DCIT CC 3(2) CEN RG 3, MUMBAI V. VIVEK MEHROTRA, MUMBAI

ITA 2175/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 1259 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J D MISTRI
• Assessee Lawyers: JACINTA ZIMIK VASHAI
• Keywords: Search and seizure
• Section: 10AA; 80HHC; 153A; 10B; 80IA; 251; 80IC; 80HH; 80IC; 13; 22; 154

Judgement Text

ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 1 OF 21 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI F BENCH, MUMBAI [ CORAM : PRAMOD KUMAR ( VICE PRESIDENT ) AND MADHUMITA ROY ( JUDICIAL MEMBER )] ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 3 ( 2 ) , CENTRAL RANGE 3 , MUMBAI .......................... APPELLANT VS VIVEK MEHROTRA .......................... RESPONDENT OFFICE NO . 116, CHRUCHGATE CHAMBER 5, NEW MARINE LINES, MUMBAI 400 020 [ PANL AAHPM4127B ] APPEARANCES BY JACINTA ZIMIK VASHAI FOR THE RESPONDENT J . D MISTRI AND NITESH JOSHI FOR THE APPELLANT DATE OF CONCLUDING THE HEARING : : JANUARY 09, 2020 DATE OF PRONOUNCEMENT : MAY 27 , 2020 ORDER PER PRAMOD KUMAR, VP : 1. BY WAY OF THESE APPEALS, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTION OF LEARNED CIT ( A ) S ORDER FIVE SEPARATE, BUT MATERIALLY IDENTICAL ORDERS, ALL DATED 03 . 01 . 2018, IN THE MATTER OF ASSESSMENT UNDER SECTION 143 ( 3 ) R . W . S . 153A OF THE INCOME TAX ACT 196 1 FOR THE ASSESSMENT YEAR 2010 - 11 TO 2012 - 13 . 2. GRIEVANCES RAISED BY THE APPELLANT ASSESSING OFFICER, WHICH ARE COMMON IN ALL THESE APPEALS, ARE AS FOLLOWS : - ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 2 OF 21 1. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT ( A ) ERRED IN ALLOWING THE ASSESSEE'S CLAIM OF DEDUCTION U / S 80IC WITHOUT APPRECIATING THE FACT THAT DURING THE COURSE OF SEARCH ACTION IT HAS BEEN CLEARLY ESTABLISHED AND CONFIRMED FROM THE STATEMENT RECORDED ON OATH OF SHRI SANJEEV KUMAR AGARWAL, MANAGER OF THE ASS ESSEE THAT THE ASSESSEE WAS NOT DOING ANY MANUFACTURING OR PROCESSING ACTIVITY BUT ONLY MIXING AND REPACKING VARIOUS INGREDIENTS AND THUS NO FINISHED PRODUCT DISTINCT FROM THE RAW MATERIAL HAS COME INTO EXISTENCE, WHICH MAY FALL WITHIN THE MEANING OF WORDS ' MANUFACTURING, PROCESSING AND PRODUCTION ' AS ENUNCIATED UNDER THE PROVISIONS OF SECTION 80IC OF THE IT . ACT, 1961 '. 2. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT ( A ) ERRED IN ALLOWING THE ASSESSEE'S CLAIM OF DEDUCTION U / S 80IC BY HOLDING THAT THE ASSESSEE'S CLAIM FOR DEDUCTION IN THE ORIGINAL ASSESSMENT IN THE RELEVANT YEAR AND PRECEDING YEARS WAS THOROUGHLY EXAMINED AND THEREAFTER ALLOWED AND HOLDING THE ACTION OF THE AO OF DISALLOWING THE ASSESSEE'S CLAIM FOR DEDUCTION U / S . 80IC IN THE ASSESSMENT U / S . 143 ( 3 ) RWS 153A AS NOT JUSTIFIED . '' 3. ' ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT ( A ) ERRED IN ALLOWING THE ASSESSEE'S CLAIM FOR DEDUCTION U / S . 80IC OF THE IT . ACT, 1961, WITHOUT APPRECIATING THE FACT THAT THE ESSENTIAL REQUIREMENT TO BE ELIGIBLE TO CLAIM THE SAID DEDUCTION U / S 80IC OF THE I . T . ACT, 1961 WAS NOT FULFILLED BY THE ASSESSEE '. 3. THE CORE ISSUE THAT WE ARE THUS REQUIRED TO ADJUDICATE IS WHETHER OR NOT THE LEARNED CIT ( A ) WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 80IC, ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE . 4. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE ISSUE IN APPEAL IS SQUARELY COVERED BY THE ORDER DATED 19 TH OCTOBER 2016 PASSED BY A COORDINATE BENCH, IN THE CASE OF DCIT VS KHUSBOO ENTERPRISES [ ITA NO . 371 / LKW / 2016; ORDER DATED 19 TH OCTOBER 2016 ] - WHICH WAS ALSO COVERED BY THE SAME SEARCH AND SEIZURE OPERATIONS, FOR THE ASSESSMENT YEAR 2008 - 09, WHEREIN THE COORDINATE BENCH HAS, INTER ALIA, OBSERVED AS FOLLOWS : 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, CAREFULLY CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE TA X AUTHORITIES BELOW AS WELL AS THE DOCUMENTS PLACED BEFORE US . THE ONLY QUESTION BEFORE US IS WHETHER THE ASSESSEE IS ENGAGED IN MANUFACTURING ACTIVITIES TO BE ELIGIBLE FOR DEDUCTION U / S 80IC OF THE ACT . THE PROVISION OF SECTION 80IC ALTHOUGH LAYS DOWN VARIOUS CONDITIONS TO BE COMPLIED WITH BY AN UNDERTAKING TO BE ELIGIBLE FOR DEDUCTION U / S 80IC ( 3 ) OF THE ACT BUT THE REVENUE DID NOT RAISE ANY OBJECTION IN THIS REGARD EXCEPT THAT THE ASSESSEE IS NOT ENGAGED IN MANUFACTURING OR PRODUCTION OF AN ARTICLE . LE ARNED D . R . EVEN THOUGH VEHEMENTLY RELIED ON THE ORDER OF THE ASSESSING OFFICER BUT DID NOT DENY THAT THE ASSESSEE HAS NOT FAILED TO COMPLY WITH OTHER CONDITIONS AS STIPULATED U / S 80IC OF THE ACT FOR THE PURPOSE OF BEING ELIGIBLE FOR DEDUCTION 80IC OF THE ACT . HIS MAIN THRUST OF THE ARGUMENT WAS THAT THE ASSESSEE WAS NOT ENGAGED IN ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 3 OF 21 MANUFACTURING OR PRODUCTION OF AN ARTICLE . HE WAS SIMPLY MIXING THE VARIOUS CHEMICALS AND ON THAT BASIS HE WAS CLAIMING AS IF HE IS ENGAGED IN MANUFACTURING OR PRODUCTION OF AN ARTICLE . 5.1 ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY RELYING ON THE ORDER OF THE CIT ( A ) CONTENDED BEFORE US THAT THE ASSESSEE IS VERY MUCH ENGAGED IN MANUFACTURING / PRODUCTION OF AN ARTICLE . HE WAS CARRYING ON THE MANUFACTURING OPERATION . HE HAS SUBMITTED VARIOUS DOCUMENTS AND EVIDENCES BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT ( A ). THE ASSESSING OFFICER COULD NOT APPRECIATE THIS FACT WHILE THE CIT ( A ) WAS ABLE TO APPRECIATE THE LINE OF THE INDUSTRIES IN WHICH THE ASSESSEE IS ENGAGED . THE ASSESSEE IS ENGAGED IN MANUFACTURE OF ODORIFEROUS SUBSTANCE . THERE ARE MORE THAN 1,50 0 RAW MATERIALS WHICH ARE BEING USED FOR MANUFACTURING . THE FINISHED GOODS PRODUCED ARE ALSO MORE THAN 500 ALL OF WHICH ARE DIFFERENT FROM EACH OTHER . THE FINISHED GOODS MANUFACTURED BY THE ASSESSEE ARE USED IN VARIOUS INDUSTRIES WHICH INCLUDE ( BUT ARE NOT LIMITED TO ) SKIN CARE PRODUCTS, DETERGENTS AND TOILET SOAPS, CONSUMER EDIBLES, INCENSE STICKS AND ROOM FRESHENERS, INDUSTRIAL PERFUMES AND FLAVORS USED BY PAN MASALA AND OTHER INDUSTRIES . HE FURNISHED PRICE LIST OF THE FIRM SHOWING THE NATURE AND TYPE OF FINISHED GOODS MANUFACTURED OR PRODUCED AND IT WAS SUBMITTED THAT EACH OF THE ABOVE CATEGORY OF THE PRODUCT REQUIRE THE DIFFERENT CHEMICAL COMPOSITIONS AND PROPERTIES . FOR EXAMPLE, AN ESSENCE OF ROSE HAS TO HAVE DIFFERENT INGREDIENTS WHEN IT IS USED IN A TOILET SOAP, AS AN AGARBATTI COMPOUND, AS A FOOD FLAVOR AND AS A PERFUME SPRAY ETC . HE SUBMITTED A FLOW CHART IN THIS REGARD AND POINTED OUT THAT THE PROCESS OF MANUFACTURE INVOLVES MELTING, GRINDING, MIXING, STIRRING AT OPTIMAL TEMPE RATURE TO PRODUCE A DISTINCT PRODUCT . THERE IS PROPER REACTION AMONGST THE PRODUCTS TO PRODUCE A DISTINCT FLAVOR OR FRAGRANCE . IT WAS SUBMITTED THAT A PERFUME OR A FLAVOR MAY INVOLVE FROM AS LESS AS 10 TO AS MUCH AS 50 RAW MATERIALS TO MANUFACTURE THE PROD UCT . FURTHERMORE, A RAW MATERIAL MAY HAVE 0 . 1 % TO EVEN 50 % OF THE CONSTITUTION OF FINISHED GOODS . THE RAW MATERIALS HAVE TO BE ADDED IN A PROPER CHRONOLOGICAL MANNER AND A PROPER FORMULATION WITHOUT WHICH THE FINISHED GOODS CANNOT BE PRODUCED . THE MIXING H AS TO BE DONE AT CONTROLLED TEMPERATURES TO GET THE DESIRED CHEMICAL REACTION . THE FINISHED GOODS ARE THEMSELVES A RESULT OF CHEMICAL REACTIONS ONLY . SEVERAL RAW MATERIALS USED BY THE ASSESSEE ARE HAZARDOUS CHEMICALS, WHICH ARE NOT PER SE FIT FOR HUMAN CON SUMPTION OR APPLICATION . HOWEVER, SCIENTIFICALLY DERIVED FORMULATIONS, WHEREBY OTHER CHEMICALS AND SUBSTANCES ARE MIXED WITH THE MATERIAL, SUCH THAT THE HAZARDOUS PROPERTIES ARE REMOVED, ARE USED BY THE ASSESSEE . SEVERAL NATURAL OILS AND FLAVORS, WHICH MAY OTHERWISE ROT / DECAY WITH PASSAGE OF TIME, AND ARE IN CONCENTRATED FORM ARE REQUIRED TO BE TREATED AND BLENDED WITH OTHER CHEMICALS ETC . SO AS TO RENDER THEM USABLE IN VARIOUS TYPE OF INDUSTRIES AND APPLICATIONS . MIXING CANNOT BE DONE WITHOUT PROPER LAB TESTING TECHNIQUES AND WITHOUT STUDYING THE BEHAVIORAL PATTERN OF VARIOUS BLENDS OVER A PERIOD OF TIME, WHICH MAY RANGE FROM ONE HOUR TO 15 DAYS . THE BLENDED MIXTURES PROPERTIES CHANGE AS SOME CHEMICALS REACT OVER A PERIOD OF TIME, WHILE IN SOME CASES REACTIONS ARE INSTANT . IT WAS FURTHER SUBMITTED THAT THE TESTING IS DONE AT EACH STAGE BY AGAIN REACTING THE FINISHED PRODUCTS WITH OTHER CHEMICALS AND SUBSTANCES, AT VARIOUS TEMPERATURES DEPENDING ON THE INTENDED USE OF THE FINISHED PRODUCT . THUS, IT WAS EXPRESSED THAT THE INDUSTRY REQUIRES HIGH EXPERTISE, SPECIALIZATION AND KNOWLEDGE OF ORGANIC AS WELL AS INORGANIC CHEMISTRY . IT WAS SUBMITTED THAT ALL THE FINISHED GOODS ARE TOTALLY DISTINCT, AS IS EVIDENT FROM THE PRI CE LIST AND ALL THE RAW MATERIALS ARE ALSO TOTALLY DIFFERENT . 5.2 THE ASSESSEE HAS ALSO POINTED OUT THAT THE ASSESSEE IS PAYING VAT DEPENDING ON THE ITEM PRODUCTS AND VAT RATES WERE DIFFERENT FOR DIFFERENT PRODUCTS AND ALSO FOR DIFFERENT RAW MATERIALS . THE VA T DEPARTMENT HAS PASSED ORDERS FOR ALL THE YEARS, INCLUDING THE YEAR UNDER APPEAL . THE ASSESSEE HAS COMMENCED THE PRODUCTION ON 04 / 10 / 2006 IN A NOTIFIED AREA AS PER NOTIFICATION NO . SO741 ( E ) DATED 28 / 06 / 2004 . THE ASSESSEE IS ENGAGED IN MANUFACTURE OF ODORIF EROUS COMPOUNDS AND INDUSTRIAL PERFUMES WHICH ARE NOT SPECIFIED IN XIII SCHEDULE . OUR ATTENTION WAS ALSO DRAWN TOWARDS THE DEFINITION OF MANUFACTURE AS GIVEN U / S 2 ( 29BA ) OF THE ACT . THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS : (I) CIT VS . VINBROS & CO . 349 ITR 697 ( SC ) ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 4 OF 21 (II) CIT VS . VINBROS & CO . 218 ITR 634 ( MAD ) (III) SHREE PAR FRANGRANCES ( P ) LTD . VS . INCOME TAX OFFICER 20 SOT 440 ( MUM ) (IV) NATURAL FRANGRANCES BHIMTAL VS . DCIT NAINITAL, I . T . A . NO . 4183 / DEL / 2011 ( DEL ) (V) DCIT NAINITAL VS . NATURAL FRAGRANCES 219 TM 28 ( MAG ) ( UTTARANCHAL ) (VI) CIT VS . INNOVATIVE INDUSTRIES ( GUJ ) I . T . A . NO . 2570 OF 2010 (VII) INCOME TAX OFFICER UDAIPUR VS . ARIHANT TILES AND MARBLES ( P ) LTD . 320 ITR 79 ( SC ) (VIII) SHREE VEER AROMATIC HERB PRODUCTS VS . INCOME TAX OFFICER 147 ITD 86 ( DEL ) (IX) MADHU JAYANTI INTERNATIONAL LTD . VS . DCIT 137 ITD 377 KOLKATTA ( SB ) (X) SHREE BHAVANI MINERALS VS . CIT, I . T . A . NO . 68 / PNI / 2013 ( GOA ) (XI) FIBERFILL ENGINEERS VS . ACIT, I . T . A . NO . 1853 / DEL / 2015 (XII) ASPINWALL & CO . LTD . VS . CIT [ 2001 ] 251 ITR 323 ( SC ) 5.3 LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY CONTENDED THAT IF THIS TRIBUNAL WANTS TO VERIFY WHETHER THE PRODUCT OR THE ARTICLE PRODUCED BY THE ASSESSEE IS DIFFERENT FROM THE RAW MATERIAL HAVING THE DIFFERENT MARKET VALUE AND WHICH CANNOT BE RECONVERTED INTO THE RAW MATERIAL, THIS TRIBUNAL CAN VERIFY THE SAME BY VISITING THE INDUSTRIAL UNIT OF THE ASSESSEE . AFTER HAVING THE DISCUSSION WITH D . R, WE DECIDED TO CALL FOR THE DEMONSTRATION OF THE MANUFACTURING PROCESS OF THE ASSESSEE IN RESPECT OF ONE OF THE ITEM AND THEREFORE, THE CASE WHEN IT WAS INITIALLY FIXED FOR 14 / 09 / 2016 WHEN THE DETAILED ARGUME NT HAS TAKEN PLACE, ADJOURNED THE CASE FOR 15 / 09 / 2016 TO SEE THE DEMONSTRATION OF TWO OF THE PRODUCTS OF THE ASSESSEE I . E . SWEET GULAB AND COMPOUND BELA . 5.4 ON 15 / 09 / 2016 THE REPRESENTATIVE OF THE ASSESSEE APPEARED ALONG WITH THREE CHEMICAL ENGINEERS OF THE ASSESSEE COMPANY HAVING DIFFERENT CHEMICALS IN SMALL BOTTLES ALONG WITH THE INDUCTION AND GLASS JARS . THE ASSESSEE FIRST DEMONSTRATED HOW THE SWEET GULAB IS MANUFACTURED . THE CHEMICAL ENGINEER SHOWED US 15 ITEMS OUT OF WHICH TWO WERE IN SOLID FORM WHILE 13 WERE IN LIQUID FORM . HE POINTED OUT THAT THE ITEMS BROUGHT BY HIM FOR MANUFACTURING 100 GMS OF SWEET GULAB WERE AS UNDER : 1. ALDEHYDE C 11 UNDECYLIC 2. ALDEHYDE C 8 3. ALDEHYDE C 9 0 . 02 0 . 1 0 . 05 4 . BENZOPHENONE 10 5 . CIS - 3 - HEXANOL 0 . 05 6 . CIS - 3 - HEXANYL ACETATE 0 . 08 7 . CITRAL 0 . 5 8 . CITRONELLOL 15 9 . DAMASCONE BETA 0 . 04 10 . GERANIOL 12 11 . GERANIUM CHINESE 4 12 . LINALOOL 0 . 8 13 . PHENYL ETHYL ALCOHOL 47 14 . ROSE CRYSTALS 10 15 . ROSE OXIDE INDIAN 0 . 16 5.5 HE TOLD US ABOUT EACH AND EVERY ITEM AND ALSO POINTED OUT THAT EACH OF THE ITEMS HAS TO BE PUT UP IN THE JAR IN THE SAME SERIATIM AS IT APPEARED IN THE LIST . IF THESE ITEMS ARE MIXED UP IN DIFFERENT ORDER, THE DESIRED SWEET GULAB WILL NOT COME AND THE PRODUCT WILL BE JUST A WASTE . TWO ITEMS NAMELY BENZOPHENONE AND ROSE CRYSTALS BEING SOLID WERE PUT IN A JAR AND HE APPLIED HEATING PROCESS SO THAT THEY CAN BE CONVERTED INTO LIQUID FORM . BEFORE US AND BEFORE LEARNED D . R . , THE CHEMICAL ENGINEER MIXED UP ALL THESE ITEMS IN A GLASS JAR I N THE SAME SERIATIM AND ULTIMATELY BROUGHT US THE SMELL OF THE PRODUCT MANUFACTURED CALLED SWEET GULAB, WHICH WAS IN LIQUID FORM . WHEN WE ASKED HIM TO MIX UP THESE PRODUCTS IN A DIFFERENT ORDER, THE CHEMICAL ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 5 OF 21 ENGINEER SHOWED US THE REACTIO N BY MIXING 3 - 4 RAW MATERIALS IN A DIFFERENT ORDER . SIMILARLY, THE DEMONSTRATION WAS ALSO MADE IN RESPECT OF THE COMPOUND BELA WHICH IS BEING MADE BY USING THE FOLLOWING CHEMICALS : 1 ALDEHYDE C 18 0 . 1 2 BENZYL PHENYL ACETATE 2 . 4 3 BENZYL ALCOHOL 5 4 . BENZYL ACETATE 36 . 5 5 BENZYL BUTYRATE 0 . 5 6 DEP 36 7 EBANOL 0 . 2 8 GALAXOLIDE 100 % 2 . 1 9 HEXYL CINNAMIC ALDEHYDE 1 . 7 10 HEDIONE 0 . 4 11 INDOLE 2 . 5 12 LINALOOL 6 . 1 13 METHYL ANTHRANILATE 2 . 8 14 FOLIONE 0 . 015 15 PHENYL ETHYL ALCOHOL 1 . 7 16 SANDELA 2 17 S ABSOLUTE 0 . 1 5.6 THE CHEMICAL ENGINEER HAS ALSO BROUGHT THE SMALL BOTTLE SHOWING THE FRAGRANCE AND THE SMELL OF THE PRODUCT WHICH WERE HANDED OVER TO LEARNED D . R . ON THE BASIS OF THE DEMONSTRATION HELD BEFORE US, WE NOTED THAT THE PRODUCT BEING PRODUCED BY MIXING THE VARIOUS CHEMICALS IS ENTIRELY DIFFERENT FROM THE RAW MATERIAL . ITS USAGE AS WELL AS THE UTILITY IS DIFFERENT . IT CANNOT BE CONVERTED AGAIN IN THE SAME FORM OF THE RAW MATE RIAL . IT HAS RESULTED IN THE TRANSFORMATION OF THE OBJECT OR THE ARTICLE WHICH IS ENTIRELY NEW AND DISTINCT HAVING A DIFFERENT NAME, CHARACTER AND USE . WE NOTED THAT THE PROVISION OF SECTION 80IC WAS INSERTED IN THE STATUTE BY THE FINANCE ACT, 2003 WITH EFFECT FROM 2004 . SECTION 80IC NOWHERE DEFINES THE WORD MANUFACTURE OR PRODUCTION OF AN ARTICLE . WE NOTED THAT THE WORD MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING HAS ALSO BEEN USED U / S 80IA AS WELL AS U / S 10B OF THE AC T . SECTION 10B DEFINED THE WORD MANUFACTURE FOR THE PURPOSE OF THE SAID SECTION TO INCLUDE ANY ( A ) PROCESS OR ( B ) ASSEMBLING OR ( C ) RECORDING OF PROGRAMME ON DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE . THUS, PROCESS WAS INCLUDED WITHIN THE WORD MANUFACTURE FOR THE PURPOSE OF SEC . 10B . EXPLANATION ( IV ) OF THE SAID SEC . 10B FURTHER PROVIDED THAT THE WORD PRODUCE FOR THE PURPOSE OF SAID SECTION, IN RELATION TO ANY ARTICLE OR THING SHALL INCLUDE PRODUCTION OF COMPUTER PROGRAMME . CB DT VIDE ITS CIRCULAR NO . 528 DATED 16 / 12 / 1988 176 ITR ST . 154 EXPLAINED THE [ PROVISIONS ENACTED BY THE FINANCE ACT, 1988 UNDER PARA 8 . 2 OF THE CIRCULAR . IN THIS CIRCULAR, CBDT HAD CLEARLY EXPLAINED THAT THE SAID NEW SEC . 10B HAD BEEN INSERTED IN THE STATUT E BOOK WITH A VIEW TO PROVIDE FURTHER INCENTIVE FOR EARNING FOREIGN EXCHANGE SO AS TO SECURE THAT THE INCOME OF A 100 % EOU SHALL BE EXEMPT FROM TAX FOR A PERIOD OF FIVE CONSECUTIVE ASSESSMENT YEARS FALLING WITHIN THE BLOCK OF EIGHT ASSESSMENT YEARS . THE EX EMPTION PROVIDED UNDER THIS NEW SECTION WAS SIMILAR TO THE ONE PROVIDED UNDER SEC . 10A OF THE ACT TO INDUSTRIAL UNDERTAKING OPERATING UNDER THE FREE - TRADE ZONE . IT WAS ALSO CLARIFIED THEREIN THAT THE EXPRESSION MANUFACTURE FOR THE PURPOSE OF BOTH SECTION S 10A AND 10B OF THE SAID ACT WOULD INCLUDE ANY PROCESSING OR ASSEMBLING OR RECORDING OF PROGRAMME ON DISC, TAPE, PERFORATED MEDIA OR OTHER INFORMATION STORAGE DEVICE . 5.7 THIS DEFINITION OF MANUFACTURE WAS REMOVED WHEN SEC . 10A AND 10B OF THE ACT WERE AMEN DED BY THE FINANCE ACT, 2001 W . E . F . 01 / 04 / 2001 . SECTIONS 10A AND 10B OF THE ACT WERE FURTHER AMENDED BY THE FINANCE ACT, 2003 W . E . F . 01 / 04 / 2004 AND THE DEFINITION OF MANUFACTURE WAS INSERTED AS UNDER : - ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 6 OF 21 EXPLANATION ( IV ) FOR THE PURPOS E OF THIS SECTION, MANUFACTURE OR PRODUCE SHALL INCLUDE THE CUTTING AND POLISHING OF PRECIOUS AND SEMI - PRECIOUS STONES . 5.8 UNDER SECTION 10B THE DEFINITION OF MANUFACTURE WAS AGAIN AMENDED TO MEAN MANUFACTURE SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN CLAUSE OF SECTION 2 OF SPECIAL ECONOMIC ZONE ACT, 2005 . SUBSEQUENTLY, SPECIAL ECONOMIC ZONE ACT, 2005 WAS PASSED BY THE PARLIAMENT IN MAY, 2005, WHICH WAS BROUGHT INTO EFFECT W . E . F . 23 / 06 / 2005 . SECTION 2 ( R ) OF SPECIAL ECONOMIC ZONE ACT DEFINES THE EXPRESSION MANUFACTURE AS UNDER : - MANUFACTURE MEANS TO MAKE, PRODUCE, FABRICATE, ASSEMBLE, PROCESS OR BRING INTO EXISTENCE, BY HAND OR BY MACHINE, A NEW PRODUCT HAVING A DISTINCT NAME, CHARACTER OR USE AND SHALL INCLUDE PROCESSES SUCH AS REFRIGERATION, CUTTING, POLISHING, BLENDING, REPAIR, REMAKING, RE - ENGINEERING AND INCLUDES AGRICULTURE, AQUACULTURE, ANIMAL HUSBAND RY, FLORICULTURE, HORTICULTURE, PISCI CULTURE, POULTRY, SERICULTURE, AVICULTURE AND MINING . 5.9 THIS DEFINITION WAS ADOPTED BY THE LEGISLATURE IN SECTION 10AA W . E . F . 10 / 02 / 2006 AS ADOPTED BY THE SPECIAL ECONOMIC ZONES ACT, 2005 BY INSERTING EXPLANATION 1 ( III ) TO SECTION 10AA OF THE ACT WHICH READS AS UNDER : - ( III ) MANUFACTURE SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN CLAUSE ( R ) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONE ACT, 2005 . 5.10 AS PER THE SAID DEFINITION PROCESS IS INCLUDED IN MANUFACTURE . SUBSEQUENTLY, BY THE FINANCE ACT, 2009 W . E . F 1 . 4 . 2009, CLAUSE ( 29BA ) WAS INSERTED IN SECTION 2 OF THE INCOME TAX ACT, 1961DEFINING THE EXPRESSION MANUFACTURE AS UNDER : MANUFACTURE , WITH ITS GRAMMATICAL VARIATIONS, MEANS A CHANGE IN A NON - LIVING PHYSICAL OBJECT OR ARTICLE OR THING, - (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR ARTICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE OR (B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE . 5.11 IN CHOWGULE & CO . PVT . LTD . VS . UNION OF INDIA ( 1981 ) 1 SCC 653 HON BLE SUPREME COURT, AFTER CONSIDERING THE JUDGMENT OF HON BLE BOMBAY HIGH COURT IN NILGIRI CEYLON TEA SUPPLYING CO . VS . STATE OF BOMBAY ( 1959 ) 10 STC 500 ( BOM .) , CLEARLY OBSERVED ON THE QUESTION WHETHER THE BLENDING OF ORE, WHILST LOADING IT IN THE SHIP BY MEANS OF THE MECHANICAL ORE HANDLING PLANT, CONSTITUTED MANUFACTURE OR PROCESSING OR ORE FOR SALE WITHIN THE MEANING OF SECTION 8 ( 3 )( B ) AND RULE 13 OF THE CENTRAL SALES TAX ACT, 1956 . DEALING WITH THIS QUESTION, THEIR LORDSHIPS HELD AND OBSERVED AT PAGES 659 AND 660 OF THE REPORTS AS UNDER : - IT STILL REMAINS TO CONSIDER WHETHER THE ORE BLENDED IN THE COURSE OF LOADING THROUGH THE MECHANICAL ORE HANDLING PLANT CAN BE SAID TO UNDERGO PROCESSING WHEN IT IS BLENDED . THE ANSWER TO THIS QUESTION DEPENDS UPON WHAT IS THE TRUE MEANING AND CONNOTATION OF THE WORD PROCESSING IN SECTION 8 ( 3 )( B ) AND RULE 13 . THIS WORD HAS NOT BEEN DEFINED IN THE ACT AND IT MUST THEREFORE BE INTERPRETED ACCORDING TO ITS PLAIN NATURAL MEANIN G . WEBSTER S DICTIONARY GIVES THE FOLLOWING MEANING OF THE WORD PROCESS : TO SUBJECT TO SOME SPECIAL PROCESS OR TREATMENT, TO SUBJECT ( ESPECIALLY RAW MATERIAL ) TO A PROCESS OF MANUFACTURE, DEVELOPMENT OF PREPARATION FOR THE MARKET ETC . ; TO CONVERT INTO M ARKETABLE FORM AS LIVESTOCK BY SLAUGHTERING, ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 7 OF 21 GRAIN BY MILLING, COTTON BY SPINNING, MILK BY PASTEURIZING, FRUITS AND VEGETABLES BY SORTING AND REPACKING . WHERE THEREFORE ANY COMMODITY IS SUBJECTED TO A PROCESS OR TREATMENT WITH A VIEW TO ITS DEVELOPMENT OR PREPARATION FOR THE MARKET , AS, FOR EXAMPLE, BY SORTING AND REPACKING FRUITS AND VEGETABLES, IT WOULD AMOUNT TO PROCESSING OF THE COMMODITY WITHIN THE MEANING OF SECTION 8 ( 3 )( B ) AND RULE 13 . THE NATURE AND EXTENT OF PROCESSING MAY VAR Y FROM CASE TO CASE; IN ONE CASE THE PROCESSING MAY BE SLIGHT AND IN ANOTHER IT MAY BE EXTENSIVE; BUT WITH EACH PROCESS SUFFERED, THE COMMODITY WOULD EXPERIENCE A CHANGE . WHEREVER A COMMODITY UNDERGOES A CHANGE AS A RESULT OF SOME OPERATION PERFORMED ON IT OR IN REGARD TO IT, SUCH OPERATION WOULD AMOUNT TO PROCESSING OF THE COMMODITY . THE NATURE AND EXTENT OF CHANGE IS NOT MATERIAL . IT MAY BE THAT CAMPHOR POWDER MAY JUST BE COMPRESSED INTO CAMPHOR CUBES BY APPLICATION OF MECHANICAL FORCE OR PRESSURE WITHOUT ADDITION OR ADMIXTURE OF ANY OTHER MATERIAL AND YET THE OPERATION WOULD AMOUNT TO PROCESSING OF CAMPHOR POWDER AS HELD BY THE CALCUTTA HIGH COURT IN OM PRAKASH GUPTA VS COMMISSIONER OF COMMERCIAL TAXES [ 16 STC 935 ( CAL )]. WHAT IS NECESSARY IN ORDER TO CHARACTERIZE AN OPERATION AS PROCESSING IS THAT THE COMMODITY MUST AS A RESULT OF THE OPERATION, EXPERIENCE SOME CHANGE . HERE, IN THE PRESENT CASE, DIVERSE QUANTITIES OF ORE PROCESSING DIFFERENT CHEMICAL AND PHYSICAL COMPOSITIONS ARE BLENDED TOGETHER TO PRODUCE ORE OF THE REQUISITE CHEMICAL AND PHYSICAL COMPOSITION DEMANDED BY THE FOREIGN PURCHASER AND OBVIOUSLY AS A RESULT OF THIS BLENDING, THE QUANTITIES OF ORE MIXED TOGETHER IN THE COURSE OF LOADING THROUGH THE MECHANICAL ORE HANDLING PLANT EXPERIENCE CHANGE IN THEIR RESPECTIVE CHEMICAL AND PHYSICAL COMPOSITION, BECAUSE WHAT IS PRODUCED BY SUCH BL ENDING IS ORE OF A DIFFERENT CHEMICAL AND PHYSICAL COMPOSITIONS . WHEN THE CHEMICAL AND PHYSICAL COMPOSITION OF EACH KIND OF ORE WHICH GOES INTO THE BLENDING IS CHANGED, THERE CAN BE NO DOUBT THAT THE OPERATION OF BLENDING WOULD AMOUNT TO PROCESSING OF O RE WITHIN THE MEANING OF SECTION 8 ( 3 )( B ) AND RULE 13 . IT IS NO DOUBT TRUE THAT THE BLENDING OF ORE OF DIVERSE PHYSICAL AND CHEMICAL COMPOSITIONS IS CARRIED OUT BY THE SIMPLE ACT OF PHYSICALLY MIXING DIFFERENT QUANTITIES FOR SUCH ORE ON THE CONVEYOR BELT O F THE MECHANICAL ORE HANDLING PLANT, BUT TO OUR MIND IT IS IMMATERIAL AS TO HOW THE BLENDING IS DONE AND WHAT PROCESS IS UTILIZED FOR THE PURPOSE OF BLENDING . WHAT IS MATERIAL TO CONSIDER IS WHETHER THE DIFFERENT QUANTITIES OF ORE WHICH ARE BLENDED TOGETHER IN THE COURSE OF LOADING THROUGH THE MECHANICAL ORE HANDLING PLANT UNDERGO ANY CHANGE IN THEIR PHYSICAL AND CHEMICAL COMPOSITION IS A RESULT OF BLENDING AND SO FAR AS THIS ASPECT OF THE QUESTION IS CONCERNED, IT IS IMPOSSIBLE TO ARGUE THAT THEY DO NOT SUFFER ANY CHANGE IN THEIR RESPECTIVE CHEMICAL AND PHYSICAL COMPOSITIONS . 5.12 THUS, THE HON'BLE SUPREME COURT ACCEPTED THAT THERE IS CHANGE IN CHEMICAL COMPOSITIONS AFTER PROCESSING OF THE IRON ORE . FROM THE SAID DECISION OF THE APEX COURT, IT IS APPAREN T THAT HON BLE APEX COURT HELD EVEN BLENDING OF IRON ORE FOR THE PURPOSE OF EXPORT INVOLVES CHANGE IN THE CHEMICAL AND PHYSICAL COMPOSITION OF IRON ORE . IF WE LOOK TO THE FACTS OF THE IMPUGNED CASE OF THE ASSESSEE, WE FIND THAT THE ASSESSEE IS MIXING VARIO US CHEMICALS EITHER IN LIQUID OR SOLID FORM BY APPLYING A PREDETERMINED PROCESS AND MIXING THEM IN A PREDETERMINED MANNER SO THAT OUT OF THE MIXING, ENTIRELY A NEW PRODUCT COME AND ITS FINISHED PRODUCT TECHNICALLY AFTER HAVING THE PROCESS OF MIXING HAS DIF FERENT NAMES . THERE ARE DIFFERENT CHEMICALS AND THE ITEMS WHICH ARE BEING USED FOR DIFFERENT PRODUCT IN A DIFFERENT PROPORTION IN A PREDETERMINED ORDER OF THE MIXING, AS SHOWN TO US DURING THE COURSE OF HEARING AND DURING THE COURSE OF DEMONSTRATION OF TWO ITEMS, AS GIVEN BY US IN THE PRECEDING PARAGRAPH, BOTH THE PRODUCTS MANUFACTURED ARE ENTIRELY DIFFERENT FROM THE VARIOUS CHEMICALS AND THE ITEMS USED BY THE ASSESSEE . THESE ITEMS SO PRODUCED HAVE A DIFFERENT NAME, DIFFERENT UTILITY AND THEY ARE BEING USED FOR DIFFERENT PURPOSES IN SOAPS, DETERGENTS, EDIBLE ITEMS, JUICES ETC . ACCORDING TO THE ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 8 OF 21 FRAGRANCES AND TASTE TO BE GIVEN TO THESE ITEMS . THESE ITEMS SO PRODUCED ARE DIFFERENT IN PHYSICAL APPEARANCE AND CHEMICAL COMPOSITION . WE DO NOT AGREE WITH LEARNED D . R . THAT THERE IS NOT ANY CHANGE IN PHYSICAL AND CHEMICAL COMPOSITION OF THE OUTPUT THAN THE INPUT AS IS BEING PROCESSED IN THE CASE OF THE ASSESSEE . IF WE GO TO SECTION 2 SUB - SECTION ( 29B C ) INSERTED WITH EFFECT FROM 01 / 04 / 2009, WE FIND THAT CLAUSE ( B ) OF THIS SECTION CLEARLY STATES THAT BRINGING INTO EXISTENCE OF NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE, TANTAMOUNT TO MANUFACTURE . EVEN THOUGH THEY REMAIN IN LIQUID FORM BUT IT IS NOT A CASE THAT ALL THE INGREDIENTS WHICH ARE BEING MIXED ARE IN LIQUID FORMS . THE TASTE AS WELL AS THE SMELL AND THE UTILITY OF THE INPUT AND THE OUTPUT WHICH WE HAVE SEEN DURING THE COURSE OF DEMONSTRATION IN THE COURT, ARE ENTIRELY DIFFERENT . IN OUR OPINION, IN VIEW OF THIS CLAUSE AND THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CHOWGULE & CO . ( SUPRA ) , IT CANNOT BE HELD THAT THE ASSESSEE IS ENGAGED IN THESE UNITS IN MANUFACTURING . 5.13 FURTHER, IN CIT VS N . C . BUDHARAJA & CO . ( 1993 ) 204 ITR 412 ( SC ) , HON BLE SUPREME COURT FURTHER OBSERVED THAT THE WORD PRODUCTION IS MUCH WIDER THAN THE WORD MANUFACTURE . IT WAS SAID ( PAGE 423 ): THE WORD PRODUCTION HAS A WIDE CONNOTATION THAN THE W ORD MANUFACTURE . WHILE EVERY MANUFACTURE CAN BE CHARACTERIZED AS PRODUCTION, EVERY PRODUCTION NEED NOT AMOUNT TO MANUFACTURE THE WORD PRODUCTION OR PRODUCE WHEN USED IN JUXTAPOSITION WITH THE WORD MANUFACTURE TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFACTURE . IT ALSO TAKES IN ALL THE BY - PRODUCTS, INTERMEDIATE PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS . 5.14 IN CHRISTIAN MICA INDUSTRIES LTD . VS . STATE OF BIHAR ( 1961 ) 12 STC 150 ( SC ) , HON BLE SUPREME COURT DEFINED THE WORD PRODUCTION , ALBEIT, IN CONNECTION WITH THE BIHAR SALES TAX ACT, 1947 . THE DEFINITION WAS ADOPTED FROM THE MEANING ASCRIBED TO THE WORD PR ODUCTION IN THE OXFORD ENGLISH DICTIONARY, AS MEANING AMONGST OTHER THINGS THAT WHICH IS PRODUCED; A THING THAT RESULTS FROM ANY ACTION, PROCESS OR EFFORT, A PRODUCT; A PRODUCT OF HUMAN ACTIVITY OR EFFORT . FOR THE WIDE DEFINITION OF THE WORD PRODUCTION , IT HAS TO FOLLOW THAT MINING ACTIVITY FOR THE PURPOSE OF PRODUCTION OF MINERAL ORES WOULD COME WITHIN THE AMBIT OF THE WORD PRODUCTION SINCE ORE IS A THING , WHICH IS THE RESULT OF HUMAN ACTIVITY OR EFFORT . 5.15 ACCORDING TO WEBSTER INTERNATIONAL ENGLISH DICTIONARY, THE VERB PRODUCE MEANS TO BRING FORWARD, BEGET, ETC . THE JUXTAPOSITION OF THE WORD MANUFACTURE WITH AGRICULTURE AND HORTICULTURE IS SIGNIFICANT AND CANNOT BE LOST SIGHT OF . THE INTENTION IN EMP LOYING THE WORD PRODUCED OBVIOUSLY WAS TO INTRODUCE AN ELEMENT OF VOLITION AND EFFORT INVOLVING THE EMPLOYMENT OF SOME PROCESS FOR BRINGING INTO EXISTENCE SOME GOODS . 5.16 IN PARAGRAPH 7 OF ITS IN THE CASE OF CHOWGULE & C0 ( P ) LTD . VS . UOI ( SUPRA ) , HON BLE A PEX COURT ALSO CONSIDERED THE QUESTION WHETHER THE DIFFERENT BRANDS OF TEA PURCHASED AND BLENDED BY THE ASSESSES FOR THE PURPOSE PRODUCING THE TEA MIXTURE COULD BE SAID TO HAVE BEEN PROCESSED , AFTER THE PURCHASE, WITHIN THE MEANING OF THE PROVISO TO SECT ION 8 ( A ) , SO AS TO PRECLUDE THE ASSESSES FROM BEING ENTITLED TO DEDUCT THEIR TURNOVER UNDER SECTION 8 ( A ) , SO AS TO PRECLUDE THE VALUE OF THE TEA PURCHASED BY THEM . THE RELEVANT OBSERVATIONS MADE BY THE HON BLE SUPREME COURT IN THIS RESPECTIVE ARE QUOTED AN D SET OUT HEREIN BELOW FOR READY REFERENCE : 7 . THE REVENUE HOWEVER RELIED ON THE DECISION OF THE BOMBAY HIGH COURT IN NILGIRI CEYLON TEA SUPPLYING CO . VS . STATE OF BOMBAY [ 10 STC 500 ( BOM HC )]. THE ASSESSEES IN THIS CASE WERE REGISTERED DEALERS IN TEA UND ER THE BOMBAY SALES TAX ACT, 1953 AND THEY PURCHASED IN BULK DIVERSE BRANDS OF TEA AND WITHOUT THE APPLICATION OF ANY MECHANICAL OR CHEMICAL PROCESS ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 9 OF 21 BLENDED THESE BRANDS OF DIFFERENT QUALITIES ACCORDING TO A CERTAIN FORMULA EVOLVED BY THEM AND SOLD THE TEA MIXTURE IN THE MARKET . THE QUESTION AROSE BEFORE THE SALES TAX AUTHORITIES WHETHER THE DIFFERENT BRANDS OF TEA PURCHASED AND BLENDED BY THE ASSESSEE FOR THE PURPOSE OF PRODUCING THE TEA MIXTURE COULD BE SAID TO HAVE BEEN PROCESSED AFTER THE PURCHASE WITHIN THE MEANING OF THE PROVISO TO SECTION 8 ( A ) , SO AS TO PRECLUDE THE ASSESSES FROM BEING ENTITLED TO DEDUCT FROM THEIR TURNOVER UNDER SECTION 8 ( A ) , THE VALUE OF THE TEA PURCHASED BY THEM . THE HIGH COURT OF BOMBAY HELD THAT DIFFERENT BRANDS OF TEA PURCHASED BY THE ASSESSES COULD NOT BE REGARDED AS PROCESSED WITHIN THE MEANING OF THE PROVISO TO CLAUSE ( A ) OF SECTION 8, BECAUSE THERE WAS NOT EVEN APPLICATION OF MECHANICAL FORCE SO AS TO SUBJECT THE COMMODITY TO A PROCESS, MANUFACTURE, DEVELOPMENT OR PREPARATION AND THE COMMODITY REMAINED IN THE SAME CONDITION . THE ARGUMENT OF THE REVENUE BEFORE US WAS THAT THIS DECISION OF THE BOMBAY HIGH COURT WAS ON ALL FOURS WITH THE PRESENT CASE AND IF THE BLENDING OF DIFFERENT BRANDS OF TEA FOR THE PURPOSE OF PRODUCING A TEA MIXTURE IN ACCORDANCE WITH A FORMULA EVOLVED BY THE ASSESSES COULD NOT BE REGARDED AS PROCESSING OF TEA, EQUALLY ON A PARITY OF REASONING, BLENDING OF ORE OF DIFFERENT CHEMICAL AND PHYSICAL COMPOSITIONS COULD NOT BE HELD TO CONSTITUTE PROCESSING OF THE ORE . NOW UNDOUBTEDLY THERE IS A CLOSE ANALOGY BETWEEN THE FACTS OF NILGIRI TEA COMPANY CASE [ 10 STC 500 ( BOM HC )] AND THE FACTS OF THE PRESENT CASE, B UT WE DO NOT THINK WE CAN ACCEPT THE DECISION OF THE BOMBAY HIGH COURT IN THE NILGIRI TEA COMPANY CASE [ 10 STC 500 ( BOM HC )] AS LAYING DOWN THE CORRECT LAW . WHEN DIFFERENT BRANDS OF TEA WERE MIXED BY THE ASSESSEE IN NILGIRI TEA COMPANY CASE [ 10 STC 500 ( BOM HC )] FOR THE PURPOSE OF PRODUCING A TEA MIXTURE OF A DIFFERENT KIND AND QUALITY ACCORDING TO A FORMULA EVOLVED BY THEM, THERE WAS PLAINLY AND INDUBITABLY PROCESSING OF THE DIFFERENT BRANDS OF TEA, BECAUSE THESE BRANDS OF TEA EXPERIENCED, AS A RESULT O F MIXING, QUALITATIVE CHANGE, IN THAT THE TEA MIXTURE WHICH CAME INTO EXISTENCE WAS OF DIFFERENT QUALITY AND FLAVOR THAN THE DIFFERENT BRANDS OF TEA WHICH WENT INTO THE MIXTURE . THERE ARE, IT IS TRUE, SOME OBSERVATIONS IN THE JUDGMENT OF THE BOMBAY HIGH CO URT WHICH SEEM TO SUGGEST THAT IF INSTEAD OF MANUAL APPLICATION OF ENERGY IN MIXING THE DIFFERENT BRANDS OF TEA, THERE HAD BEEN APPLICATION OF MECHANICAL FORCE IN PRODUCING THE TEA MIXTURE, THE COURT MIGHT HAVE COME TO A DIFFERENT CONCLUSION AND THESE OBSE RVATIONS WERE RELIED UPON BY THE ASSESSEE, SINCE IN THE PRESENT CASE THE BLENDING WAS DONE BY APPLICATION OF MECHANICAL FORCE, BUT WE DO NOT THINK THAT IS THE CORRECT TEST TO BE APPLIED FOR THE PURPOSE OF DETERMINING WHETHER THERE IS PROCESSING . THE QUES TION IS NOT WHETHER THERE IS MANUAL APPLICATION OF ENERGY OR THERE IS APPLICATION OF MECHANICAL FORCE . WHATEVER BE THE MEANS EMPLOYED FOR THE PURPOSE OF CARRYING OUT THE OPERATION, IT IS THE EFFECT OF THE OPERATION ON THE COMMODITY THAT IS MATERIAL FOR THE PURPOSE OF DETERMINING WHETHER THE OPERATION CONSTITUTES PROCESSING WE ARE CLEARLY OF VIEW THAT THE BLENDING OF ORE IN THE COURSE OF LOADING THROUGH THE MECHANICAL ORE HANDLING PLANT AMOUNTED TO PROCESSING OF ORE WITHIN THE MEANING OF SECTION 8 ( 3 )( B ) AND RULE 13 AND THE MECHANICAL ORE HANDLING PLANT FELL WITHIN THE DESCRIPTION OF MACHINERY, PLANT, EQUIPMENT USED IN THE PROCESSING OF ORE FOR SALE 5.17 IN DECIDING THE SAID QUESTION, THE HON BLE SUPREME COURT AFTER CONSIDERING THE JUDGMENT OF THE HON BL E BOMBAY HIGH COURT IN NILGIRI CEYLON TEA SUPPLYING CO . VS . STATE OF BOMBAY [ 1959 ] 10 STC 500 ( BOM ) , INTER ALIA, OBSERVED AS FOLLOWS : (I) WHEN DIFFERENT BRANDS OF TEA WERE MIXED BY THE ASSESSEE AS IN NILGIRI CEYLON TEA SUPPLYING CO . S CASE ( 1959 ) 10 STC 500 ( BOM ) FOR THE PURPOSE OF PURCHASING A TEA MIXTURE OF A DIFFERENT KIND AND QUALITY ACCORDING TO A FORMULA EVOLVED BY THEM, THERE WAS PLAINLY AND INDUBITABLY PROCESSING FOR THE DIFFERENT BRANDS OF TEA, BECAUSE THESE BRA NDS OF TEA EXPERIENCED, AS A RESULT OF MIXING, A QUALITATIVE CHANGE, IN THAT THE TEA MIXTURE WHICH CAME INTO EXISTENCE WAS OF A DIFFERENT QUALITY AND FLAVOR THAN THE DIFFERENT BRANDS OF THE TEA WHICH WENT INTO THE MIXTURE; (II) THERE ARE, IT IS TRUE, SOME OBSERVATIONS IN THE JUDGMENT OF THE BOMBAY HIGH COURT WHICH SEEM TO SUGGEST THAT IF INSTEAD OF MANUAL APPLICATION OF ENERGY IN MIXING THE DIFFERENT BRANDS OF TEA, THERE HAD BEEN APPLICATION OF MECHANICAL FORCE IN PRODUCING THE TEA MIXTURE, THE ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 10 OF 21 COURT MIGHT HAVE COME TO A DIFFERENT CONCLUSION AND THESE OBSERVATIONS WERE RELIED UPON BY THE ASSESSEE, SINCE, IN THE PRESENT CASE, THE BLENDING WAS DONE BY APPLICATION OF MECHANICAL FORCE, BUT THAT IS NOT THE CORRECT TEST TO BE APPLIED FOR THE PURPOSE OF DETERMINING WHETHER THE OPERATION CONSTITUTES IS PROCESSING . ( III ) THE QUESTION IS NOT WHETHER THERE IS ANY MANUAL APPLICATION OF ENERGY OR THERE IS APPLICATION OF MECHANICAL FORCE . WHATEVER BE THE MEANS EMPLOYED FOR THE PURPOSE OF CARRYING OUT THE OPERATION, IT IS THE EFFECT O F THE OPERATION ON THE COMMODITY THAT IS MATERIAL FOR THE PURPOSE OF DETERMINING WHETHER THE OPERATION CONSTITUTES PROCESSING . 5.18 THEREFORE, HON BLE SUPREME COURT, IN CONSTRUING THE EXPRESSION PROCESSING ALLOWED THE APPEAL OF THE ASSESSEE, IN CHOWGULE & CO . PVT . LTD . ( SUPRA ) , HOLDING, INTER ALIA, THAT WHERE ANY COMMODITY IS SUBJECTED TO A PROCESS OR TREATMENT WITH A VIEW TO ITS DEVELOPMENT OR PREPARATION FOR THE MARKET IT WOULD AMOUNT TO PROCESSING OF THE COMMODITY WITHIN THE MEANING OF CENTRAL SALES TA X ACT, 1956 . HON BLE SUPREME COURT, IN THE SAID JUDGMENT, DID NOT CONSIDER THE EXPRESSION MANUFACTURE SINCE THE QUESTION WAS DECIDED ONLY ON THE EXPRESSION PROCESSING . HOWEVER, CONSIDERING THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF NILGIRI TE A CO . [ 1959 ] 10 STC 500, HON BLE SUPREME COURT OBSERVED THAT, FOR THE PURPOSE OF PRODUCING A TEA MIXTURE OF A DIFFERENT KIND AND QUALITY ACCORDING TO A FORMULA EVOLVED BY THEM, THERE WAS PLAINLY AND INDUBITABLY PROCESSING OF THE DIFFERENT BRANDS OF TEA, BECAUSE THESE BRANDS OF TEA EXPERIENCED, AS A RESULT OF A QUALITATIVE CHANGE, IN THAT THE TEA MIXTURE WHICH CAME INTO EXISTENCE WAS OF A QUALITY AND FLAVOR FROM THE DIFFEREN T BRANDS OF TEA WHICH WENT INTO THE MIXTURE . 5.19 HON BLE KERALA HIGH COURT HAD THE OCCASION TO CONSIDER WHETHER ASSESSEE IS ENGAGED IN THE MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING WHEN ASSESSEE WAS EXCLUSIVELY ENGAGED IN BLENDING, PACKAGING AND EXPORT OF TEA BAGS, TEA PACKETS AND BULK TEA PACKS IN THE CASE OF TATA TEA LTD . VS . ACIT 338 ITR 285 . HON BLE HIGH COURT NOTED IN THAT CASE THAT THE REVENUE S STAND IS THAT MANUFACTURE OR PRODUCTION HAD LIBERAL MEANING UNDER THE DEFINITION CLAUSE CONTAINED IN SECTION 10B OF THE ACT UNTIL ITS DELETION WHICH COVERS EVEN PROCESSING AND, THEREFORE, BLENDING AND PACKAGING OF TEA FOR EXPORT WAS TREATED AS MANUFACTURE OR PRODUCTION OF AN ARTICLE QUALIFYING FOR EXEMPTION . HON BLE KERALA HIGH COURT CONSIDERED THE CONTENTION OF THE ASSESSEE THAT THE SCHEME OF INCOME TAX EXEMPTION AVAILABLE TO UNITS IN THE SEZ U / S 10A OF THE ACT AND UNITS IN THE FREE TRADE ZONE PROVIDED U / S 10AA OF THE ACT AND THE EXEMPTION AVAILABLE TO 100 % EOU U / S 1 0B OF THE ACT ARE VERY SIMILAR IN NATURE AND THE WORDINGS OF THE STATUTORY PROVISIONS ARE SIMILAR IN NATURE . HON BLE KERALA HIGH COURT ALSO CONSIDERED THE JUDGMENT IN THE DECISION OF SUPREME COURT IN TARA AGENCIES ( 292 ITR 444 ( SC ) RELIED UPON BY THE SR . STANDING COUNSEL FOR THE REVENUE, WHEREIN HON BLE SUPREME COURT CLEARLY HELD THAT BLENDING OF TEA DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING, BUT IS ONLY PROCESSING . HON BLE HIGH COURT ALLOWING THE APPEAL OF THE ASSESSEE HELD THAT THE ASSESSEE WAS EXCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT AND WAS NOT MANUFACTURING OR PRODUCING ANY OTHER ARTICLE OR THING . IT WAS RECOGNIZED AS A 100 % EOU DIVISION AND THE DEPARTMENT HAD NO CASE THAT THE ASSESSEE S UNIT ENGAGED IN EXPORT OF TEA BAGS AND TEA PACKETS WAS NOT A 100 % EOU . IF EXEMPTION WAS DENIED ON THE GROUND THAT PRODUCTS EXPORTED WERE NOT PRODUCED OR MANUFACTURED IN THE INDUSTRIAL UNITS OF THE ASSESSEE S 100 % EOU, IT WOULD DEFEAT THE VERY OBJECT OF SECTION 10B OF T HE ACT . ( SIMILAR TO ASSESSEE S CASE ). FURTHER, INDUSTRIAL UNITS ENGAGED IN THE VERY SAME ACTIVITY, I . E . , BLENDING, PACKING AND EXPORT OF TEA IN THE SPECIAL ECONOMIC ZONES AND FREE TRADE ZONES, WOULD CONTINUE TO ENJOY TAX EXEMPTION UNDER SECTION 10A OF THE ACT AND SECTION 10AA OF THE ACT RESPECTIVELY . THE ASSESSEE WAS ALLOWED EXEMPTION ON THE PROFIT DERIVED BY ITS 100 % EOU ENGAGED IN BLENDING, PACKING AND EXPORT OF TEA BAGS AND TEA PACKETS . HON BLE HIGH COURT HELD AS UNDER : THE FINDING OF THIS COURT IS THAT THE PURPOSE OF INCORPORATION OF SECTION 2 ( R ) OF THE SPECIAL ECONOMIC ZONES ACT, 2005, INTO SECTION 10AA OF THE INCOME - TAX ACT IS TO PROVIDE A LIBERAL MEANING TO THE WORD MANUFACTURE WHICH TAKES IN EVEN BLENDING, REFRIGERATION, ETC . IT WAS NOTICED BY THIS COURT THAT THE DEFINITIONS OF MANUFACTURE ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEA R : 200 - 11, 11 - 12 AND 12 - 13 PAGE 11 OF 21 CONTAINED IN THE ABOVE DEFINITION CLAUSES ARE VERY LIBERAL WHICH TAKES IN EVEN PROCESSING LIKE BLENDING . THE CONTENTION OF THE COUNSEL FOR THE ASSESSEE IS THAT THE PURPOSE OF REMOVAL OF THE DEFINITION OF MANUFACTURE FROM SECTION 10B WAS NOT TO PROVIDE A RESTRICTED MEANING FOR THAT TERM CONTAINED IN THE MAIN SECTION BECAUSE IF THAT WAS SO, THEN THE LEGISLATURE WOULD HAVE ONLY MODIFIED THE DEFINITION CLAUSE . FURTHER, THE DEFINITION OF 100 PER CENT EXPORT ORIENTED UNIT EVEN AFTER THE AMENDMENT IS RETAINED IN THE SAID SECTION, WHICH DEFINES IT AS AN UNDERTAKING WHICH HAS BEEN APPROVED A S A 100 PER CENT EXPORT ORIENTED UNDERTAKING BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF POWERS CONFERRED BY SECTION 40 OF THE INDUSTRIES ( DEVELOPMENT & REGULATION ) ACT, 1951, AND THE RULES MADE UNDER THAT ACT . IT IS PERT INENT TO NOTE THE PRODUCTS FOR WHICH THE ASSESSEE S UNIT IS RECOGNIZED AS A 100 PER CENT EXPORT ORIENTED UNIT ARE TEA BAGS, TEA IN PACKETS AND TEA IN BULK PACKS . IN FACT, THE ASSESSEE IS EXCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT AND IS NOT MANUFACTURING OR PRODUCING ANY OTHER ARTICLE OR THING . STILL IT IS RECOGNIZED AS A 100 PER CENT EXPORT ORIENTED UNIT BY THE CONCERNED AUTHORITY WITHIN THE MEANING OF T HAT TERM CONTAINED IN THE DEFINITION CLAUSE OF SECTION 10B OF THE INCOMETAX ACT AND THE DEPARTMENT HAS NO CASE THAT THE ASSESSEE S UNIT ENGAGED IN EXPORT OF TEA BAGS AND TEA PACKETS IS NOT A 100 PER CENT EXPORT ORIENTED UNIT . SO MUCH SO, IN OUR VIEW, IF EX EMPTION IS DENIED ON THE GROUND THAT PRODUCTS EXPORTED ARE NOT PRODUCED OR MANUFACTURED IN THE INDUSTRIAL UNIT OF THE ASSESSEE S 100 PER CENT EXPORT ORIENTED UNIT, THE SAME WOULD DEFEAT THE VERY OBJECT OF SECTION 10B . FURTHER, INDUSTRIAL UNITS ENGAGED IN T HE VERY SAME ACTIVITY, I . E . , BLENDING, PACKING AND EXPORT OF TEA IN THE SPECIAL ECONOMIC ZONES AND FREE TRADE ZONES, WILL CONTINUE TO ENJOY TAX EXEMPTION UNDER SECTION 10A AND SECTION 10AA RESPECTIVELY . THE STILL WORSE POSITION IS THAT THE APPELLANT WOULD BE DENIED OF EXPORT EXEMPTION AVAILABLE UNDER SECTION 80HHC EVEN TO A MERCHANT EXPORTER . IN OUR VIE W, THE DECISION OF THE SUPREME COURT IN TARA AGENCIES CASE [ 2007 ] 292 ITR 444 ( SC ) IS NOT APPLICABLE FOR THE PURPOSE OF CONSIDERING EXEMPTION FOR INDUSTRIES IN THE EXPORT PROCESSING ZONES, FREE TRADE ZONES AND TO 100 PER CENT EXPORT ORIENTED UNITS COVERED BY SECTIONS 10A, 10AA AND 10B OF THE INCOME TAX ACT . THEREFORE, FOLLOWING THE JUDGMENT OF THIS COURT ABOVE REFERRED TO WE HOLD THAT THE ASSESSEE IS ENTITLED TO EXEMPTION ON THE PROFIT DERIVED BY ITS 100 PER CENT EXPORT ORIENTED UNIT ENGAGED IN BLENDING, P ACKING AND EXPORT OF TEA BAGS AND TEA PACKETS . CONSEQUENTLY, WE ALLOW THE APPEALS BY REVERSING THE ORDERS OF THE TRIBUNAL AND BY RESTORING THE ORDERS OF THE FIRST APPELLATE AUTHORITY DECLARING THE APPELLANT S ENTITLEMENT FOR EXEMPTION . 5.20 HON BLE HIGH COURT IN THIS CASE, IN OUR OPINION, HAS CLEARLY LAID DOWN THAT ONCE THE ASSESSEE IS RECOGNIZED AS A 100 % EOU FOR ENGAGING IN AN ACTIVITY AND ASSESSEE IS ENGAGED IN THE SAME VERY ACTIVITY, IF THE EXEMPTION IS DENIED TO THE ASSESSEE ON THE GROUND THAT THERE IS NO PRODUCTION OR MANUFACTURING BUT ONLY PROCESSING OF THE PRODUCTS EXPORTED IN THE 100 % EXPORT ORIENTED UNIT, THE SAME WOULD DEFEAT THE VERY OBJECT OF SECTION 10B . THE HON BLE HIGH COURT TOOK THE VIEW THAT THE DECISION OF THE HON BLE SUPREME COURT IN TARA AG ENCY S CASE 292 ITR 444 WILL NOT APPLY EVEN THOUGH HON BLE SUPREME COURT IN THAT CASE HAS HELD THAT BLENDING OF TEA DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF AN ARTICLE BUT IS ONLY PROCESSING . THUS, THE HON BLE KERALA HIGH COURT IN THE CASE OF TATA T EA LTD . ( SUPRA ) GAVE THE CLEAR CUT FINDING IMPLIEDLY THAT EVEN IF THE ASSESSEE IS ENGAGED IN PROCESSING AND IS RECOGNIZED AS 100 % EOU, IT WILL BE ENTITLED FOR EXEMPTION CLAIMED U / S 10B OF THE ACT . 5.21 THUS, HON'BLE KERALA HIGH COURT IN THE CASE OF TATA TEA LTD . ( SUPRA ) GAVE THE CLEAR CUT FINDING IMPLIES THAT EVEN IF THE ASSESSEE IS ENGAGED IN PROCESSING, IT WILL BE ENTITLED FOR EXEMPTION AS IT CAN BE SAID TO HAVE BEEN ENGAGED IN MANUFACTURING OR AN ARTICLE . ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 1 2 OF 21 5.22 EVEN ON THIS ISSUE WE HAVE GONE THROUGH THE DECISION OF HON BLE SPECIAL BENCH IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD . AND OTHERS VS . DCIT . THE QUESTION FOR CONSIDERATION AND DECISION OF THE SPECIAL BENCH WAS : WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ASSESSEES, WHO ARE IN THE BUSINESS OF BLENDING & PROCESSING OF TEA AND EXPORT THEREOF, CAN BE SAID TO BE MANUFACTURE / PRODUCER OF THE TEA FOR THE PURPOSE OF SECTION 10A / 10B OF THE I . T . ACT, 1961? 5.23 THE BRIEF FACTS IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD . IN ITA NO . 1463 / KOL / 2007 WERE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING, PROCESSING, EXPORTING AND DEALING IN VARIOUS COMMODITIES, MORE PARTICULARLY TEA, COFFEE, JUTE, PEPPER, CHILLIES, CARDAMOM, TURMERIC AND SIMILAR OTHER SPICES, ETC . THE ASSESSEE, AS PER THE CLAIM IS A 100 % EOU WITHIN THE MEANING OF SECTION 10B OF THE I . T . ACT, 1961 AND CLAIMED EXEMPTION UNDER T HAT SECTION . THE ASSESSEE BUYS TEA FROM AUCTIONS HELD IN TEA BOARD RECOGNIZED AUCTION CENTRES AT KOLKATA, GUWAHATI, SILIGURI, COCHIN, COIMBATORE AND COONOOR . THE ASSESSEE CONCEDED THE FACTUAL POSITION THAT IT IMPORTS SMALL QUANTITY OF TEA OF THE TYPE AND Q UALITY NOT PRODUCED IN INDIA . IT FURTHER CONCEDED THE FACTUAL POSITION THAT IT DOES NOT GROW OR MANUFACTURE ANY TEA . ACCORDING TO THE ASSESSEE, TEA SO BOUGHT IN DIFFERENT AUCTIONS IS PROCESSED WITH A VIEW TO REMOVE ALL DUST AND FOREIGN SUBSTANCES AND THEREAFTER IT BLENDS DIFFERENT VARIETIES OF TEA TO MAKE IT OF UNIFORM AND CONSISTENT QUALITY THROUGHOUT THE YEAR . THEREAFTER, IT IS PACKED IN CONSUMER PACKETS OF 50, 100, 250, 500 OR 1000 GMS . ETC . OR PACKED IN THE FORM OF TEA BAGS OF 1 . 94 GMS . OR 2 GMS . ETC . , AS THE CASE MAY BE . THE ASSESSEE CLAIMED EXEMPTION U / S 10B OF THE ACT IN RESPECT OF ITS 100 % EOU FOR EXPORT OF MANUFACTURED JUTE BAGS, PACKET TEA, TEA BAGS, BULK TEA, ETC . THE AO REJECTED THE CLAIM OF ASSES SEE OF EXEMPTION U / S 10B IN RESPECT OF EXPORT OF BLENDING OF TEA . THE REJECTION OF EXEMPTION U / S 10B WAS CONFIRMED BY THE CIT ( A ). WHEN THE MATTER WENT BEFORE THE SPECIAL BENCH, SPECIAL BENCH AFTER DISCUSSION THE RELEVANT PROVISIONS AS WELL AS THE VARIOUS DECISIONS OF HIGH COURT AND THE SUPREME COURT HELD AS UNDER : - 32 . THE PROVISIONS OF SECTION 10AA OF THE ACT WAS INSERTED ON THE STATUTE BOOK BY THE SPECIAL ECONOMIC ZONES ACT, 2005 W . E . F . 10 . 02 . 2006 . EVEN PRIOR TO THE ENACTMENT OF THE SAID SEZ AC T, SPECIAL ECONOMIC ZONES ( INCLUDING UNITS THEREIN ) WERE ALL ALONG TREATED LIKE EQU / FTZ / EPZ FOR ALL PURPOSES WHATSOEVER AND WERE DEALT WITHIN THE EXIM POLICY ACCORDINGLY . SECTION 2 ( K ) OF THE SPECIAL ECONOMIC ZONE ACT, 2005 DEFINES THE EXPRESSION ' EXISTING SPECIAL ECONOMIC ZONE ' TO MEAN EVERY SPECIAL ECONOMIC ZONE WHICH IS IN EXISTENCE ON OR BEFORE THE COMMENCEMENT OF THE SAID ACT . SECTION 2 ( E ) DEFINES THE EXPRESSION ' EXISTING UNIT ' TO MEAN EVERY UNIT WHICH HAS BEEN SET UP ON OR BEFORE THE COMMENCEMENT OF THE SAID ACT IN AN EXISTING SPECIAL ECONOMIC ZONE . IN OTHER WORDS, ADMITTEDLY ALL SPECIAL ECONOMIC ZONES WERE ALS O BEING GOVERNED BY THE EXIM POLICY PRIOR TO THE ENACTMENT OF SEZ ACT, 2005 . CLAUSE ( III ) OF EXPLANATION 1 TO SECTION 1OAA LAYS DOWN THAT THE EXPRESSION ' MANUFACTURE ' SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN SECTION 2 ( R ) OF THE SPECIAL ECONOMIC ZON ES ACT, 2005, WHICH DEFINITION IS AS UNDER : ' MANUFACTURE ' MEANS TO MAKE, PRODUCE, FABRICATE, ASSEMBLE, PROCESS OR BRING INTO EXISTENCE, BY HAND OR BY MACHINE, A NEW PRODUCT HAVING A DISTINCTIVE NAME, CHARACTER OR USE AND SHALL INCLUDE PROCESSES SUCH AS RE FRIGERATION, CUTTING, POLISHING, BLENDING, REPAIR, REMAKING, RE - ENGINEERING AND INCLUDES AGRICULTURE, AQUACULTURE, ANIMAL HUSBANDLY, FLORICULTURE, HORTICULTURE, PISCICULTURE, POULTRY, SERICULTURE, VITICULTURE AND MINING '. IN EXIM POLICY, THE EXPRESSION ' MANUFACTURE ' IS DEFINED, IN PARAGRAPH 9 . 30 & 9 . 31 THEREOF ALMOST IN THE SAME MANNER AS IN THE SPECIAL ECONOMIC ZONE ACT, 2005, WHICH IS AS UNDER : ' MANUFACTURE ' MEANS TO MAKE, PRODUCE, FABRICATE, ASSEMBLE, PROCESS OR BRING INTO EXISTENCE, BY HAND OR BY MACH INE, A NEW PRODUCT HAVING A DISTINCTIVE NAME, CHARACTER OR USE AND SHALL INCLUDE PROCESSES SUCH AS REFRIGERATION, REPACKING, POLISHING AND LABELING . ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 1 3 OF 21 MANUFACTURE, FOR THE PURPOSE OF THIS POLICY, SHALL ALSO INCLUDE AGRICULTURE, AQUACULTURE, ANIMAL HUSBANDRY, FLORICULTURE, HORTICULTURE, PISCICULTURE, POULTRY, SERICULTURE, VITICULTURE AND MINING .' BUT THE ONLY DIFFERENCE BETWEEN THE EXIM POLICY OF 2002 - 07 AND OF 2000 IS THAT WORDS ' AND SEGREGATION ' WHICH WERE APPEARING IN THE DEFINITION OF THE EXPRESSION 'MANUFACTURE ' IN THE EXIM POLICY OF 2000 WAS DELETED IN THE EXIM POLICY OF 2002 - 07 . FURTHER, EVE N IN PREVENTION OF FOOD ALTERNATION RULES, 1955, IT HAS BEEN INTER ALIA STATED THAT TEA USED IN THE MANUFACTURE OF FLAVOURED TEA SHALL CONFORM TO THE STANDARDS OF TEA . THE FLAVOURED TEA : MANUFACTURERS SHALL REGISTER THEMSELVES WITH THE TEA BOARD BEFORE M AKING FLAVOUR TEA IN THE TEA ( DISTRIBUTION & EXPORT ) CONTROL ORDER, 1957 ISSUED BY THE GOVERNMENT OF INDIA, MINISTRY OF COMMERCE & INDUSTRY ( DEPARTMENT OF COMMERCE ) THE EXPRESSIONS ' FLAVOUR TEA ' , ' GREEN TEA ' ' INSTANT TEA ' , ' PACKET TEA ' ' QUICK BREWING BLACK TEA ' , ' TEA ' AND ' TEST BAG ' HAVE BEEN SEPARATELY DEFINED AS DISTINCT PRODUCT . IN TEA ( MARKETING ) CONTROL ORDER, 2003 ISSUED BY THE ' CENTRAL GOVERNMENT, IN EXERCISE OF THE POWERS CONFERRED BY SECTION 30 ( 5 )( 3 ) OF THE TEA ACT, 1953, THE EXPRESSIONS ' MANUFACT URER ' , ' BUYER ' , ' PACKET TEA ' , ' TEA BAG ' , - ' GREEN TEA ' , ' QUICK BREWING BLACK TEA ' , ' INSTANT TEA ' AND ' MADE TEA ' HAVE ALSO BEEN DISTINCTLY AND SEPARATELY DEFINED . CLAUSE ( 29BA ) WAS INSERTED IN SECTION 2 OF THE INCOME TAX ACT, 1961 BY THE FINANCE ( NO . 2 ) ACT, 2009 W . E . F . 01 . 04 . 2009 TO DEFINE THE EXPRESSION ' MANUFACTURE ' AS UNDER : ' MANUFACTURE ' , WITH ITS GRAMMATICAL VARIATIONS, MEANS A CHANGE IN A NON - LIVING PHYSICAL OBJECT OR ARTICLE OR THING, - (A) RESULTING IN TRANSFORMATION OF THE OBJECT OR ARTICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE; OR (B) BRINGING INTO EXISTENCE OF A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE; THE AFORESAID DEFINITION OF THE EXPRESSION ' MANUFACTURE ' , ALTHOUGH BROUGHT INTO THE STATUTE BOOK W . E . F . 01 . 04 . 2009, WAS APPLIED BY THE HON'BLE SUPREME COURT EVEN FOR THE ASSESSMENT YEAR 2001 - 02 IN ITO V . ARIHANT TILES AND MARBLES PVT . LTD . ( 2010 ) 320 ITR 7 9, 82 ( SC ) ON THE GROUND THAT PARLIAMENT HAD TAKEN NOTE OF GROUND REALITY IN INSERTING SECTION 2 ( 29BA ) IN THE INCOME TAX LAW . THE SAID DEFINITION WAS AGAIN APPLIED BY THE HON'BLE SUPREME COURT IN CIT V . EMPTEE POLY - YARN PVT . LTD . ( 2010 ) ' GREEN TEA ' MEANS T HE VARIETY OF MANUFACTURED TEA COMMERCIALLY KNOWN AS GREEN TEA; 320 ITR 665,667 ( SC ). 33. THE ASSESSEE COMPANY CARRIES OUT ITS OPERATIONS OF BLENDING, PACKAGING AND EXPORT OF TEA BAGS, TEA PACKETS AND BULK TEA PACKS IN ITS MODERN FACTORY, WELL EQUIPPED WITH A LL IMPORTED AND SOPHISTICATED AUTOMATIC PLANT AND MACHINERIES WITH THE HELP OF OVER 100 WORKMEN ENGAGED ON CONTRACT BASIS THROUGH M / S . TROT PVT . LTD . THE MANUFACTURING' . OPERATIONS ARE CARRIED IN ITS SAID FACTORY SITUATED AT 19 / 4A, MUNSHIGANJ ROAD ( UNDER F ALTA EXPORT PROCESSING ZONE ) , KOLKATA . WE FIND FROM FACTS OF THE CASE THAT THE DETAILS OF TURNOVER OF THE ASSESSEE SHOWS BULK TEA ( 0 . 94 %) , PACKET TEA AND TEA BAGS .( 99 . 06 %) , . AS . PER DIFFERENT DESCRIPTIONS, BRAND NAMES AND VARIETIES, AS LISTED APR . ASSESSE E COMPANY IS DULY REGISTERED AS A 100 % EOU BY THE GOVERNMENT OF INDIA, MINISTRY OF INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION SECRETARIAL FOR INDUSTRIAL APPROVALS, ECU SECTION IN THE STATE OF WEST BENGAL FOR MANUFACTURE OF PACKET TEA, TEA BAGS / BULK TEA WITH ANNUAL CAPACITY OF 3110 MT . IN TERMS OF REGISTRATION CERTIFICATE DATED 26TH DECEMBER, 1995, INTER ALIA, WITH THE CONDITION THAT ITS 100 % PRODUCTION ( EXCLUDING REJECTS NOT EXCEEDING 5 %) WOULD HAVE TO BE EXPORTED AND THAT ITS REGISTERED EOU UN IT SHALL MAKE VALUE ADDITION TO A MINIMUM EXTENT OF 79 %. UNDISPUTEDLY, THE EXPORTED CONSUMER PRODUCTS, BLENDED BY ASSESSEE IN ITS SAID FACTORY PREMISES IS A CASE OF SUBSTANTIAL VALUE ADDITION, AS COMPARED TO THE UNBLENDED BLACK TEA IN GRANULE AND DUST FORM NORMALLY AVAILABLE FOR SALE IN THE OPEN RETAIL MARKET THROUGHOUT INDIA . ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 1 4 OF 21 34. THE SUBJECT FOR CONSIDERATION UNDER SECTIONS 10A AND / OR 10B OF THE SAID ACT IS MANUFACTURE / PRODUCTION OF TEA ; THE OBJECT BEING GRANT OF BENEFITS OF TAX EXEMPTION TO EXPORTERS CARRYING OUT THEIR OPERATIONS IN FTZ, EOU, EPZ & SEZ AREAS IN ACCORDANCE WITH THE EXIM POLICY DECLARED BY THE GOVERNMENT OF INDIA IN PARLIAMENT AND IN THE LIGHT OF ALLIE D AND GOVERNING LAWS; IN THE LIGHT OF ALLIED LAWS E . G . THE TEA ACT, 1953, THE PREVENTION OF FOOD ADULTERATION ACT, 1953 READ WITH PREVENTION OF FOOD ADULTERATION RULES, 1955 . THE TEA ( MARKETING ) CONTROL ORDER, 2003, THE TEA ( DISTRIBUTION & EXPORT ) CONTROL ORDER, 2005 AS WELL AS THE RULES AND REGULATIONS FRAMED BY THE TEA BOARD AND ALSO CALCUTTA TEA TRADERS ASSOCIATION FROM TIME TO TIME AS DISCUSSED ABOVE . 35. WE FIND FROM THE ABOVE FACTS AND CIRCUMSTANCES AND CASE LAWS RELIED ON BY BOTH THE SIDES THAT THE ASSE SSEE WAS EXCLUSIVELY ENGAGED IN BLENDING, PACKAGING AND EXPORT OF TEA BAGS, TEA PACKETS AND BULK TEA PACKS . THE ASSESSEE'S DIVISION ENJOYS RECOGNITION AS A 100 % EOU, WHICH IS GRANTED BY THE DEVELOPMENT COMMISSIONER, MINISTRY OF COMMERCE & INDUSTRY, GOVT . O F INDIA . THE ASSESSEE CLAIMED EXEMPTION U / S . 10B OF THE ACT FOR AYS 2000 - 01 ONWARDS, WHICH WAS GRANTED UPTO THE AY 2003 - 04 . HOWEVER, FOR THE AY 2004 - 05, EXEMPTION WAS DECLINED FOR THE REASONS THAT BY THE FINANCE ACT, 2000, THE DEFINITION OF `MANUFACTURE WHICH INCLUDED 'PROCESSING' CONTAINED IN SECTION 1OB OF THE ACT WAS DELETED W . E . F . 01 . 04 . 200 1 . THE ARGUMENT OF THE DEPARTMENT IS THAT MANUFACTURE OR PRODUCTION HAD LIBERAL MEANING UNDER THE DEFINITION CLAUSE CONTAINED IN SECTION 10B OF THE ACT UNTIL ITS DELETION WHICH COVERS EVEN PROCESSING AND, THEREFORE, BLENDING ' AND PACKAGING OF TEA FOR EXPOR T WAS TREATED AS 'MANUFACTURE' OR 'PRODUCTION' OF AN ARTICLE QUALIFYING FOR EXEMPTION . WE ARE OF THE CONSIDERED VIEW THAT THE CONTENTION OF THE ASSESSEE THAT THE SCHEME OF INCOME TAX EXEMPTION AVAILABLE TO UNITS IN THE SEZ U / S . TOA OF THE ACT AND UNITS IN THE FREE TRADE ZONE PROVIDED U / S, 10AA OF THE ACT AND THE EXEMPTION AVAILABLE TO 100 % EOU U / S . 1OB OF THE ACT ARE VERY SIMILAR IN NATURE AND THE WORDINGS OF THE STATUTORY PROVISIONS ARE SIMILAR IN NATURE IS CORRECT . WE FIND THAT HON'BLE KERALA HIGH COURT A LSO CONSIDERED THE JUDGMENT IN - THE DECISION OF SUPREME COURT IN TARA AGENCIES, SUPRA RELIED ON BY THE LD . CIT, DR, WHEREIN HON'BLE SUPREME COURT CLEARLY HELD THAT BLENDING OF TEA DOES NOT AMOUNT TO 'MANUFACTURE' OR 'PRODUCTION' OF AN ARTICLE, BUT IS ONLY P ROCESSING . WE FIND THAT THE ASSESSEE WAS EXCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT AND WAS NOT MANUFACTURING OR PRODUCING ANY OTHER ARTICLE OR THING . IT WAS RECOGNISED AS A 100 % EOU DIVISION AND THE DEPARTMENT HAD NO CASE THAT THE ASSESSEE'S UNIT ENGAGED IN EXPORT OF TEA BAGS AND TEA PACKETS WAS NOT A 100 % EOU . IF EXEMPTION WAS DENIED ON THE GROUND THAT PRODUCTS EXPORTED WERE NOT PRODUCED OR MANUFACTURED IN TH E INDUSTRIAL UNIT OF THE ASSESSEE'S 100 % EOU, IT WOULD DEFEAT THE VERY OBJECT OF SECTIONS 10B OF THE ACT . 36. WE, IN VIEW OF THE ABOVE, HOLD THAT WHEN THE PRODUCTS FOR WHICH THE ASSESSEE'S UNIT IS RECOGNIZED AS A 100 % EOU ARE TEA BAGS, TEA IN PACKETS AND TEA IN BULK PACKS AND THE ASSESSEE IS EXCLUSIVELY ENGAGED IN BLENDING AND PACKING OF TEA FOR EXPORT MAY NOT BE MANUFACTURER OR PRODUCER OF ANY OTHER ARTICLE OR THING IN COMMON PARLANCE . HOWEVER, FOR THE PURPOSE OF SECTION 10A, 10AA AND 10B, WE HAVE TO CONSIDER THE DEFINITION OF THE WORD ' MANUFACTURE ' AS DEFINED IN SECTION 2 ( R ) OF SEZ ACT, EXIM POLICY, FOOD ADULTERATION RULES, 1955, TEA ( MARKETING ) CONTROL ORDER, 2003, ETC . WE ALSO FIND THAT THE DEFINITION OF 'MANUFA CTURE' AS PER SECTION 2 ( R ) OF THE SEZ ACT, 2005 IS INCORPORATED IN SECTION 10AA OF THE INCOME - TAX ACT WITH EFFECT FROM 10 . 02 . 2006 . HON'BLE KERALA HIGH COURT IN THE CASE OF GIRNAR INDUSTRIES ( SUPRA ) HAD HELD SUCH AMENDMENT IN SECTION 10AA TO BE OF CLARIFICA TORY IN NATURE . THE DEFINITION OF 'MANUFACTURE' UNDER THE SEZ ACT, EXIM POLICY, FOOD ADULTERATION RULES AND TEA ( MARKETING ) CONTROL ORDER IS MUCH WIDER THAN WHAT IS THE MEANING OF THE TERM `MANUFACTURE UNDER THE COMMON PARLANCE, AND IT INCLUDES PROCESSING, BLENDING, PACKAGING ETC . IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE KERALA HIGH COURT IN THE CASE OF GIRNAR INDUSTRIES ( SUPRA ) AND TATA TEA LIMITED ( SUPRA ) , WE ' HOLD THAT THE ASSESSEE IS EN TITLED FOR EXEMPTION UNDER SECTION 10B OF THE ACT ON ACCOUNT OF BLENDING OF TEA . SIMILARLY, IN OUR VIEW, THE INDUSTRIAL UNITS ENGAGED ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 1 5 OF 21 IN THE VERY SAME ACTIVITY I . E . BLENDING, PACKING AND EXPORT OF TEA IN THE FREE TRADE ZONE SHALL ALSO BE ENTITLED TO ENJOY TAX EXEMPTION UNDER SECTION 10A OF THE ACT . 37. ACCORDINGLY, WE ANSWER THE QUESTION REFERRED IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ASSESSEES WHO ARE IN THE BUSINESS OF BLENDING AND PROCESSING OF TEA AND EXPORT THEREOF, IN 100 % EOUS ARE MANUFACTURER / PRODUCER OF THE TEA FOR THE PURPOSE OF CLAIMING EXEMPTION U / S . 10B OF THE ACT . FURTHER, ASSESSEES WHO ARE IN THE BUSINESS OF BLENDING AND PROCESSING OF TEA HI RESPECT OF UNDERTAKINGS IN FREE TRADE ZONES ARE MANUFACTURER / PRODUCER OF TEA FOR THE PURPOSE OF CLAIMING EXEMPTION U / S . 10A OF THE ACT . WE HAVE EXAMINED AND DISCUSSED THE FACTS IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD . AND FOUND THAT THERE IS BLENDIN G OF TEA AND CONSEQUENTLY THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U / S . 10B OF THE ACT AS PRAYED FOR . THEIR APPEAL FOR THE AY 2004 - 05 IS ALLOWED . AS REGARDS OTHER APPEALS AND THAT OF THE INTERVENERS, THE MATTERS ARE RESTORED BACK TO THE DIVISION BENCH, WITH DIRECTIONS TO DECIDE THOSE APPEALS IN THE LIGHT OF PRINCIPLE LAID DOWN HEREIN, SO FAR AS THE CLAIM FOR RELIEF U / S . 10A OR 10B OF THE ACT IN ACCORDANCE WITH LAW . 5.24 FROM THE READING OF PARA 35 OF THE AFORESAID JUDGMENT WE NOTED THAT THE SPECIAL BENCH IN THIS CASE CLEARLY HELD THAT THE ASSESSEE WAS ENGAGED ONLY IN PROCESSING AND WAS NOT ENGAGED IN THE MANUFACTURE OR PRODUCTION BUT HAD ULTIMATELY UNDER PARA 36 IT TOOK THE VIEW IN VIEW OF THE FACT THAT THE DEFINITION OF MANUFACTURE U / S 2 ( R ) OF THE SEZ ACT, 2005 WHICH IS INCORPORATED IN SECTION 10AA W . E . F . 10 / 02 / 2006 INCLUDES PROCESSING . THEREFORE, FOLLOWING THE DECISION OF KERALA HIGH COURT IN THE CASE OF GIRNAR INDUSTRIES AND TATA TEA LTD . ( WHICH WAS DISCUSSED BY US IN THE PRECEDING PARAGRAPHS ) HELD THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U / S 10B OF THE ACT ON ACCOUNT OF BLENDING OF TEA . 5.25 WE HAVE ALSO GONE THROUGH THE DECISION OF HON BLE SUPREME COURT IN INDIAN CINE AGENCIES VS CIT 308 ITR 98 . IN THIS CASE THE QUESTION BEFORE THE HON BLE SUPREME COURT WAS : WHEN THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF CUTTING JUMBO ROLL FILMS INTO FLAT AND SMALL ROLLS IN DESIRED SIZES, WHETHER SUCH ACTIVITY UNDERTAKEN BY THE ASSESSEE WAS MANUFACTURE OR PRODUCTION? IN THIS CASE, THE HON BLE SUPREME COURT AFTER DISCUS SING VARIOUS CASES, THE PROVISIONS OF DIFFERENT ACTS AND THE DICTIONARY MEANING TOOK THE VIEW THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURE / PRODUCTION . WHILE HOLDING SO UNDER PARA 12 OF ITS ORDER, HON BLE SUPREME COURT HAS GIVEN THE SAME ANALOGY FOR THE P URPOSE OF ELIGIBILITY OF DEDUCTION UNDER SECTION 80HH AND 80 - I AS HAS BEEN GIVEN BY THE KERALA HIGH COURT IN THE CASE OF TATA TEA DISCUSSED HEREIN ABOVE FOR THE PURPOSE OF SECTION 10B, THAT IF THERE WAS NO MANUFACTURING ACTIVITY, THEN THE QUESTION OF REFER RING TO ITEM 10 OF ELEVENTH SCHEDULE FOR THE PURPOSE OF EXCLUSION DOES NOT ARISE . FROM THIS JUDGMENT, THUS, IT IS APPARENT THAT THE HON BLE APEX COURT ACCEPTED THAT MANUFACTURE / PRODUCTION INCLUDES PROCESSING ALSO . 5.26 WE HAVE ALSO GONE THROUGH THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF ITO VS . ARIHANT TILES AND MARBLES PVT . LTD . 320 ITR 79 ( SC ). IN THIS CASE WHEN THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF CUTTING AND POLISHING OF MARBLE BLOCKS, THE QUESTION BEFORE THE SUPREME COURT WAS WHETHER THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE WOULD FALL WITHIN THE MEANING OF THE WORDS MANUFACTURE OR PRODUCTION IN SECTION 80 - IA OF THE INCOME - TAX ACT, 1961? IN THIS CASE, HON BLE SUPREME COURT, AFTER DISCUSSING THE DEFINITION OF MANUFA CTURE GIVEN IN SECTION 2 ( 29BA ) OF THE INCOME - TAX ACT, 1961 AND ALSO DISCUSSING THE PROVISIONS OF SECTION 80 - IA ( 2 )( III ) AND AFTER GOING THROUGH VARIOUS DECISIONS, HELD AS UNDER : 22 . APPLYING THE ABOVE TESTS LAID DOWN BY THIS COURT IN CIT VS . N . C . BUDHAR AJA AND CO . 204 ITR 412 ( SC ) TO THE FACTS OF THE PRESENT CASES, WE ARE OF THE VIEW THAT BLOCKS CONVERTED INTO POLISHED SLABS AND TILES AFTER UNDERGOING THE PROCESS INDICATED ABOVE CERTAINLY RESULTS IN EMERGENCE OF A NEW AND DISTINCT COMMODITY . THE ORIGINAL BLOCK DOES NOT REMAIN THE MARBLE BLOCK, IT BECOMES A SLAB OR TILE . IN THE CIRCUMSTANCES, NOT ONLY THERE IS MANUFACTURE BUT ALSO AN ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 1 6 OF 21 ACTIVITY WHICH IS SOMETHING BEYOND MANUFACTURE AND WHICH BRINGS A NEW PRODUCT INTO EXISTENCE AND, THEREFORE, ON THE FACTS OF THESE CASES, WE ARE OF THE VIEW THAT THE HIGH COURT WAS RIGHT IN COMING TO THE CONCLUSION THAT THE ACTIVITY UNDERTAKEN BY THE RESPONDENTS - ASSESSEES DID CONSTITUTE MANUFACTURE OR PRODUCTION IN TERMS OF SECTION 80IA OF THE INC OME TAX ACT, 1961 . 23 . BEFORE CONCLUDING, WE WOULD LIKE TO MAKE ONE OBSERVATION . IF THE CONTENTION OF THE DEPARTMENT IS TO BE ACCEPTED, NAMELY THAT THE ACTIVITY UNDERTAKEN BY THE RESPONDENTS HEREIN IS NOT A MANUFACTURE, THEN, IT WOULD HAVE SERIOUS REVENUE CONSEQUENCES . AS STATED ABOVE, EACH OF THE RESPONDENTS IS PAYING EXCISE DUTY, SOME OF THE RESPONDENTS ARE JOB WORKERS AND THE ACTIVITY UNDERTAKEN BY THEM HAS BEEN RECOGNIZED BY VARIOUS GOVERNMENT AUTHORITIES AS MANUFACTURE . TO SAY THAT THE ACTIVITY WILL NOT AMOUNT TO MANUFACTURE OR PRODUCTION UNDER SECTION 80IA WILL HAVE DISASTROUS CONSEQUENCES, PARTICULARLY I N VIEW OF THE FACT THAT THE ASSESSEES IN ALL THE CASES WOULD PLEAD THAT THEY WERE NOT LIABLE TO PAY EXCISE DUTY, SALES TAX ETC . BECAUSE THE ACTIVITY DID NOT CONSTITUTE MANUFACTURE . KEEPING IN MIND THE ABOVE FACTORS, WE ARE OF THE VIEW THAT IN THE PRESENT C ASES, THE ACTIVITY UNDERTAKEN BY EACH OF THE RESPONDENTS CONSTITUTES MANUFACTURE OR PRODUCTION AND, THEREFORE, THEY WOULD BE ENTITLED TO THE BENEFIT OF SECTION 80IA OF THE INCOME TAX ACT, 1961 . 5.27 IN THIS CASE ALSO, HON BLE SUPREME COURT TOOK THE VIEW THAT CUTTING AND POLISHING OF THE MARBLE BLOCKS IS THE ACTIVITY WHICH CONSTITUTES MANUFACTURE OR PRODUCTION AS AFTER PROCESSING MARBLE BLOCK NO MORE REMAINS AS MARBLE BLOCK . THIS DECISION HAS ALSO DU LY CONSIDERED, IN OUR OPINION, WHETHER THE ACTIVITY OF PROCESSING IS MANUFACTURE / PRODUCTION . 6 . IN VIEW OF OUR AFORESAID DISCUSSION, WE HOLD THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING AND PRODUCTION OF AN ARTICLE AND THEREFORE, THE ASSESSEE SHALL BE ENTITLED FOR THE DEDUCTION AVAILABLE U / S 80IC OF THE ACT . WE ACCORDINGLY CONFIRM THE ORDER OF CIT ( A ) AS IN OUR OPINION, NO ILLEGALITY OR INFIRMITY IS FOUND IN THE ORDER OF CIT ( A ). 5. DEALING W ITH EXACTLY THE SAME GROUNDS OF APPEAL IN THE CASE OF SISTER CONCERN KHUSHBU INDUSTRIES, AND VIDE ORDER ON ITA NOS . 2164 TO 2169 / MUMBAI / 2018, A COORDINATE BENCH HAS DISMISSED IDENTICALLY WORDED APPEAL AND ADDED AS FOLLOWS : 5. LEARNED DEPARTMENTAL REPRESENTAT IVE, HOWEVER, URGES US NOT TO FOLLOW THE AFORESAID ORDER . HE SUBMITS THAT EVEN THOUGH THE AFORESAID ORDER IS CONFIRMED BY HON BLE JURISDICTIONAL HIGH COURT, THEIR LORDSHIPS HAVE CONFIRMED THE ORDER ON TECHNICAL GROUNDS AND NOT ON MERITS . HE ALSO SUBMITS TH AT WHAT HAS BEEN TERMED AS PRODUCTION IS JUST MIXING UP OF PRODUCTS AND REPACKING THE SAME . IN SUPPORT OF THIS CONTENTION, HE RELIES UPON THE STATEMENT GIVEN BY AN EMPLOYEE DURING THE COURSE OF SEARCH PROCEEDINGS . NONE OF THESE SUBMISSIONS, HOWEVER, IMPRES S US . EVEN THOUGH THE ORDER OF THE COORDINATE BENCH IS CONFIRMED BY HON BLE HIGH COURT ON TECHNICAL GROUND, THAT DOES NOT MEAN, OR EVEN IMPLY, THAT THE BINDING NATURE OF THE DECISION, ON MERITS, IS AFFECTED . THE DECISION OF THE COORDINATE BENCH BINDS US NE VERTHELESS . IN ANY CASE, WE HAVE CAREFULLY PERUSED THE ORDER OF THE COORDINATE BENCH AND WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO TAKEN BY THE COORDINATE BENCH . AS FOR THE STATEMENT OF AN EMPLOYEE RECORDED DURING THE SEARCH OPERATION, IT IS NOT IN DISPUTE THAT, EVEN GOING BY THAT STATEMENT, THE INGREDIENTS ARE MIXED AND IT IS THIS MIXING OF INGREDIENTS, AS ANALYSED IN DETAIL BY THE COORDINATE BENCH, CONSTITUTES MANUFACTURING IN THE LIGHT OF THE LAW LAID DOWN BY HON BLE COURTS ABOVE . FOLLOWING THE STAND SO TAKEN BY THE COORDINATE BENCH, LEARNED CIT ( A ) , FOR THE DETAILED REASONS SET OUT IN HIS ORDER, HAS HELD THAT THE CLAIM OF ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 1 7 OF 21 DEDUCTION UNDER SECTION 80IC IS ADMISSIBLE . WE HAVE ALSO NO TED THAT, AS NOTED BY THE ASSESSING OFFICER, JUST BECAUSE THE ASSESSEE HAS USED CERTAIN RAW MATERIALS IN THE ORGANIC AND INORGANIC CHEMICALS, IT DOES NOT MEAN THAT THE PRODUCT MANUFACTURED IS ALSO IN THE NATURE OF ORGANIC OR INORGANIC CHEMICALS . THERE IS A LSO A CATEGORICAL FINDING TO THE EFFECT THAT THE PRODUCTS MANUFACTURED BY THE ASSESSEE FALL UNDER CHAPTER 33 RELATED TO ESSENTIAL OILS, RESINOIDS, PERFUMERY, COSMETIC OR TOILET PREPARATIONS AND DONOT FALL UNDER CHAPTER 28 OR 29 DEALING WITH ORGANIC / INO RGANIC CHEMICALS . NOTHING HAS BEEN BROUGHT BEFORE US TO DISLODGE THESE FINDINGS . WE, THEREFORE, SEE NO MERITS IN THE GRIEVANCES OF THE ASSESSING OFFICER . 6. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BEN CH . IN ANY CASE, NO DISTINGUISHING FEATURES HAVE BEEN POINTED OUT TO US EITHER . IN THE LIGHT OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE AND FOLLOWING THE VIEWS OF THE COORDINATE BENCH WITH WHICH WE ARE IN CONSIDERED AGREEMENT, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEARNED CIT ( A ) AND DECLINE TO INTERFER E IN THE MATTER . 7. HOWEVER, BEFORE WE PART WITH THE MATTER, WE MUST DEAL WITH ONE PROCEDURAL ISSUE AS WELL . WHILE HEARING OF THESE APPEALS WAS CONCLUDED ON 9TH JANUARY 2020, THIS ORDER THEREON IS BEING PRONOUNCED TODAY ON TH DAY OF MAY, 2020, MUCH AFTER THE EXPIRY OF 90 DAYS FROM THE DATE OF CONCLUSION OF HEARING . WE ARE ALSO ALIVE TO THE FACT THAT RULE 34 ( 5 ) OF THE INCOME TAX APPELLATE TRIBUNAL RULES 1963, WHICH DEALS WITH PRONOUNCEMENT OF ORDERS, PROVIDES AS FOLLOWS : (5) THE PRONOUNCEMENT MAY BE IN ANY OF THE FOLLOWING MANNERS : (A) THE BENCH MAY PRONOUNCE THE ORDER IMMEDIATELY UPON THE CONCLUSION OF THE HEARING . (B) IN CASE WHERE THE ORDER IS NOT PRONOUNCED IMMEDIATELY ON THE CONCLUSION OF THE HEARING, THE BENCH SHALL GIVE A DATE FOR PRONOUNCEMENT . (C) IN A CASE WHERE NO DATE OF PRON OUNCEMENT IS GIVEN BY THE BENCH, EVERY ENDEAVOUR SHALL BE MADE BY THE BENCH TO PRONOUNCE THE ORDER WITHIN 60 DAYS FROM THE DATE ON WHICH THE HEARING OF THE CASE WAS CONCLUDED BUT, WHERE IT IS NOT PRACTICABLE SO TO DO ON THE GROUND OF EXCEPTIONAL AND EXTRAORDINARY CIRCUMSTANCES OF THE CASE, THE ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 1 8 OF 21 BENCH SHALL FIX A FUTURE DAY FOR PRONOUNCEMENT OF THE ORDER, AND SUCH DATE SHALL NOT ORDINARILY ( EMPHASIS SUPPLIED BY US NOW ) BE A DAY BEYOND A FURTHER PERIOD OF 30 DAYS AND DUE NOTICE OF THE D AY SO FIXED SHALL BE GIVEN ON THE NOTICE BOARD . 8. QUITE CLEARLY, ORDINARILY THE ORDER ON AN APPEAL SHOULD BE PRONOUNCED BY THE BENCH WITHIN NO MORE THAN 90 DAYS FROM THE DATE OF CONCLUDING THE HEARING . IT IS, HOWEVER, IMPORTANT TO NOTE THAT THE EXPRESSION ORDINARILY HAS BEEN USED IN THE SAID RULE ITSELF . THIS RULE WAS INSERTED AS A RESULT OF DIRECTIONS OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SHIVSAGAR VEG RESTAURANT VS ACIT [( 2009 ) 317 ITR 433 ( BOM )] WHERE IN THEIR LORDSHIPS HAD, INTER ALIA, DIRECTED THAT WE, THEREFORE, DIRECT THE PRESIDENT OF THE APPELLATE TRIBUNAL TO FRAME AND LAY DOWN THE GUIDELINES IN THE SIMILAR LINES AS ARE LAID DOWN BY THE APEX COURT IN THE CASE OF ANIL RAI ( SUPRA ) AND TO ISSUE APPROPRIATE ADMINISTRATIVE DIRECTIONS TO ALL THE BENCHES OF THE TRIBUNAL IN THAT BEHALF . WE HOPE AND TRUST THAT SUITABLE GUIDELINES SHALL BE FRAMED AND ISSUED BY THE PRESIDENT OF THE APPELLATE TRIBUNAL WITHIN SHORT EST REASONABLE TIME AND FOLLOWED STRICTLY BY ALL THE BENCHES OF THE TRIBUNAL . IN THE MEANWHILE ( EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW ) , ALL THE REVISIONAL AND APPELLATE AUTHORITIES UNDER THE INCOME - TAX ACT ARE DIRECTED TO DECIDE MATTERS HEARD BY THEM WITHIN A PERIOD OF THREE MONTHS FROM THE DATE CASE IS CLOSED FOR JUDGMENT . IN THE RULED SO FRAMED, AS A RESULT OF THESE DIRECTIONS, THE EXPRESSION ORDINARILY HAS BEEN INSERTED IN THE REQUIREMENT TO PRONOUNCE THE ORDER WITHIN A PERIOD OF 90 DAYS . THE QUESTION THEN ARISES WHETHER THE PASSING OF THIS ORDER, BEYOND NINETY DAYS, WAS NECESSITATED BY ANY EXTRAORDINARY CIRCUMSTANCES . 9. LET US IN THIS LIGHT REVERT TO THE PREVAILING SITUATION IN THE COUNTRY . ON 24TH MARCH , 2020, HON BLE PRIME MINISTER OF INDIA TOOK THE BOLD STEP OF IMPOSING A NATIONWIDE LOCKDOWN, FOR 21 DAYS, TO PREVENT THE SPREAD OF COVID 19 EPIDEMIC, AND THIS LOCKDOWN WAS EXTENDED FROM TIME TO TIME . AS A MATTER OF FACT, EVEN BEFORE THIS FORMAL NATIONWIDE LOCKDOWN, THE FUNCTIONING OF THE INCOME TAX APPELLATE TRIBUNAL AT MUMBAI WAS SEVERELY RESTRICTED ON ACCOUNT OF LOCKDOWN BY THE MAHARASHTRA GOVERNMENT, AND ON ACCOUNT OF STRICT ENFORCEMENT OF HEALTH ADVISORIES WITH A VIEW OF CHECKING SPREAD OF COVID 19 . TH E EPIDEMIC SITUATION IN MUMBAI BEING GRAVE, THERE WAS NOT MUCH OF A RELAXATION IN SUBSEQUENT LOCKDOWNS ALSO . IN ANY CASE, THERE WAS UNPRECEDENTED DISRUPTION OF JUDICIAL WOK ALL OVER THE COUNTRY . AS A MATTER OF FACT, IT HAS BEEN SUCH AN UNPRECEDENTED SITUAT ION, CAUSING DISRUPTION IN THE FUNCTIONING OF JUDICIAL ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 1 9 OF 21 MACHINERY, THAT HON BLE SUPREME COURT OF INDIA, IN AN UNPRECEDENTED ORDER IN THE HISTORY OF INDIA AND VIDE ORDER DATED 6 . 5 . 2020 READ WITH ORDER DATED 23 . 3 . 2020, EXTENDED THE LIMITATIO N TO EXCLUDE NOT ONLY THIS LOCKDOWN PERIOD BUT ALSO A FEW MORE DAYS PRIOR TO, AND AFTER, THE LOCKDOWN BY OBSERVING THAT IN CASE THE LIMITATION HAS EXPIRED AFTER 15 . 03 . 2020 THEN THE PERIOD FROM 15 . 03 . 2020 TILL THE DATE ON WHICH THE LOCKDOWN IS LIFTED IN TH E JURISDICTIONAL AREA WHERE THE DISPUTE LIES OR WHERE THE CAUSE OF ACTION ARISES SHALL BE EXTENDED FOR A PERIOD OF 15 DAYS AFTER THE LIFTING OF LOCKDOWN . HON BLE BOMBAY HIGH COURT, IN AN ORDER DATED 15TH APRIL 2020, HAS, BESIDES EXTENDING THE VALIDITY OF ALL INTERIM ORDERS, HAS ALSO OBSERVED THAT, IT IS ALSO CLARIFIED THAT WHILE CALCULATING TIME FOR DISPOSAL OF MATTERS MADE TIME - BOUND BY THIS COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STA ND EXTENDED ACCORDINGLY , AND ALSO OBSERVED THAT ARRANGEMENT CONTINUED BY AN ORDER DATED 26TH MARCH 2020 TILL 30TH APRIL 2020 SHALL CONTINUE FURTHER TILL 15TH JUNE 2020 . IT HAS BEEN AN UNPRECEDENTED SITUATION NOT ONLY IN INDIA BUT ALL OVER THE WORLD . GOV ERNMENT OF INDIA HAS, VIDE NOTIFICATION DATED 19 TH FEBRUARY 2020, TAKEN THE STAND THAT, THE CORONAVIRUS SHOULD BE CONSIDERED A CASE OF NATURAL CALAMITY AND FMC ( I . E . FORCE MAJEURE CLAUSE ) MAYBE INVOKED, WHEREVER CONSIDERED APPROPRIATE, FOLLOWING THE DUE PROCEDURE . THE TERM FORCE MAJEURE HAS BEEN DEFINED IN BLACK S LAW DICTIONARY, AS AN EVENT OR EFFECT THAT CAN BE NEITHER ANTICIPATED NOR CONTROLLED WHEN SUCH IS THE POSITION, AND IT IS OFFICIALLY SO NOTIFIED BY THE GOVERNMENT OF INDIA AND THE COVID - 19 EPIDEMIC HAS BEEN NOTIFIED AS A DISASTER UNDER THE NATIONAL DISASTER MANAGEMENT ACT, 2005, AND ALSO IN THE LIGHT OF THE DISCUSSIONS ABOVE, THE PERIOD DURING WHICH LOCKDOWN WAS IN FORCE CAN BE ANYTHING BUT AN ORDINARY PERIOD . 10. IN THE LIGHT OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT RATHER THAN TAKING A PEDANTIC VIEW OF THE RULE REQUIRING PRONOUNCEMENT OF ORDERS WITHIN 90 DAYS, DISREGARDING THE IMPORTANT FACT THAT THE ENTI RE COUNTRY WAS IN LOCKDOWN, WE SHOULD COMPUTE THE PERIOD OF 90 DAYS BY EXCLUDING AT LEAST THE PERIOD DURING WHICH THE LOCKDOWN WAS IN FORCE . WE MUST FACTOR GROUND REALITIES IN MIND WHILE INTERPRETING THE TIME LIMIT FOR THE PRONOUNCEMENT OF THE ORDER . LAW IS NOT BROODING OMNIPOTENCE IN THE SKY . IT IS A PRAGMATIC TOOL OF THE SOCIAL ORDER . THE TENETS OF LAW BEING ENACTED ON THE BASIS OF PRAGMATISM, AND THAT IS HOW THE LAW IS REQUIRED TO INTERPRETED . THE INTERPRETATION SO ASSIGN ED BY US IS NOT ONLY IN CONSONANCE WITH THE LETTER AND SPIRIT OF RULE 34 ( 5 ) BUT IS ALSO A PRAGMATIC APPROACH AT A TIME WHEN A DISASTER, NOTIFIED ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 20 OF 21 UNDER THE DISASTER MANAGEMENT ACT 2005, IS CAUSING UNPRECEDENTED DISRUPTION IN THE FUNCTIONING OF OUR JUSTICE DELIVERY SYSTEM . UNDOUBTEDLY, IN THE CASE OF OTTERS CLUB VS DIT [( 2017 ) 392 ITR 244 ( BOM )] , HON BLE BOMBAY HIGH COURT DID NOT APPROVE AN ORDER BEI NG PASSED BY THE TRIBUNAL BEYOND A PERIOD OF 90 DAYS, BUT THEN IN THE PRESENT SITUATION HON BLE BOMBAY HIGH COURT ITSELF HAS, VIDE JUDGMENT DATED 15 TH APRIL 2020, HELD THAT DIRECTED WHILE CALCULATING THE TIME FOR DISPOSAL OF MATTERS MADE TIME - BOUND BY THI S COURT, THE PERIOD FOR WHICH THE ORDER DATED 26TH MARCH 2020 CONTINUES TO OPERATE SHALL BE ADDED AND TIME SHALL STAND EXTENDED ACCORDINGLY . THE EXTRAORDINARY STEPS TAKEN SUO MOTU BY HON BLE JURISDICTIONAL HIGH COURT AND HON BLE SUPREME COURT ALSO INDICAT E THAT THIS PERIOD OF LOCKDOWN CANNOT BE TREATED AS AN ORDINARY PERIOD DURING WHICH THE NORMAL TIME LIMITS ARE TO REMAIN IN FORCE . IN OUR CONSIDERED VIEW, EVEN WITHOUT THE WORDS ORDINARILY , IN THE LIGHT OF THE ABOVE ANALYSIS OF THE LEGAL POSITION, THE PERIOD DURING WHICH LOCK OUT WAS IN FORCE IS TO EXCLUDED FOR THE PURPOSE OF TIME LIMITS SET OUT IN RULE 34 ( 5 ) OF THE APPELLATE TRIBUNAL RULES, 1963 . VIEWED THUS, THE EXCEPTION, TO 90 - DAY TIME - LIMIT FOR PRONOUNCEMENT OF ORDERS, INHERENT IN RULE 34 ( 5 )( C ) , WITH RESPECT TO THE PRONOUN CEMENT OF ORDERS WITHIN NINETY DAYS, CLEARLY COMES INTO PLAY IN THE PRESENT CASE . OF COURSE, THERE IS NO, AND THERE CANNOT BE ANY, BAR ON THE DISCRETION OF THE BENCHES TO REFIX THE MATTERS FOR CLARIFICATIONS BECAUSE OF CONSIDERABLE TIME LAG BETWEEN THE POINT OF TIME WHEN THE HEARING IS CONCLUDED AND THE POINT OF TIME WHEN THE ORDER THEREON IS BEING FINALIZED, BUT THEN, IN OUR CONSIDERED VIEW, NO SUCH EXERCISE WAS REQUIRED TO BE CARRIED OUT ON THE FACTS OF THIS CASE . 11. IN THE RESULT, ALL THE APPEALS ARE DISMISSED, IN THE TERMS INDICATED ABOVE . ORDER PRONOUNCED UNDER RULE 34 ( 4 ) OF THE INCOME TAX ( APPELLATE TRIBUNAL ) RULES, 1962, BY PLACING THE DETAILS ON THE NOTICE BOARD . SD / XX SD / XX MADHUMITA ROY PRAMOD KUMAR ( JUDICIAL MEMBER ) ( VICE PRESIDENT ) MUMBAI, DATED THE 27 TH DAY OF MAY, 2020 ITA NO . 2173,2174 AND 2175 / MUM / 2018 ASSESSMENT YEAR : 200 - 11, 11 - 12 AND 12 - 13 PAGE 21 OF 21 COPIES TO : ( 1 ) THE APPELLANT ( 2 ) THE RESPONDENT ( 3 ) CIT ( 4 ) CIT ( A ) ( 5 ) DR ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI