed for cancellation of registration for non-filing of returns and non-payment of tax could be kept in abeyance.

Issue (i): Whether crushed bones and bone meal produced from raw animal bones amount to manufactured goods entitled to sales tax exemption under Notification S.R.O. No. 1729 of 1993.

Analysis: The notification granted exemption only to goods produced by an industry by way of manufacture, and its definition specifically excluded mere conversion of one form of goods into another form of the same goods. The process adopted involved crushing, cleaning, drying, and separating bones into sized pieces for supply to another industry, while the residue was powdered into bone meal. This was held to be only a physical conversion of bones into different forms, not a commercially distinct manufacture. Bone meal was also treated as only bone powder obtained from the same raw material, and thus outside the scope of manufacture under the notification.

Conclusion: The petitioner was not entitled to sales tax exemption on crushed bones or bone meal, and the exemption claim failed.

Issue (ii): Whether the proceedings proposed for cancellation of registration for non-filing of returns and non-payment of tax could be kept in abeyance.

Analysis: Though the exemption claim was rejected, the Court granted the petitioner time to regularise compliance by filing complete returns and remitting tax with interest. The assessing officer was directed to defer coercive action for a limited period, with liberty to proceed thereafter if statutory compliance was not made.

Conclusion: The cancellation proceedings were kept in abeyance for two months, with conditional relief to the petitioner.

Final Conclusion: The principal challenge to the denial of sales tax exemption was rejected, but limited time-bound relief was granted against immediate coercive recovery and cancellation action.

Ratio Decidendi: Where a taxing notification confines exemption to manufactured goods and expressly excludes mere conversion of goods from one form to another, crushing or powdering raw material into different physical forms does not amount to manufacture.

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