Sales tax exemption on sterilised needles cannot be denied where sterilisation qualifies as manufacturing under the notification.

Sterilisation of raw needles into sterilised needles was treated as a manufacturing or processing activity for sales tax exemption purposes where the exemption notification conditions were otherwise satisfied. The existence of an actual processing unit and regular sterilisation activity was the ative factual basis, and exemption could not be refused on the ground that the finished product fetched only a marginally higher price. The price differential was a commercial matter and was not a criterion stated in the notification. On that reasoning, denial of the exemption was considered unsustainable and the assessee was entitled to the benefit of the notification.

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Issues: Whether the petitioner was entitled to sales tax exemption on sterilised needles on the basis that sterilisation amounted to manufacture and the denial of exemption on the ground of marginal price difference was sustainable.

Analysis: The petitioner had a processing plant and, on inspection, was found to be regularly carrying on sterilisation of raw needles into sterilised needles. The appellate authority had already accepted that sterilisation could fall within the meaning of manufacture for the purpose of the exemption notification. The decisive factor for exemption was compliance with the notification and the existence of actual processing activity, not whether the sterilised product fetched a materially higher market price than the raw needle. The price differential depended on commercial factors and was not a criterion prescribed by the notification. Since the factual finding showed that the processing unit existed and the sterilisation process was being undertaken, the refusal of exemption on the basis adopted by the State Level Committee was unsustainable.

Conclusion: The denial of sales tax exemption was invalid. The petitioner was entitled to the benefit of the exemption notification, and the impugned order was liable to be quashed in favour of the assessee.

Ratio Decidendi: Where the conditions of an exemption notification are satisfied and the assessee is found to be carrying on the relevant manufacturing or processing activity, exemption cannot be denied on a ground not contemplated by the notification, such as the extent of price increase in the finished product.

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