Purchase tax on oil cakes fails where processing does not destroy the commodity's identity or create a new commercial product.

Purchase tax under section 6 of the Karnataka Sales Tax Act, 1957 applies only when taxable goods bought without sales tax are consumed, exhausted, or so processed that they lose their identity and become a different commercial commodity. Oil cake used in extracting solvent oil was held not to satisfy that test because the cakes retained their trade identity, merely with reduced oil content. On that basis, the purchase tax levy on the oil-cake turnover was not sustainable, and revisional interference with the first appellate authority was unjustified. The appellate order was therefore restored.

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Issues: Whether sunflower oil cake and groundnut oil cake purchased from unregistered dealers and used in the extraction of solvent oil were consumed in the manufacture of other goods for sale or otherwise so as to attract purchase tax under section 6 of the Karnataka Sales Tax Act, 1957, and whether the revisional authority was justified in interfering with the first appellate authority's order.

Analysis: Section 6, as applicable, fastened purchase tax where taxable goods purchased without levy of sales tax were consumed in the manufacture of other goods for sale or otherwise consumed or otherwise disposed of. The expression "consume" was understood to require either exhaustion of the goods or such use that the original commodity loses its identity and emerges as a different commercial commodity. The extraction of oil from oil cake did not bring into existence a new and distinct commodity; the cakes continued to remain oil cake in trade and common parlance, only with reduced oil content. Since the original goods retained their identity and were not consumed in the statutory sense, the ingredients for purchase tax were not satisfied. As the appellate authority's view accorded with the settled legal position, the revisional authority could not treat that order as erroneous and prejudicial to the interests of revenue.

Conclusion: The levy of purchase tax on the purchase turnover of the oil cakes was not sustainable, and the revisional interference was unjustified.

Final Conclusion: The assessee was entitled to succeed, the revisional order was liable to be set aside, and the order of the first appellate authority was restored.

Ratio Decidendi: For purchase tax to apply under section 6, the purchased goods must be consumed in a manner that causes them to lose their identity or to be used up so as to emerge as a different commercial commodity; mere processing that leaves the commodity commercially the same does not amount to such consumption.

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