The court established that the process of milling or hulling paddy into rice does not constitute a process of manufacture, and rice cannot be considered a manufactured article under the Karnataka Sales Tax Act, 1957.

( 1 ) THESE are revision petitions preferred by the State under S. 23 (1) of the Karnataka Sales Tax Act, 1957 (hereinafter called the 'act'), against the common order of the Sales Tax Appellate Tribunal, in STA 605 of 1972. STA 66 of 1972 d/. 4th Sepr, 1973, and STA 180 of 1973 d/. 3rd Sepr, 1973. They involve a common question and they have been argued together. They will be disposed of by this order.

( 2 ) THE respondents are registered dealers under the 'act', and they own rice mills. They purchase paddy and after milling paddy, the resultant rice is sold. The Commrl Tax Officer brought the purchase turnover of paddy to tax under S. 6 (i) of the Act. This was upheld in appeal by the Asst Commr of Comml Taxes and on further appeal to the Sales Tax appellate Tribunal, it was held that it could not be construed that mere dehusking of paddy and getting rice amounted to 'manufacture' and on the facts and circumstances it could not be said that there was any consumption of goods in the manufacture of other goods for sale of otherwies, and the imposition of sales tax under S. 6 (i) was not right. The correctness of this conclusion is challenged in these revision petitions.

( 3 ) IT is urged by the learned Govt Advocate that paddy and rice are two different articles and are not the same and the conversion of paddy into rice amounts to 'manufacture' according to the dictionary meaning or in its grammatical sense as by means of processing, paddy is converted into rice for consumption or utilisation and therefore it must be held that there is consumption of goods in the manufacture of other goods for sale or other wise and as such the purchase turnover was liable to tax. Alternatively it is contended that even if it be held that there was no manufacture of goods for sale or otherwise, the assessee has disposed of such goods in a manner otherwise than by sale in the State and therefore the turnover attracted the imposition of tax under S. 6 (i) of the Act.

( 4 ) THE question for consideration is whether by hulling or milling paddy, the resultant product rice amounts to consumption of paddy in the manufacture of other goods for sale and whether there was disposal of such goods in any manner otherwise than by way of sale in the State.

( 5 ) THE relevant portion of Section 6 of the Act is as follows :" 6. Levy of purchase tax under certain circumstances.-Subject to the provisions of sub-sec (5) of S. 5, every dealer who in the course of his business purchases any taxable goods in circumstances in which no tax under S. 5 is leviable on the sale price of such goods and, (i) either consumes such goods in the manufacture of other goods for sale or otherwise or disposes of such goods in any manner other than by way of sale in the State, or (ii ). . . . . . . . . . . . shall be liable to pay tax on the purchase price of such goods at the same rate at which it would have been leviable on the sale price of such goods under Section 5. "

( 6 ) THE expression 'manufacture' has not. been defined in the Act. The learned Govt Advocate argued that paddy and rice are different articles and, therefore, as there is conversion of one kind of goods into another, it must be held that there has been consumption of goods in the manufacture of other goods for sale or otherwise. For the former submission, reliance was placed on the decision of the Supreme Court in Ganesh Trading Co v. State of Haryana, 32 STC. 623. . In that case, the Supreme Court was considering the claim of a dealer for exclusion of the turnover relating to paddy over which purchase tax had been paid, in computing the total turnover. Under the provisions of the Punjab General Sales Tax Act 1968, there was an exemption from payment of sales tax if the very paddy in respect of which purchase tax was paid was sold and not if that paddy was converied into rice and then sold. The contention of the dealer was that paddy and rice were identical goods and therefore when the law g