Manufacture test in purchase tax: converting cream into butter by stirring does not create a distinct commercial commodity.

Conversion of cream into butter by stirring was analysed under the manufacture test for purchase tax under Section 7A of the Tamil Nadu General Sales Tax Act, 1959. The settled principle applied was that a process amounts to manufacture only if the original article loses its identity and a commercially distinct commodity emerges. On the facts discussed, cream and butter were treated as the same commodity in different forms, and stirring or churning merely accelerated a natural process without creating a new product. On that basis, consumption in manufacture of another distinct commodity was not established, and Section 7A was treated as inapplicable.

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Issues: Whether conversion of cream into butter by stirring amounts to manufacture so as to attract purchase tax under Section 7A of the Tamil Nadu General Sales Tax Act, 1959.

Analysis: The authorities below concurrently found that cream is only the prior stage of butter and that no manufacturing process is involved in converting cream into butter. The Court applied the settled test that a process amounts to manufacture only when the processed article loses its original identity and becomes commercially a distinct commodity. On the facts found, cream and butter were treated as two forms of the same commodity, and stirring or churning merely quickened a natural process without bringing into existence a new commercial product. Since there was no consumption of cream in the manufacture of another distinct commodity, the charging provision in Section 7A could not operate.

Conclusion: Section 7A was not attracted, and the levy of purchase tax failed.

Final Conclusion: The revisions were rejected because the assessed conversion of cream into butter did not constitute manufacture and did not create liability under the purchase tax provision.

Ratio Decidendi: A process does not amount to manufacture unless it results in a commercially distinct commodity with a different identity from the original article; where the processed product remains substantially the same commodity, purchase tax on consumption in manufacture is not attracted.

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