Second sale exemption denied for notebooks made from paper, as processing creates a distinct commercial commodity beyond the statutory entry.

Second sale exemption under the KGST Act applies only when the later sale is of the same goods purchased within the State. Paper converted into notebooks through cutting, stitching, binding and covering becomes a distinct commercial commodity, so notebooks are not the same goods as paper and the exemption was unavailable on their sale. A Commissioner's clarification cannot override the statutory entry or its Explanation; to the extent it conflicted with the Act, it had no legal effect. The revisions therefore failed because the notebooks were treated as a separate taxable product and the contrary administrative clarification could not prevail over the statute.

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Issues: (i) whether notebooks manufactured from locally purchased paper are the same goods as paper for claiming second sale exemption under the relevant entry in the First Schedule to the KGST Act; (ii) whether a clarification issued by the Commissioner could override the statutory scheme.

Issue (i): whether notebooks manufactured from locally purchased paper are the same goods as paper for claiming second sale exemption under the relevant entry in the First Schedule to the KGST Act.

Analysis: Second sale exemption is available only when the sale is of the same goods purchased within the State. Notebook is not merely paper in another form: the manufacturing process involves cutting, stitching, binding and attaching a cover, resulting in a value-added product with a distinct commercial identity. The statutory scheme, as recast with the Explanation, also treats notebook as a new product made out of paper and provides rebate only in respect of tax paid on the paper purchased within the State.

Conclusion: Notebook and paper are different goods, and the assessee is not entitled to second sale exemption on the sale of notebooks.

Issue (ii): whether a clarification issued by the Commissioner could override the statutory scheme.

Analysis: A clarification inconsistent with the statute cannot prevail over the statutory provision. The Court noted that the clarification proceeded without proper attention to the relevant entry and its Explanation, and that administrative circulars or letters cannot displace the law.

Conclusion: The clarification has no effect to the extent it conflicts with the statutory provision.

Final Conclusion: The revisions were not sustainable because notebooks manufactured from paper were treated as a separate taxable product, and the contrary clarification could not override the statutory entry.

Ratio Decidendi: Second sale exemption applies only to the same goods, and when processing transforms paper into notebooks, the resulting article is a distinct commercial commodity; any administrative clarification contrary to the statute is without legal force.

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