( 1 ) THE appellant is a partnership firm and a dealer registered under the provisions of the karnataka Sales Tax Act, 1957 (KST Act for short ). It is engaged in the process of extracting solvent oil from oil cake and soyabean seeds. In the course of its business activity, the appellant has purchased, both from registered and unregistered dealers sunflower oil cake, groundnut oil cake and soyabean seeds and consumed in the production of de-oiled sunflower oil cake, groundnut oil cake etc. , for sale. The purchases made from unregistered dealers, who are not liable to pay tax under the Act was to the tune of Rs. 81,39,300/- and Rs. 9,51,000/- respectively. The dealer had filed its annual returns in form-4 before the assessing authority claiming exemption on the purchase turnover of sunflower oil cake, groundnut oil cake and soyabean seeds from unregistered dealers, on the ground that the extraction of solvent oil out of oil cake and soyabean seeds does not amount to manufacture and the resultant product namely de-oiled sunflower oil cake and de-oiled groundnut oil cake are not new commercial commodities even in commercial circles nor in common parlance. The assessing authority while computing the tax liability of the assessee for the assessment year 1993-1994 has rejected the claim of the appellant and has levied purchase tax under Section 6 of the Act, on the ground that the oiled sunflower cake and groundnut oiled cake are consumed to bring into existence a new commercial commodity and are capable of being sold or supplied as de-oiled sunflower oil cake and de-oiled groundnut oil cake.

( 2 ) THE dealer being aggrieved by the said order of assessment, wherein the assessing authority had levied purchase tax on the purchase of oiled sunflower cake and oiled groundnut cake made from unregistered dealer, had carried the matter before the first appellate authority by filing an appeal under Section 20 of the KST Act. The primary ground urged in the appeal on the findings of the assessing authority on this aspect of the matter, was that the process of extraction of solvent oil out of oil cake and soyabean seeds does not amount to manufacture and it is a simple process of extracting oil from the cake and soyabean seeds. The de-oiled cake and de-oiled soyabean seeds are nothing but oil cake and soyabean seeds. The assessee had also placed reliance on the clarification issued by the Commissioner of Commercial Taxes in No. CLR CR 378/89-90, dated 6-11-1989 and the decision of the Karnataka Appellate Tribunal in STA Nos. 923 and 924/1992 and 318/1993 decided on 16-2-1995.

( 3 ) THE first appellate authority after affording an opportunity of hearing to the appellant, apart from other issues, had also framed the following issue for his consideration and decision. The issue is:

"whether on the facts and circumstances of the case, the assessing authority is justified in levying tax under Section 6 of the Act on the purchase turnover of sunflower oil cake and groundnut oil cake amounting to Rs. 81,39,300. 00 purchased from persons other than registered dealers and used in the process of extraction of solvent oil?"

While answering this issue, the first appellate authority relying on the observations made by the madras High Court in the case of S. Viswanathan v. State of Tamilnadu and Ors.- 100 STC 76, has come to the conclusion that the oil cakes used in the process of extraction of solvent oil do not lose their main character and use and therefore, the oil cake and de-oiled cake are considered as one and the same commodity. The first appellate authority further observes in his order, that the oil cake and the de-oiled cake are understood as one and the same commodity even in common or commercial parlance. If at all there is any difference between the two, it may be only in respect of oil content therein and therefore, the oil cake or de-oiled cake are still oil cake irrespective of the oil content therein and the oil content