What is “manufacture”? Whether the process carried out by using soyabean as raw material and ending in the product crude degummed soyabean oil is manufacturing?

(1) To constitute manufacture, the following are the essential features:

i. There must be a process or series of process.

ii. The original commodity or raw material undergoes a transformation through the process or series of process.

iii. At the end of the process or series of process, a new commodity emerges.

iv. The new commodity should have a distinct name, character or use and can no longer be regarded as the original commodity.

v. It should be regarded as distinct from the original commodity and recognized as so in the trade.

(2) The test is not whether the end product is a consumable product or not. The High Court missed the point by holding that because crude degummed soyabean oil was not further refined and therefore was not a consumable item; it did not have a distinct identity. This is not the test of manufacture. While there is no dispute that soyabean is an agricultural product, the High Court while endorsing the view of the Assistant Commissioner held that crude degummed soyabean oil is also an agricultural product. Certainly, crude degummed soyabean oil is distinct from soyabean; it is not the same thing as soyabean.

[Union of India Vs. Delhi Cloth and General Mills Co. Ltd AIR 1963 SC 791, Deputy CST Vs. Pio Food Packers 1980 Supp. SCC 174, Commissioner of Income Tax, Orissa Vs. M/s N.C. Budharaja And Company 1994 Supp (1) SCC 280 and other judgements referred]