RAJESH BALIA, J. - (1.) THE question which has been addressed to this Court for determination is whether production of the stone ballast (gitti) by breaking the large stones amounts to manufacturing, so as to make the respondent unit entitled to claim benefit of exemption from payment of tax under the New Sales Tax Incentive Scheme, 1989 (hereinafter called the "incentive Scheme") in the light of definition of "manufacture" given in the Rajasthan Sales Tax Act, 1994 which governs the present case. THE respondent, M/s. Prakash Udhyog, had made an application on November 17, 1997 under the Incentive Scheme for the purpose of sanctioning issue of eligibility certificate for exempting its new industrial unit which started commercial production and has applied for eligibility certificate on November 17, 1997. THE new unit was shown to be engaged in the production of "stone, grits/chips" for which large stones are used as raw material. "stone grits" is known commonly in this part of the country as "gitti" which is a colloquial expression for ballast or metal used for laying pathways or roads. It is required of such material that the stones do not exceed required maximum size, and do not be of smaller than the minimum size. In other words, the commodity known as gitti has to be of size within such variable limits, so that it can be used as such. THE process required to get "gitti" is to grind or crush large sized stones to required sizes. So also chips is still finer small pieces of stone of various types for use in laying floor or used in concrete structure and laying bitumen road layer. THE material which is used for shaping them in gitti or chips are uncut and unsized stone which are otherwise unusable in any work.
(2.) THE District Level Screening Committee referred to its decision in Volkem India Limited, in which it was stated to have held that where there is no change in the physical properties of the end-product of raw material, it does not amount to manufacture but only amounts to processing. Following the same it declined to accept the process of stone crushing or grinding as activity of manufacturing and rejected the application in its meeting held on March 5, 1998. Aggrieved by the aforesaid order, the assessee preferred an appeal before the Rajasthan Tax Board which found after considering the factual aspect in the light of definition of "manufacture" that the assessee is purchasing boulders or large size of stones as raw material under declaration in form No. S. T. 17 and therefrom, by applying the mechanical process the commodity known as gitti and chips are produced which are distinct commercial commodity than the raw material used therein. Such activity is an activity of manufacturing. It also referred to the fact that the decision of the State Level Screening Committee in the case of M/s. Volkem India Limited that the commodity involved was processed to "wallstone night coalsit" which is altogether a different commodity, was in the context of the provisions of the statute and its marketing conditions. THE case is distinguishable and cannot ipso facto be applied to the present case without discerning the facts of that case, without adverting to the same, by merely referring to the fact of making a decision. It was also found from the notings on the record in relation to present case that all the officers of the Industrial Department and the members of the Screening Committee were throughout considering the production of grits (gitti) and chips as an activity of manufacturing and in fact District Level Screening Committee has been, until decision in present case, sanctioning issue of eligibility certificates to such units for grant of benefit under the incentive scheme. Merely because the Director of Industries have sent a note to the District Level Screening Committee inviting the attention to the case of M/s. Volkem India Limited, the D. L. S. Committee has taken different course in the present matter without considering the facts of M/s. Volkem India Limited which were entirely different and held that the decision was not justified. Accordingly, the Board allowed the appeal and directed the D. L. S. Committee to issue eligibility certificate to the applicant-dealer within two months. Aggrieved with the aforesaid order of the Tax Board dated September 24, 1998, the Revenue has preferred this revision before this Court. Heard learned counsel for the parties. Learned counsel for the Revenue urged with some emphasis that the decision of the Rajasthan High Court in C. T. O. v. Bhonri Lal Jain reported in [1994] 94 STC 118, does not appear to lay down the law correctly and it requires reconsideration. It was argued that in view of the law laid down in the various decisions it is essential that as a result of processing of goods, a new commodity different in nature and shape with different physical and chemical properties must come into existence which could be treated differently from the parent raw material. Relying on the decision of the Bombay High Court in Commissioner of Sales Tax v. Mahalaxmi Stores [1995] 97 STC 601 in which the court concerned with, the same question relating to the very same commodity, namely, "gitti", has held that though the activity may be called a processing activity, but it does not result in bringing in existence any new commercially different commodity which is subject to tax under a different entry of the Schedule prescribing rates on different commodities, but continues to fall in the same entry, viz. , stone. Therefore, moulding of stones to size of gitti cannot be considered an activity of manufacture which is a principal condition of entry to benefits of New Sales Tax Incentive Scheme. He places, reliance on number of decisions of the Supreme Court, viz. , Deputy Commissioner of Sales Tax v. Pio Food Packers [1980] 46 STC 63, State of Maharashtra v. Shiv Datt & Sons [1992] 84 STC 497, Bahri Steel Wires v. Additional Commercial Tax Officer [1992] 84 STC 418 (Kar), Krishna Chandra Dutta (Spice) Pvt. Ltd. v. Commercial Tax Officer [1994] 93 STC 180 (SC) and Assistant Commercial Taxes Officer v. Sitaram Badrilal [1986] 61 STC 258 (Raj ). Mr. Mehta, learned counsel for the non-petitioner, on the other hand, urged that the matter is squarely covered by the decision of this Court in C. T. O. v. Bhonri Lal Jain [1994] 94 STC 118 in respect of the commodity with which we are concerned. In view of a binding decision of this Court, the contrary decisions of other courts are not of much assistance and no reason appears to take a different view. In fact other courts have also taken the same view of the matter as this Court. He placed reliance on two decisions of the Madhya Pradesh High Court, namely, G. R. Kulkarni v. State [1957] 8 STC 294 which has been approved and reaffirmed by a Full Bench reported in Kher Stone Crusher v. General Manager District Industries Centre [1990] 79 STC 149. At the outset it may be stated that the decided cases furnish guidelines for the purpose of examining the issue in each case on its own "whether the process involved in each case results in a manufacture of new and distinct commercial commodity". The general principle is that where the article produced is treated by those who deal in it, as distinct in identity from the commodity which has been subjected to any process, manual or mechanical, through which the original commodity passes, which may vary from one case to another, through several stages and process with each process the original commodity suffers some change. Every miniscule change does not bring into existence a distinctly recognisable and tradable new commodity but it is only such change in series of changes which takes the commodity to a point where it ceases to be known as the original commodity or raw material but instead is recognised as a distinct article of distinct use and utility that the process can be said to be a manufacturing processing. It also depends upon the expression used in the relevant statute and the object of such statute determines the sphere of enquiry into question "when an activity can be said to result in manufacture". It is also relevant to consider to what use, the commodity in its original shape can be and is ordinarily put and the use to which the commodity in its altered shape or form as a result of processing applied to it, can be put. If the commodity in its original shape and altered shape, without there being any change in the physical properties of the commodity, can be put to the same use, notwithstanding change of form it cannot be termed as an activity of manufacture. At the same time, without there being change in the physical properties, two commodities, namely, the original commodity to which processing has been applied and the processed commodity are not substitute for each other in use but each is put to distinct use for distinct object, and is understood as two distinct commodities in the commercial field where the commodity is traded, it is to be held to be a case of an activity of manufacture. Tersely put it may be called test of functional utility. In each case, the question has to be examined independently, keeping in view the purpose for which the interpretation has to be made, the expression used in the relevant statute; use to which the commodities can be put in its original form and in its altered form; the distinct recognition by the persons who trade in them, where the question arises in the context of tax on the event of sale of commodity. No one single test can be said to be conclusive so as to formulate a straitjacket formulas to find the answer. However, as will be seen later in this discussion through the various precedents, in the context of sales tax statutes, and definition of "manufacture" given in various State sales tax laws, one common thread appears to have been woven through the principles enunciated in reaching its conclusion by the courts has been the test of functional utility, and the distinctive identity of the concerned commodities by those who trade in it; known as commercial parlance test.
(3.) THE basic facts which are before us in the present case are that the assessee purchases large stone boulders or stone pieces of uneven sizes and dimensions as a raw material and by crushing or grinding them through the use of machinery at the unit in question the end-product in the form known as gitti or chips is obtained. THE name of product spelt in application in its chaste English is given as stone "grits and chips". The definition of "manufacture" under section 2 (27) of the Act of 1994 reads : " 'manufacture' includes every processing of goods which bring into existence a commercially different and distinct commodity but shall not include such processing as may be notified by the State Government. " At this juncture, it may be apposite to note the definition of "manufacture" given in the repealed Act of 1954 which has been substituted by the new Act of 1994. Under the old Act of 1954, the term was defined as : " 'manufacture' includes any process or manner of producing, collecting, extracting, preparing or making any goods but does not include such manufactures or manufacturing processes as may be notified by the State Government. " There is a common expression used under both the enactments that manufacture includes every process of goods but "shall not include such process that has been notified by the State Government". While the new Act used one simple determinative test that every processing activity which brings into a commercially different and distinct commodity is to be treated as an activity of manufacture unless excepted by the notification of the State Government, under the old Act, while no reference was made to bring into existence a commercially different and distinct commodity but emphasis was laid in the manner of processing by enumerating the various processes, namely, producing, collecting, extracting, preparing or making any goods; it included even the process of collecting. Nonetheless the basic ingredient of bringing into existence a distinct commodity was still considered to be inherent in expression "manufacture". It may be noticed that the decisions referred to by both the learned counsel relates to period prior to the coming into force of the new Act of 1994 in the light of the old definition of "manufacture" which was in pari materia in the States of Maharashtra, Madhya Pradesh and Rajasthan. The question, therefore, has to be examined whether processing of boulder or large pieces of stones of uneven sized dimensions into gitti or chips results in bringing into existence a commercially different and distinct commodity, with distinct functional utility. ;