Manufacture test for leather processing: conversion of wet blue leather into finished leather qualified for concessional tax treatment.

Conversion of wet blue leather into finished leather was treated as manufacture because the process produced a commercially distinct article with a separate identity, name, character and use. The scheduled tax entries for leather did not control the manufacture inquiry; the decisive test was whether the original material lost its identity and emerged in a new commercial form. On the facts, finished leather was recognised separately in trade and industry, so the dealer qualified for concessional treatment under the sales tax provisions and the revision failed.

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Issues: Whether conversion of wet blue leather into finished leather amounts to manufacture so as to entitle the dealer to concessional treatment under the sales tax provisions.

Analysis: The disputed activity involved multiple stages of processing of wet blue leather into finished leather. Applying the settled test of manufacture, the relevant enquiry was whether the process brought into existence a commercially different article with a distinct identity, name, character, and use. The entries in the schedule describing leather for tax purposes did not determine the issue of manufacture. On the facts, wet blue leather lost its identity and emerged as finished leather, which is recognized separately in trade and industry. The earlier Division Bench decision on identical facts and the Supreme Court decisions on the meaning of manufacture supported this conclusion.

Conclusion: The conversion of wet blue leather into finished leather amounts to manufacture, and the disputed turnovers were entitled to concessional treatment. The revision was dismissed and the questions of law were answered against the Revenue.

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