Timber processing into veneer did not create a new commodity, so a second tax levy was unsustainable.

Cutting timber logs into veneer, chiran, planks or smaller sizes did not amount to manufacture because no commercially distinct commodity emerged, so the original timber retained its identity. As the turnover had already suffered tax on purchase of the logs, the same goods could not be subjected to a second levy on sale as a purported manufactured product. The statutory definition of manufacture under the Uttar Pradesh Trade Tax Act did not treat such processing as manufacture. The later notification enhancing the rate to 16% was held inapplicable to the assessment year in dispute.

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Issues: Whether timber logs cut into veneer or chiran retained their identity as timber so as to prevent a second levy of tax, and whether the enhanced rate of 16% applied to the disputed period.

Analysis: The turnover had already suffered tax on the purchase of timber logs. The question was whether cutting the logs into smaller sizes and veneer produced a new commercial commodity. Applying the settled test that manufacture requires emergence of a commercially distinct article, the Court held that mere cutting, slicing or conversion of timber into planks, sizes or veneer does not change its essential identity. The statutory definition of manufacture under Section 2(e-1) of the Uttar Pradesh Trade Tax Act, 1948 did not treat such cutting as manufacture. Since no new commodity came into existence, the same goods could not be taxed again on sale. The later notification enhancing the rate to 16% was held to be irrelevant to the assessment year in dispute.

Conclusion: The levy on sale of veneer or chiran was not sustainable as a second tax on the same commodity, and the enhanced rate was inapplicable.

Final Conclusion: The revision succeeded and the impugned order was modified to the extent that the additional levy on veneer or chiran could not stand.

Ratio Decidendi: Where processing of timber does not bring into existence a new commercially distinct commodity, the original timber retains its identity and cannot be subjected to a second levy on its sale as a purported manufactured product.

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