Manufacture and tax rebate principles applied to paper cutting, with trade tax consequences governed by notification scheme.

Cutting paper from large size to small size does not amount to manufacture because no new commercial commodity with a distinct name, character or use emerges; the processing therefore does not attract trade tax on the processed paper. On the tax-rate issue, where entry tax and trade tax are both 5%, rebate on trade tax is governed by the applicable notification scheme, and the later notification was treated as controlling entitlement. The analysis also notes that State Development Tax was not sustained in the circumstances discussed. The overall disposition is described as partly in favour of the assessee on manufacture and partly in favour of the revenue on rebate.

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Issues: (i) Whether cutting paper from large size to small size amounts to manufacture so as to attract trade tax on the processed paper; (ii) Whether, where entry tax and trade tax are both at 5%, trade tax rebate is available and state development tax is leviable.

Issue (i): Whether cutting paper from large size to small size amounts to manufacture so as to attract trade tax on the processed paper.

Analysis: Manufacture requires emergence of a new and different article having a distinctive name, character and use. Mere cutting of paper from large size to small size does not bring into existence a new commercial commodity and does not change the identity or use of the paper. The processing therefore does not amount to manufacture.

Conclusion: The issue is answered in favour of the assessee and against the department.

Issue (ii): Whether, where entry tax and trade tax are both at 5%, trade tax rebate is available and state development tax is leviable.

Analysis: On the footing of the binding view that when the rate of entry tax and trade tax is the same, rebate has to be granted on trade tax, the Court held that the later notification governed the entitlement to rebate. It further accepted that, in the circumstances of the case, no State Development Tax was leviable.

Conclusion: The issue is answered in favour of the revenue and against the assessee on the question of rebate, with the accompanying levy of State Development Tax not sustained as argued.

Final Conclusion: The revisions were disposed of by allowing the assessee's challenge on manufacture while upholding the revenue's position on the rebate issue.

Ratio Decidendi: A process amounts to manufacture only if it results in a new commodity with a distinctive name, character and use, and when the applicable tax rates are equal the entitlement to rebate depends on the governing notification scheme.

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