G.B Patnaik, J.:— These five writ applications involve a common question of law and, therefore, were heard together and are being disposed of by this common judgment. O.J.C No. 1166 of 1992 is against an order of reassessment made by the sales tax authority under section 12(8) of the Orissa Sales Tax Act, 1947, in respect of assessment year 1989-90. O.J.C Nos. 6 of 1993 and 162 of 1993 are by the self-same assessee against notice issued for framing assessment for the assessment years 1990–91 and 1991–92 respectively. O.J.C Nos. 181 of 1993 and 182 of 1993 are also by the same assessee against notice issued for assessment under the Central Sales Tax Act, 1956, for the years 1990–91 and 1991-92. The question for consideration in all these writ applications is whether the activity of the petitioner in obtaining cotton from waste cotton can be said to be a manufacture of a product, or merely is a case of processing on which the further question regarding exemption from levy of sales tax under the Industrial Policy. Resolution of 1986 as well as 1989 would depend?

2. The Government of Orissa in the Industries Department being satisfied that there has been remarkable progress of industrial growth on account of attractive package of incentives conferred under the Industrial Policy Resolution of 1980 came forward with the Policy Resolution of 1986 in May, 1986. Amongst the objectives for laying down the Policy, planning for long-term and optimal utilisation of raw materials, industrial by-products and waste materials available in the State and expeditious delivery of incentives and facilities and effective monitoring progress of industrialisation, are some with which we are concerned in the case in hand. The Policy declared that all new industrial units for which investment has been made on or after the effective date will be eligible for the package of incentives under the Policy. So far as concession relating to exemption of sales tax is concerned, the Policy provided that all new small industries will be exempted from sales tax on purchase of spare parts of machinery, raw materials and packing materials for a period of five years from the date of commercial production. So far as finished products are concerned, it provided that products of new small-scale industries will be exempted from sales tax for a period of five years from the date of their commercial production. Though the petitioner is a small-scale industrial unit and after purchasing the raw materials of waste cotton produces cotton by way of mechanical processing applied for issuance of eligibility certificate to the competent authority, namely the General Manager, District Industries Centre, but after having issued such certificate, as the same was withheld, the petitioner approached this Court in O.J.C No. 6397 of 1992, and this Court by order dated November 16, 1992, directed the appropriate authority of the Government to consider the application of the petitioner for renewal and issuance of certificates in forms II and III. In accordance with the said direction, the District Industries Centre, Sambalpur, issued the eligibility certificates. Thus the petitioner has been recognised as a small-scale industrial unit by the competent authority of the Government in the Industries Department which is the policy-making department of the resolution and has extended some incentives and concession to these industrial units. Notice for assessment under section 12(4) of the Orissa Sales Tax Act was served upon the petitioner for the assessment year 1989–90 on March 26, 1991, annexed as annexure 8. The petitioner appeared and made its submissions on March 30, 1991 and no orders have been passed thereon. The Sales Tax Officer, however, issued a notice of reassessment under section 12(8) of the Act for the self-same year 1989–90 which was served on the petitioner on July 19, 1991. The same has been annexed as annexure 9. The petitioner appeared and made its submissions on the question of entitlement of exemption from sales tax under the Policy Resolution of the Government, but the assessing officer passed the order of reassessment on December 31, 1991, annexed as annexure 1, which is the impugned order in O.J.C No. 1166 of 1992. The assessing officer has come to the conclusion that the production of cotton from waste cotton does not involve any process of manufacture and since no manufacturing activity is evident, the dealer is not eligible to utilise the forms for purchase of raw materials free of tax. The assessing officer has also come to the conclusion that notwithstanding grant of registration certificate by the District Industries Centre and exemption certificates in forms II and III, in view of the nature of activity as no manufacturing is involved, the dealer is not eligible to get the exemption from levy of sales tax in accordance with the Policy Resolution of the Government. With these conclusions, the assessing officer having levied a penalty of Rs. 10,000 under section 12(8) of the Orissa Sales Tax Act and having re-determined the taxable turnover by adding Rs. 8,82,222 and ultimately having found that the dealer is liable to pay the total tax Rs. 1,07,643.41, the petitioner has assailed the said order.

3. The main arguments advanced by Mr. A.K Ray for the petitioner is that production of cotton from waste cotton does involve a process of manufacturing and, therefore, the petitioner is entitled to the exemption from payment of sales tax under the Policy Resolution. He further contends that the maker of the policy having granted necessary certificate of exemption, the sales tax authorities were not entitled to sit in judgment over the same and, therefore, the impugned order under section 12(8) is without jurisdiction.

4. The Officer of the Industries Department having appeared for opposite party No. 1 has filed a counter-affidavit supporting the stand of the petitioner. He has categorically stated that the industrial unit of the petitioner has been considered eligible for the incentives declared in Industrial Policy Resolution of 1986 as well as the incentives declared in Industrial Policy Resolution of 1989 as a continuing unit of 1986 and it is engaged in the manufacturing of cotton from waste cotton.

5. On behalf of the sales tax authority, a counter-affidavit has, however, been filed stating therein that no doubt, the assessing officer had passed an order under section 12(4) of the Orissa Sales Tax Act allowing the exemption from levy of sales tax under Industrial Policy Resolution of 1986, but that had been done under a mistake which tantamounts to escapement of turnover and consequently, notices had been issued under section 12(8) of the Orissa Sales Tax Act. It has further been stated that issuance of a declaration form as per the Industrial Policy Resolution and the certificates issued by the Industries Department are not conclusive so far as the entitlement of the petitioner to receive the exemption in question and the Sales Tax Officer would be well within his jurisdiction to examine the validity of the grant of exemption. Since the activities of the petitioner do not involve any process of manufacturing, the tax exemption cannot be given and has not been given both on the raw materials as well as finished products. According to the counter-affidavit, the definition of “manufacture” which was added in section 2(ddddd) with effect from August 1, 1991, clearly indicates that the law prior to the same did not authorise an industry involved in mere processing to get the exemption in question and consequently, the impugned order under annexure 1 is fully justified.

6. In course of hearing of the writ application, learned counsel appearing for the petitioner as well as the learned Standing Counsel for the Revenue reiterated their respective stand taken in the affidavits. In the aforesaid premises, the short question that arises for consideration is whether the activities of the petitioner in producing cotton from waste cotton are entitled to the concession of exemption from levy of sales tax under the Policy Resolution of 1986? The further question which has to be answered in this connection is whether it involves a process of manufacturing or is a case of mere processing?

7. So far as the first question is concerned, under the Policy Resolution of 1986, the exemption from sales tax on raw material is available for all small industries on purchase of raw materials for a period of five years from the date of commercial production. So far as the finished products are concerned, products of new small-scale industries are exempted from sales tax for a period of five years from the date of commercial production. The relevant provisions are extracted herein below in extenso:

“C. Incentives:

(d) Concessions relating to sales tax—

(i) Exemption of sales tax on raw materials— All new village, cottage and small industries will be exempted from sales tax on purchase of spare parts of machinery, raw materials and packing materials for a period of 5 years from the date of their commercial production. All new medium and large industries will be eligible for similar facility for 3 years in Zone B and C and for 5 years in Zone A.

(ii) Exemption of sales tax on finished products—

(a) Products of all existing and new khadi, village, cottage industries and handicrafts will be exempted from sales tax when sold by the concerned manufacturing units or sales outlets of authorised co-operative/Government agencies. Finished products of all existing and new electronics industries so declared by the State Electronics Development Corporation will also be exempted from sales tax.

(b) Products of new small-scale industries will be exempted from sales tax for a period of 5 years from the date of their commercial production”

8. The aforesaid Policy Resolution nowhere expresses the expressions like “manufacture” or “processing” and it grants exemption in respect of purchases of raw materials of all small-scale industries and similarly exemption on finished products of all small-scale industries for a period of five years from the date of commercial production. There is no dispute that the commercial production of the petitioner started on December 14, 1989 and, therefore, the assessment year 1988–89 is fully covered by the same. On a plain reading of the aforesaid Policy Resolution of the Government, the conclusion is inescapable that the petitioner's unit being a small-scale industrial unit is exempted from levy of sales tax on purchase of raw materials as well as on sale of finished products. The Sales Tax Officer, however, has taken note of the fact that the declaration in form I-8 can only be utilised by an industrial unit for the purpose of manufacture inside the State and since the activity of the petitioner in producing cotton from waste cotton does not involve any manufacturing activity, the form had been erroneously given and had been utilised by the petitioner and, therefore, the petitioner is not entitled to the incentive in question. Similarly, according to the sales tax authority, so far as the finished product is concerned, only those industries which are eligible to purchase goods, i.e, raw materials free of tax would be eligible to sell such goods free of tax and since the petitioner is not entitled to purchase raw materials free of tax, as stated earlier, is not entitled to get exemption from sale of finished products. It is in this context, the question whether it involves an activity of manufacturing becomes important and arises for consideration.

9. According to the learned Standing Counsel, the “cotton” which is said to be the finished product is the same as “waste cotton” which is the raw material and, therefore, it can never be said that any process of manufacturing is involved therein. This contention is difficult for us to accept either by examining and applying the common parlance theory or otherwise. If a buyer goes to the market and asks for cotton then he will be given either the sterilised cotton or surgical cotton or cotton pure and simple, but nobody would give him “waste cotton”. In fact, waste cotton is not ordinarily sold in the market. Therefore, the two types of cotton cannot be held to be the same, as contended by the learned Standing Counsel for the Revenue. Then again, in the case of South Bihar Sugar Mills Ltd. v. Union of India, [1968] 3 SCR 21, AIR 1968 SC 922, 1978 CLT (J) 336, the Supreme Court considered the expression “manufacture” and held that the word “manufacture” implies a change but every change in the raw materia) is not “manufacture” and there must be such a transformation that a new and different article must emerge having a distinctive name, character or use. If the aforesaid ratio is applied to the case in hand, we have no hesitation to come to the conclusion that cotton which is produced from waste cotton is a distinct article different in character or use than the waste cotton and, therefore, it must be held that a manufacturing activity is involved in producing cotton from waste cotton. The word “manufacture” has various shades of meanings and is of wide import, as has been held by the Supreme Court in the case of Ganesh Trading Co. v. State of Haryana, [1973] 32 STC 623 and in the case of Hajee Abdul Shukoor and Co. v. State of Madras, [1964] 15 STC 719. The expression “manufacture” had not been defined in the Orissa Sales Tax Act, but has been defined by the amended provision that has been inserted by Act 21 of 1991 to mean:

“‘Manufacture’, with all its grammatical variations and cognate expressions, means producing, extracting, altering, ornamenting, finishing or otherwise processing or adopting any goods, but shall not include such manufacture or manufacturing process as the State Government may, by notification, specify from time to time.”

10. Thus, mere processing has been included in the expression “manufacture” from 1991. In other words, the legislative intent is apparent by providing for such a definition which was also the prevailing state of law and had not been codified. In this view of the matter, the activity of the petitioner in producing cotton from waste cotton must be held to be a manufacturing process and, therefore, is entitled to the exemption in question. The conclusion of the Sales Tax Officer that it does not involve “manufacturing” is rather a narrow view of the expression which cannot be sustained particularly when the policy makers of the resolution unequivocally indicate that the petitioner's unit is entitled to the exemption in question from levy of sales tax on purchase of raw materials and sale of finished products. Not only the authorities of the Industries Department had issued necessary certificates in favour of the petitioner, but also in the counter-affidavit filed in this Court came forward with the stand by stating positively that the petitioner's industry is entitled to the exemption from levy of sales tax under the Policy Resolution of 1986. In this connection it would be appropriate to notice a decision of the Allahabad High Court in the case of Kumar Fuels v. State of Uttar Pradesh, [1986] 63 STC 467, where the court was examining somewhat similar provision under the U.P Sales Tax Act and the power of the sales tax authorities in overriding the eligibility certificate granted by the Government. The learned Judges observed that the Commissioner of Sales Tax has not been given any power to sit in judgment over the grant of eligibility certificate granted by the Government.

11. As has been stated earlier, the Policy Resolution nowhere expresses the term “manufacture” and, therefore, all small-scale industrial units are exempted from levy of sales tax on purchase of raw materials as well as sale of finished products for a period of five years from the date of commercial production and the only requirement is that the competent authority of the Government under the Industries Department must issue the necessary certificate which has been issued in this case and, therefore, in terms of the Policy Resolution and in the absence of any denial that the petitioner is a small-scale industrial unit and commercial production started from December 14, 1989, the petitioner is entitled to the concession of tax relief given under the Policy Resolution. Even otherwise, we hold that the activity of the petitioner of producing cotton from waste cotton being a manufacturing activity, the petitioner is entitled to the concession in question. The Sales Tax Officer committed an error in passing the order under section 12(8) of the Orissa Sales Tax Act under annexure 1 by denying the concession to the petitioner. The impugned order under annexure 1 is hereby quashed and O.J.C No. 1166 of 1992 is allowed. The other writ applications, namely O.J.C Nos. 6 of 1993, 162 of 1993, 181 of 1993 and 182 of 1993 are disposed of with a direction that the proceedings be concluded bearing in mind the law laid down by us in this judgment.

12. All the writ applications are disposed of accordingly. We make no order as to costs.

R.K Patra, J.:— I agree.

Writ petitions disposed of accordingly.