Binay Opto Electronics Private Ltd, Kolkata V. A.C.I.T.-Circle-5, Kolkata, Kolkata

ITA 1589/KOL/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83050 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2014
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 10-09-2009
• Court: TRIBUNAL
• Department Lawyers: P B PRAMANIC
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Keywords: Search and seizure; Opportunity of being heard
• Section: 143(3); 80IB

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] ' / I.T.A NO.1589/KOL/2009 #$ %&/ ASSESSMENT YEAR: 2004-05 BINAY OPTO ELECTRONICS PVT. LTD. VS. ASSISTANT C OMMISSIONER OF INCOME-TAX, (PAN: AABCB2719D) CIRCLE-5, KOLKATA. (() /APPELLANT ) (*+()/ RESPONDENT ) DATE OF HEARING: 06.08.2014 DATE OF PRONOUNCEMENT: 13.08.2014 FOR THE APPELLANT: SHRI SOUMITRA CHOWDHURY FOR THE RESPONDENT: SHRI P. B. PRAMANIC, JCIT / ORDER PER SHRI MAHAVIR SINGH, JM : THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-V, KOLKATA IN APPEAL NO. CIT(A)-V/KOL/195/CIR-5/2006-07 DATED 31.03.2009. AS SESSMENT WAS FRAMED BY ACIT, CIRCLE- 5, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2004-05 VIDE HIS ORDER DATED 26.12. 2006. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO DISALLOWING THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 80IB OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO. 1: 1) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE C ASE WAS IT APPROPRIATE AND LAWFUL TO DISALLOW THE DEDUCTION CLAIMED OF RS.764899 UNDER S ECTION 80IB OF THE ACT. 3. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPA NY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF LED BASED PRODUCTS AND THIS FACT I S RECORDED BY AO IN HIS ASSESSMENT ORDER. THE ASSESSEE CLAIMED DEDUCTION U/S. 80IB OF THE ACT IN THE RETURN OF INCOME FILED BY ASSESSEE FOR THE RELEVANT ASSESSMENT YEAR. THE ASSESSEE IS A SMALL SCALE INDUSTRIAL UNDERTAKING HAVING REGISTRATION NO.30325068/SI DATED 18.08.1997. THE FACTORY IS SITUATED AT 44, ARMENIAN STREET, KOLKATA-700 001. THE ASSESSEE IS ALSO REGISTERED W ITH CENTRAL EXCISE VIDE RC NO. 20/M/8/C/9 CAL-E/97 DATED 06.06.1997, NOW CENTRAL EXCISE CHANG ED THE RC TO AABCB2719DXM001. 2 ITA NO.1589/K/2009 BINAY OPTO ELECTRONICS PVT. LTD. AY 2007-08 TO 2 004-05 THE ASSESSEE CLAIMED TO HAVE BEEN MANUFACTURING LED BASED AVIATION SIGNALING, WARNING, TRAFFIC LIGHTS, PUSH BUTTONS, SELECTOR SWITCH, LAMP HOLDERS, LED MODULES/LAMPS/INDICATORS, LED BASED HEAVY DUTY LINE TESTER FALLING UNDER CENT RAL EXCISE TARIFF 8530, 8536.90, 8530.8000M 8536.5010. THE ASSESSEE IS HAVING FOLLO WING MACHINERIES AND EQUIPMENTS: DIGITAL METER, LUX MOTOR, PHOTOMETRIC, HIGH VOLTAG E MACHINE, MEAGRE, VIBRATION MACHINE, HEAT CHAMBER AND VARIOUS OTHER TESTING EQU IPMENTS. THE ASSESSEE CLAIMED TO HAVE BASIC MANUFACTURING PR OCESS BASED ON INTRICATE ELECTRICAL ENGINEERING AND THE SAME IS CUSTOMERS SPECIFIED. TH E DRAWINGS AND DESIGNING OF CIRCUIT IS MOST IMPORTANT FACTOR UPON WHICH PRODUCT IS DEVELOPED, A CCORDING TO CUSTOMER SPECIFICATIONS AND THE MANUFACTURING PROCESS DEPENDS UPON THE DRAWINGS AND DESIGNING OF CIRCUIT PROVIDED BY CUSTOMERS. THE ASSESSEE EXPLAINED THE ENTIRE PROCE SS BEFORE THE AO AS UNDER: THE PRODUCTS MANUFACTURED BY THE ASSESSEE IS LABOU R INTENSIVE. THE BASIC MANUFACTURING PROCESS IS BASED ON INTRICATED ELECTRICAL ENGINEERI NG. THE PRODUCES OF THE COMPANY ARE BASED ON CUSTOMER SPECIFICATION. VOLTAGE, COLOUR OF LIGHTS, AC/DC VARIES FROM CUSTOMER TO CUSTOMER. AS A SEQUEL TO THAT MANUFACTURING PROCES S DEPENDS ON DRAWING AND DESIGNING OF CIRCUIT. IN FACT AND IN EFFECT DRAWING AND DESIGNIN G OF CIRCUIT IS THE MOST BASIC FACTOR UPON WHICH THE PRODUCT IS DEVELOPED ACCORDING TO CUSTOME R SPECIFICATION. THIS VITAL ASPECT OF PRODUCTION PROCESS IS CARRIED OUT BY THE ASSESSEE. THE NEXT PART OF THE PRODUCTION PROCESS IS SUB-ASSE MBLY AND SOLDERING. THIS PART OF THE WORK IS CARRIED OUT BY THE JOB WORKER/PROCESSOR WHO IS BEING PAID PROCESSING CHARGES. THE WORK ENTAILS FILLING, MOUNTING AND SOLDERING OF RAW MATERIALS/COMPONENTS IN CIRCUIT BOARD. THE OPERATION TO SUCH EFFECT IS CARRIED OUT UNDER THE SUPERVISION OF THE EMPLOYEES OF THE ASSESSEE AT THE FACTORY OF THE JOB WORKERS. EXTENSIVE LEST THEREOF IS ALSO CARRIED OUT BY THE EMPLOYEES OF THE ASSESSEE TO ENSURE FITTING, MOUNTING AND SOLDERING OR REQUISITE RAW MATERIALS/COMPONENTS IN PURCHASE OF THE CIRCUIT DES IGNED. THE CIRCUIT BOARD FITTED AND MOUNTED WITH RAW MATER IALS/COMPONENTS ARE THEN BROUGHT TO THE FACTORY OF THE ASSESSEE SITUATED AT 44, ARMERNI AN STREET KOLKATA. TERMINALS AND ADAPTORS ARE THEREAFTER FITTED AND MOUNTED. THE CIR CUIT BOARD FITTED ARE MOUNTED WITH VARIOUS RAW MATERIALS/COMPONENTS, THEREAFTER PASSES THROUGH CHEMICAL APPLICATION TO DEVELOP HEAT RESISTANCE CAPACITY. THE DEVELOPED CIRCUIT BOARD THEREAFTER UNDERGOES. B URNING, OPERATIONS IN ORDER TO TESTIFY THE POWER RESISTANCE CAPACITY WHICH IS VERY MUCH CR ITICAL FOR DEVELOPMENT OF THE FINAL PRODUCT. THIS PROCESS ENSURES THE MAIN OPERATIONAL PERFORMANCE, THE EMISSION OF LIGHT, THE FREQUENCY THEREOF AND BRIGHTNESS. VARIOUS TESTING O PERATIONS ARE THEREAFTER CARRIED OUT BY THE ASSESSEE TO ADHERE TO STRICT QUALITY CONTROL NO RMS AND ALSO TO ENSURE THE DEVELOPMENT OF THE PRODUCT IN ACCORDANCE WITH THE SPECIFICATION OF THE CUSTOMER. THE PRODUCT WHICH SATISFIES THE QUALITY CONTROL TEST IS THEN CONSIDER ED AS FINAL MANUFACTURED PRODUCT. LABELING OF THE PRODUCT IS CARRIED OUT THEREAFTER. ALL RAW MATERIALS, COMPONENTS AND OTHER INPUTS ARE BEING PROCESSED AND PURCHASED BY THE ASSESSEE. IN PURSUANCE OF APPROPRIATE EXCISE NOTIFI CATION THE ASSESSEE HAS DECLARED BEFORE CENTRAL EXCISE AUTHORITIES, THE REMOVAL OF RAW MATE RIALS AND COMPONENTS FROM ITS STORES TO 3 ITA NO.1589/K/2009 BINAY OPTO ELECTRONICS PVT. LTD. AY 2007-08 TO 2 004-05 THE FACTORY OF THE JOB WORKER FOR CARRYING OUT FITT ING, MOUNTING AND SOLDERING OF VARIOUS RAW MATERIALS/ COMPONENTS IN THE CIRCUIT BOARD ACCO RDING TO THE DRAWING AND DESIGN OF THE CIRCUIT. IT WAS FURTHER DECLARED THAT AFTER CARRYIN G OUT THE OPERATION OF FITTING, MOUNTING AND SOLDERING OF RAW MATERIALS/COMPONENTS AT THE FACTOR Y OF THE JOB WORKER UNDER CLOSE SUPERVISION AND MONITORING BY THE EMPLOYEES OF THE ASSESSEE, FURTHER PROCESSING, BURNING AND TESTING SHALL BE CARRIED OUT AT THE FACTORY OF THE ASSESSEE, WHEREBY AND WHERETO A PRODUCT WILL EMERGE WHICH IS HAVING DISTINCT IDENTI TY IN THE COMMERCIAL WORLD. THE PRODUCTS EMERGED FROM THE ARMENIAN STREET FACTORY O F THE ASSESSEE ARE REGARDED AS MANUFACTURED HAVING DISTINCT IDENTITY IN THE COMMER CIAL WORLD. BUT THE AO DISALLOWED THE DEDUCTION CLAIMED U/S 80I B OF THE ACT ONLY ON THE PREMISE THAT THE SAME ISSUE WAS EXAMINED BY THE AO FOR AY 2002-03 AN D THE SAME WAS DISALLOWED AND FURTHER CONFIRMED BY CIT(A) VIDE HIS ORDER IN APPEAL NO. CI T(A)-V/KOL/86/CIRCLE-5/2005-06 DATED 05.12.2005. BUT, NOW LD. COUNSEL FOR THE ASSESSEE B EFORE US FILED TRIBUNALS ORDER IN ASSESSEES PAPER BOOK FOR THE RELEVANT AY 2002-03 IN ITA NO. 3 58/K/2006 WHEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE FOR THE REASON THAT THE DETAILS OF PROCESSING/MANUFACTURING WERE NEVER PRODUCED BEFORE THE AO AND HENCE, TRIBUNAL SET ASIDE THE MAT TER BACK TO THE FILE OF AO BY OBSERVING IN PARA 7 OF THE ORDER AS UNDER: 7. HEARD BOTH THE PARTIES, PERUSED THE RECORDS AND FIND THAT THE PROCESSES OF MANUFACTURING UNDERTAKEN BY THE ASSESSEE COMPANY WE RE NOT BROUGHT TO THE NOTICE OF THE LOWER AUTHORITIES BY THE ASSESSEE AND, THEREFORE, W E TREAT THESE DETAILS OF PROCESSING/MANUFACTURING AS NEW EVIDENCE PRODUCED B Y THE ASSESSEE BEFORE US. SINCE THESE DETAILS OF PROCESSES OR MANUFACTURING WERE NO T BEFORE THE ASSESSING OFFICER, WE DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FI LE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION WHO SHALL VERIFY THE SAME AFTER AFFORD ING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THEREFORE, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 4. IT WAS INFORMED BY LD. SR. DR THAT THE AO, IN TE RM OF TRIBUNALS DIRECTIONS FOR THE ASSESSMENT YEAR 2002-03, EXAMINED THE ISSUE AFRESH AND AGAIN DISALLOWED THE DEDUCTION AND NOW MATTER IS PENDING BEFORE CIT(A) IN SECOND ROUN D. THE AO RELYING ON THE EARLIER YEARS ASSESSMENT ORDER DISALLOWED DEDUCTION U/S. 80IB OF THE ACT BY OBSERVING AS UNDER: THE SECTION 80IB SAYS THAT DEDUCTION U/S. 80IB IS AVAILABLE ONLY TO ONE ASSESSEE FROM THE INCOME DERIVED OUT OF GOODS MANUFACTURED. THE ASSESSEE IS ONLY PREPARING THE DESIGN AND ON THE BASIS OF SUCH DESIGN IT IS GETTIN G THE GOODS PRODUCT FROM ITS SISTER CONCERN. ON RECEIPT OF GOODS FROM ITS SISTER CONC ERN THE ASSESSEE IS FURTHER TESTING THE GOODS, PACKING THE SALE AND THEN SELLING/SUPPLYING TO CUSTOMERS. THUS CONSIDERING THE ACTIVITY OF THE ASSESSEE AND ITS INVOLVEMENT IN PRO DUCTS OF LED AND OTHER ELECTRICAL GOODS IT IS FOUND THAT THE DESIGNING, TESTING AND P ACKING OF THE GOODS MANUFACTURED CANNOT BE TREATED AS MANUFACTURING. IN THIS SITUAT ION IT IS HELD THAT THE ASSESSEE IS NOT THE REAL MANUFACTURER OF THE GOODS. HENCE, THE ASS ESSEE IS NOT ENTITLED FOR THE DEDUCTION U/S. 80IB AND ACCORDINGLY THE ASSESSEES CLAIM OF D EDUCTION U/S. 80IB IS DISALLOWED. 4 ITA NO.1589/K/2009 BINAY OPTO ELECTRONICS PVT. LTD. AY 2007-08 TO 2 004-05 5. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT( A), WHO ALSO CONFIRMED THE ACTION OF AO VIDE PARA 5 AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE AND SUBMISSION MADE AS ABOVE. THE AO HAS REJECTED THE CLAIM OF DEDUCTION U/S 801B ON TWO GROUNDS- FIRST, THAT THE APPELLANT IS NOT ENGAGED IN MANUFACTURING ACTIVITIE S AND, SECOND, THE DEDUCTION U/S 80IB HAS ALREADY ALLOWED TO ITS SISTER CONCERN. ON THE B ASIS OF FACTS AND ITS MANUFACTURING ACTIVITIES PRODUCED BY THE APPELLANT COMPANY BOTH B EFORE THE AO AND BEFORE THE UNDERSIGNED, IT IS CLEAR THAT THE ENTIRE ACTIVITIES ARE BEING MANAGED FROM THE SAME PREMISES. SOME OF THE ACTIVITIES ARE BEING PERFORME D BY THE APPELLANT COMPANY ITSELF AND REMAINNG BY THE SISTER CONCERN OF THE APPELLANT CO MPANY. IT IS LKE THE TWO CONCERNS ARE ENGAGED FOR THE SAME SORT OF ACTIVITIES. IF BOTH TH E CONCERNS ARE BEING RUN FROM THE SAME PREMISES, IT IS NOT UNDERSTANDABLE WHY TWO COMPANIE S HAVE BEEN FORMED FOR THE SAME ACTIVITIES. THUS, IT APPEARS TO BE A CASE WHERE BOT H THE COMPANIES HAVE BEEN FORMED IN ORDER TO CLAIM DEDUCTION U/S 80IB. IF IT IS SO THEN CLAIM FOR DEDUCTION U/S 80IB CAN BE ALLOWED ONLY TO ONE CONCERN AND NOT TO BOTH THE CON CERNS. I, THEREFORE, AGREE WITH THE FINDINGS OF THE AO THAT IF ONE SISTER CONCERN OF TH E APPELLANT COMPANY HAS ALREADY BEEN ALLOWED THE DEDUCTION U/S. 80IB, ANOTHER COMPANY I. E. THE APPELLANT COMPANY IS NOT ENTITLED FOR THE SAME DEDUCTION. THUS, ADDITION MA DE BY AO IS CONFIRMED. AGGRIEVED, NOW ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE IS A SMALL-SCALE INDUSTRI AL UNDERTAKING HAVING PERMANENT REGISTRATION NO 30325068/SL DATED 18.08.1997 AND OBTAINED EXCISE LICENCE HAVING R. C. NO. 20/M/8/C/9 CAL- E/97 DATED 06.06.1997 WHICH HAS PRESENTLY BEEN CHANGED TO AABCB2719DXM001. THE ASSESSEE CLAIMED BEFORE US THAT THE MANUFACTURING A CTIVITIES CARRIED OUT ARE HAVING FOLLOWING TWELVE STAGES: (1) DRAWING AND DESIGNING OF CIRCUIT (2) DEVELOPMENT OF CIRCUIT BOARD / PRODUCT ACCORDN G TO CUSTOMER SPECIFICATION. (3) ASSEMBLING OF REQUISITE RAW MATERIALS. (4) MOUNTING / SOLDERING OF SOME COMPONENTS IN CIRC UIT BOARD. (5) TESTING OF CIRCUITS AS TO WHETHER THE MOUNTING AND SOLDERING ARE AS PER SPECIMENS OF CIRCUIT DESIGNED. (6) AFTER BEING FULLY SATISFIED ABOUT THE JOB WORK, OTHER COMPONENTS ARE FITTED IN THE CIRCUIT BOARD. (7) TERMINALS AND ADAPTERS ARE THEREAFTER FITTED AN D MOUNTED. (8) THE CIRCUIT BOARD FITTED AND MOUNTED WITH VARIO US COMPONENTS ARE PASSED THROUGH SEVERAL CHEMICAL APPLICATIONS TO DEVELOP HEAT RESIS TANCE. (9) THE CIRCUIT BOARD THEREAFTER UNDERGOES HEATING OPERATIONS. (10) THEREAFTER THE POWER RESISTANCE CAPACITY OF TH E CIRCUIT BOARD IS TESTED TO ENSURE THE PROCESS AND MAIN OPERATIONAL PERFORMANCE OF THE PRO DUCT, THE EMISSION OF LIGHT, THE FREQUENCY THEREOF AND THE BRIGHTNESS. 5 ITA NO.1589/K/2009 BINAY OPTO ELECTRONICS PVT. LTD. AY 2007-08 TO 2 004-05 (11) ANY DEFECT IN THE PROCESS IS RECOGNIZED THROUG H THIS PROCESS AND REMEDIAL MEASURES ARE TAKEN. (12) VARIOUS TESTING OPERATIONS ARE THEREAFTER CARR IED OUT TO ADHERE TO STRICT QUALITY CONTROL NORMS TO ENSURE THE DEVELOPMENT OF THE PROD UCTS IN ACCORDANCE WITH THE SPECIFICATION OF THE CUSTOMERS. OUT OF THE VARIOUS STAGES OF PRODUCTION PROCESS ONLY NUMBER (4) AS MENTIONED ABOVE IS CARRIED THROUGH BI NAY LED DISPLAYS & DEVICES PVT. LTD. 7. IN VIEW OF THE ABOVE FACTS, ASSESSEE ALSO CLAIME D THAT DETAILS OF PRINCIPAL ITEMS OF RAW MATERIALS AS REGARDS OPENING STOCK, PURCHASES, CONS UMPTION AND CLOSING STOCK REFLECTS THAT RAW MATERIALS CONSUMED DURING THE YEAR WAS RS 8099915 A ND MOVEMENT OF FINISHED GOODS EVIDENCING OPENING STOCK, PRODUCTION, SALES AND CLO SING STOCK ARE FILED BEFORE THE AO. ALL RAW MATERIALS, COMPONENTS AND OTHER INPUTS ARE BEING PR OCESSED AND PURCHASED BY THE ASSESSEE AND DECLARED BEFORE CENTRAL EXCISE AUTHORITIES, REMOVAL OF RAW MATERIALS AND COMPONENTS FROM ITS STORES, JOB WORKER CARRYING OUT THE JOB OF MOUNTING AND SOLDERING OF VARIOUS RAW MATERIALS / COMPONENTS IN THE CIRCUIT BOARD. IT WAS DECLARED TH AT AFTER CARRYING OUT THE OPERATION OF MOUNTING AND SOLDERING OF RAW MATERIALS / COMPONENT S AT FACTORY UNDER SUPERVISION AND MONITORING BY EMPLOYEES OF THE ASSESSEE, FURTHER PR OCESSING, DEVELOPMENT OF HEAT RESISTANCE CAPACITY, POWER RESISTANCE CAPACITY AND TESTING BE CARRIED OUT AT THE FACTORY OF THE ASSESSEE WHEREBY A PRODUCT WILL EMERGE, WHICH IS HAVING A PE RMANENT AND DISTINCT IDENTITY IN THE COMMERCIAL WORLD. FACTUALLY IT WAS CLAIMED THAT EXC ISE DUTY IS CHARGEABLE AT THE TIME OF REMOVAL OF MANUFACTURED EXCISABLE GOODS FROM FACTOR Y AND IT HAS PAID EXCISE DUTY THROUGH TR 6 CHALLAN OF RS 1871282 AND APPROPRIATED DUTY OF R S 24331 7 AGAINST CENVAT CREDIT AGGREGATING TO RS 2114599 DURING THE PREVIOUS YEAR. ACCORDING TO THE ASSESSEE, AO HAS NOT CONSIDERED SUCH BASIC FACTOR. IN PURSUANCE OF THE E XCISE ACT, ASSESSEE IS MAINTAINING VARIOUS STATUTORY REGISTERS VIZ RG1, RG23A PART II AND IS P AYING EXCISE DUTY AND IS FILING MONTHLY/QUARTERLY RETURNS TO THE EXCISE AUTHORITIES . THE ASSESSEE BENG MANUFACTURER, IS UNDER OBLIGATION TO COMPLY WITH ALL SUCH STATUTORY FORMAL ITIES. 8. THIS ISSUE HAS BEEN DEALT BY HONBLE SUPREME COU RT IN THE CASE OF UJAGAR PRINTS VS. UNION OF INDIA (1989) 179 ITR 317 (SC), WHEREIN IT HAS BEEN HELD AS UNDER: WE HAVE CAREFULLY CONSIDERED THESE SUBMISSIONS. IN EMPIRE INDUSTRIES' CASE [1986] 162 ITR 846, THIS COURT CONSIDERED SIMILAR SUBMISSI ONS IN AN ALMOST IDENTICAL CONTEXT AND SITUATION. LEARNED JUDGES REFERRED TO THE OBSE RVATIONS OF THIS COURT IN CST V. HARBILAS RAI AND SONS [1968] 21 STC 17, IN WHICH T HE VIEW EXPRESSED BY THE DIVISION BENCH OF THE MADHYA PRADESH HIGH COURT IN HIRALAL JITMAL V. CST [1957] 8 STC 325, 326, WAS HELD SUPPORTABLE ON THE REASONING THAT (S EE [1986] 162 ITR 846, 862) 6 ITA NO.1589/K/2009 BINAY OPTO ELECTRONICS PVT. LTD. AY 2007-08 TO 2 004-05 '.... THE DECISION OF THE MADHYA PRADESH HIGH COURT MIGHT PERHAPS BE JUSTIFIED ON THE GROUND THAT A PRINTED OR DYED CLOTH IS COMMERCIALLY A DIFFERENT ARTICLE FROM THE CLOTH WHICH IS PURCHASED AND PRINTED OR DYED.' THE DIVISION BENCH ALSO REFERRED TO, WITH APPROVAL , THE DECISION OF THE BOMBAY HIGH COURT IN KORES (INDIA) LTD. V. UNION OF INDIA [1982] 10 ELT (J) 253. THE DIVISION BENCH NOTICED THE QUESTION ARISING FOR DECISION (S EE [1986] 162 ITR 846, 862) : 'FABRIC ITSELF MEANS WOVEN MATERIALS. IT WAS CONTEN DED THAT PROCESSING THE MANUFACTURED FABRIC DOES NOT BRING INTO EXISTENCE A NY NEW WOVEN MATERIAL BUT THE QUESTION IS : DO NEW AND DIFFERENT GOODS EMERGE HAV ING A DISTINCTIVE NAME, USE AND CHARACTER ?' ANSWERING, THE BENCH SAID (SEE [1986] 162 ITR 846, 865): 'IT APPEARS IN THE LIGHT OF THE SEVERAL DECISIONS A ND ON THE CONSTRUCTION OF THE EXPRESSION THAT THE PROCESS OF BLEACHING, DYEING AND PRINTING ETYMOLOGICALLY ALSO MEANS MANUFACTURING PROCESSES...' IT IS STRENUOUSLY URGED FOR THE PROCESSORS THAT TH E VIEW TAKEN BY THE DIVISION BENCH IN EMPIRE INDUSTRIES' CASE [1986] 162 ITR 846 SUFFERS FROM FALLACIES BOTH OF REASONING AND CONCLUSION AND REQUIRES TO BE RECONSI DERED. THE PREVALENT AND GENERALLY ACCEPTED TEST TO ASCER TAIN WHETHER THERE IS 'MANUFACTURE' IS TO FIND WHETHER THE CHANGE OR THE SERIES OF CHANGES BROUGHT ABOUT BY THE APPLICATION OF PROCESSES TAKE THE COMMODITY TO THE POINT WHERE, COMMERCIALLY, IT CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODIT Y BUT IS, INSTEAD, RECOGNISED AS A DISTINCT AND NEW ARTICLE THAT HAS EMERGED AS A RES ULT OF THE PROCESSES. THE PRINCIPLES ARE CLEAR. BUT DIFFICULTIES ARISE IN THEIR APPLICAT ION IN INDIVIDUAL CASES. THERE MIGHT BE BORDERLINE CASES WHERE EITHER CONCLUSION WITH EQUAL JUSTIFICATION MAY BE REACHED. INSISTENCE ON ANY SHARP OR INTRINSIC DISTINCTION BE TWEEN 'PROCESSING' AND 'MANUFACTURE', WE ARE AFRAID, RESULTS IN AN OVER SI MPLIFICATION OF BOTH AND TENDS TO BLUR THEIR INTERDEPENDENCE IN CASES SUCH AS THE PRESENT ONE. THE CORRECTNESS OF THE VIEW IN EMPIRE INDUSTRIES' CASE [1986] 162 ITR 846 CANNOT B E TESTED IN THE LIGHT OF MATERIAL IN THE FORM OF AFFIDAVITS EXPRESSING THE OPINION OF PE RSONS SAID TO BE ENGAGED IN OR CONNECTED WITH THE TEXTILE TRADE AS TO THE COMMERCI AL IDENTITY OF THE COMMODITIES BEFORE AND AFTER THE PROCESSING-PLACED BEFORE THE COURT IN A SUBSEQUENT CASE. THESE OPINIONS ARE, OF COURSE, RELEVANT AND WOULD BE AMONGST THE V ARIOUS FACTORS TO BE TAKEN INTO ACCOUNT IN DECIDING THE QUESTION. ON A CONSIDERATION OF THE MATTER, WE ARE PERSUADED TO THINK THAT THE VIEW TAKEN IN EMPIRE INDUSTRIES' CASE [1986] 162 ITR 846 THAT 'GREY FABRIC' AFTER IT UNDERGOES THE VARIOUS PROCESSES OF BLEACHING, DYEING, SIZING, PR INTING, FINISHING, ETC., EMERGES AS A COMMERCIALLY DIFFERENT COMMODITY WITH ITS OWN PRIC E STRUCTURE, CUSTOM AND OTHER COMMERCIAL INCIDENTS AND THAT THERE WAS IN THAT SE NSE A 'MANUFACTURE' WITHIN THE MEANING OF SECTION 2(F), EVEN AS UNAMENDED, IS AN E MINENTLY PLAUSIBLE VIEW AND IS NOT SHOWN TO SUFFER FROM ANY FALLACY. INDEED, ON THIS P OINT, THE REFERRING BENCH DID NOT DISAGREE OR HAVE ANY RESERVATIONS EITHER. IT IS TO BE NOTICED THAT IF THE AMENDING LAW IS VALID, THIS ASPECT BECOMES ACADEMIC. 9. WE FIND THAT MONITORING AND SOLDERING OF RAW MAT ERIALS/COMPONENTS ON CIRCUIT BOARD AS PERFORMED BY JOB WORKER IS ONLY ONE PART OF THE MAN UFACTURING ACTIVITIES HAS NOT RESULTED 7 ITA NO.1589/K/2009 BINAY OPTO ELECTRONICS PVT. LTD. AY 2007-08 TO 2 004-05 TOWARDS EMERGENCE OF ANY PRODUCT WHICH HAS COMMERCI AL IDENTITY AND IS EXCISABLE. IT WAS NOT CONSIDERED BY THE ASSESSING OFFICER THAT HAD SUCH W ORK PERFORMED BY JOB WORKER RESULTED INTO EMERGENCE OF A PRODUCT HAVING COMMERCIAL IDENTITY, THEN SUCH WORK WOULD HAVE ATTRACTED THE EXCISE ACT. THE PRODUCT THAT OF AVIATION OBSTRUCTIO N LIGHT (AOL), PUSH BUTTONS, MODULES AND LINE TESTER EMERGED AS FINISHED GOODS HAVING COMMER CIAL IDENTITY FROM CONSUMPTION OF RAW MATERIALS, VIZ, ADAPTER, RESISTANCE, DIODE, LED, GA SKET, PCB, LENS AND CAPACITOR OUT OF THE MANUFACTURING ACTIVITIES CARRIED OUT BY THE ASSESSE E. THE ASSESSEE IS A SMALL-SCALE INDUSTRIAL UNDERTAKING AND IS ENGAGED IN THE BUSINESS OF MANUF ACTURING OF ANY ARTICLE OR THING. ALL CONDITIONS LAD DOWN IN SECTION 80-IB OF THE ACT ST ANDS SATISFIED. CENTRAL EXCISE AUTHORITIES RECOGNIZES THE ASSESSEE AS MANUFACTURER AND IS COLL ECTING EXCISE DUTY FROM THE ASSESSEE FOR MANUFACTURE OF EXCISABLE GOODS. IN VIEW OF THE FACT S AND CIRCUMSTANCES, CLAIM OF DEDUCTION UNDER SECTION 80-IB OF THE ACT IS AS PER LAW AND SA ME IS ALLOWED. 10. FROM THE ABOVE CASE LAW OF HONBLE SUPREME COUR T IN THE CASE OF UJAGAR PRINTS, SUPRA AND THE FACTS OF THE CASE THAT THE CENTRAL EXCISE A UTHORITIES RECOGNIZES ASSESSEE AS MANUFACTURER AND IS COLLECTING EXCISE DUTY FOR MANU FACTURE OF EXCISABLE GOODS FOR CARRYING OUT THE OPERATION OF FITTING, MOUNTING AND SOLDERING OF RAW MATERIALS/COMPONENTS AT THE FACTORY OF THE JOB WORKER UNDER CLOSE SUPERVISION AND MONITORI NG BY THE EMPLOYEES OF THE ASSESSEE, FURTHER PROCESSING, BURNING AND TESTING SHALL BE CA RRIED OUT AT THE FACTORY OF THE ASSESSEE, WHEREBY AND WHERETO A PRODUCT WILL EMERGE WHICH IS HAVING DISTINCT IDENTITY IN THE COMMERCIAL WORLD. IN TERM OF THIS, WE ARE OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. WE ORDER ACCORDINGLY. 11. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 12. ORDER IS PRONOUNCED IN THE OPEN COURT ON 13.08. 2014. SD/- SD/- , ! , (SHAMIM YAHYA ) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13TH AUGUST, 2014 ,- #./ 0 JD.(SR.P.S.) 8 ITA NO.1589/K/2009 BINAY OPTO ELECTRONICS PVT. LTD. AY 2007-08 TO 2 004-05 1 *2 3 2%4- COPY OF THE ORDER FORWARDED TO: 1 . () / APPELLANT M/S. BINAY OPTO ELECTRONICS PVT. LTD., 44, ARMENIAN STREET, KOLKATA-700 001. 2 *+() / RESPONDENT ACIT, CIRCLE-5, KOLKATA. 3 . # ( )/ THE CIT(A), KOLKATA 4. 5. # / CIT KOLKATA 2:; *# / DR, KOLKATA BENCHES, KOLKATA +2 */ TRUE COPY, #