S. H. KAPADIA, J.

( 1 ) LEAVE granted.

( 2 ) THIS civil appeal filed by the assessee raises the question relating to liability to pay "purchase tax" under Section 5a of the Kerala General Sales Tax Act, 1963 ("1963 Act", for short ).

( 3 ) APPELLANT-ASSESSEE purchases "red oil" from unregistered dealers and converts such red oil into "sandalwood oil" by removing water content and other impurities. As regards the processing, there is no dispute between the parties. The case of the department, in short, is that the assessee is not selling red oil as such; that the commodity purchased (i. e. red oil) by the assessee has undergone manufacture when it is heated to a specified degree and the same is filtered by which impurities are removed and, therefore, according to the Department, conversion of red oil into san-dalwood oil attracts levy under Section 5a of the 1963 Act.

( 4 ) FOR the sake of convenience we quote Section 5a of the 1963 Act which reads as follows:

"5a. Levy of purchase tax. (1) Every dealer who, in the course of his business, purchases from a registered dealer or from any other person any goods, the sale or purchase of which is liable to tax under this Act, in circumstances in which no tax is payable under sub-sections (1), (2), (3), (4) or (5) of Section 5 and either. (a) consumes such goods in the manufacture of other goods for sale or otherwise; or (b) uses or disposes of such goods in any manner other than by way of sale in the state;"

( 5 ) A short question which arises for determination in this civil appeal is : whether the above process amounts to consumption/use of red oil in the manufacture of sandalwood as contended on behalf of respondent-Department.

( 6 ) SHRI Soli J. Sorabjee, learned senior counsel appearing on behalf of the appellant, submits that the removal of impurities by process of filtration does not amount to consumption/use in the manufacture of sandalwood oil in terms of Section 5a of the 1963 Act. Learned counsel submits that the assessee has paid tax on the final product, namely, sandalwood oil sold locally (See averments made by the assessee in that connection in the synopsis of the civil appeal paper book ). Learned counsel submits that process of purification is not manufacture. In this connection it is submitted that the basic structure and composition of the red oil remains same even after the purification process and, therefore, the Department has erred in treating red oil and sandalwood oil as two separate and distinct commodities. On the question whether such purification process amounts to manufacture or not, learned counsel places reliance on several judgments of this Court in support of his contention.

( 7 ) PER contra, Shri T. L. V. Iyer, learned senior counsel appearing on behalf of the department, submits that red oil and sandalwood oil are two separate and distinct commodities. Learned counsel submits that red oil containing impurities has no value in the market. According to learned counsel, it is only the sandalwood oil which has market value. Learned counsel further submits that Section 5a of the 1963 Act has been enacted by the Legislature as it wanted to bring, within the scope of purchase tax, items purchased from unregistered dealers without payment of tax for consumption/use. In this connection, learned counsel places reliance on the amending Act 3 of 1990 by which Section 5a stood amended to bring within the scope of purchase tax items purchased from unregistered dealer without payment of tax for "use". According to learned counsel, in the present case red oil is a rawmaterial, that it has been purchased by the assessee and it has been consumed/used in the manufacture of sandalwood oil (final product) and, therefore, assessee is liable to pay purchase tax on purchase turnover of red oil under Section 5a (1) (a) or (b) of the 1963 Act.

( 8 ) WE find merit in this civil appeal filed by the assessee. At the outset, it may be stated that process of purification is not in