M/s. Resistoflex Dynamics (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 2554/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69573 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 01-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Depreciation; Principle of natural justice; Rule of consistency
• Section: 143(3); 14A; 80IB

Judgement Text

I.T.A. NO. 2554/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2554/DEL/2013 A.Y. : 200 9 - 10 M/S RESISTOFLEX DYNAMICS (P) LTD., C/0 RRA TAXINDIA, D-28, SOUTH EXTENSION, PART-I, NEW DELHI -110049 (PAN: AACCR 3766 P) VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE- 15(1), NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : DR. RAKESH GUPTA, ADVOCATE DEPARTMENT BY : SH. KEYUR PATEL. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LD. CIT(A) DATED 19.3.2013 AND PERTAINS TO ASSE SSMENT YEAR 2009-10.. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTA NCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACT S IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S. 80IC IN RESPECT OF THE PROFITS DERIVED FROM PAONTA SAHIB UN IT OF THE APPELLANT ON THE BASIS THAT THE APPELLANTS SA ID UNDERTAKING IS NOT MANUFACTURING ARTICLE OR THING. I.T.A. NO. 2554/DEL/2013 2 2. THAT IN ANY VIEW OF THE MATTER AND IN ANY CASE, THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF DED UCTION U/S. 80IC IN RESPECT OF THE PROFITS DERIVED FROM PA ONTA SAHIB UNIT IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 44,865/- U/S. 14 A BY INVOKING THE PROVISIONS OF RULE 8D OF INCOME TAX RU LES, 1962. 4. THAT IN ANY VIEW OF THE MATTER AND IN ANY CASE, THE ACTION OF LD. CIT(A) IN CONFIRMING THE DISALLOWANC E OF RS. 44,865/- U/S. 14A BY INVOKING THE PROVISIONS OF RUL E 8D OF INCOME TAX RULES, 1962 IS BAD IN LAW AND AGAINST TH E FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT HAVING REGARD TO FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN P ASSING THE IMPUGNED ORDER CONTRARY TO LAW AND FACTS AND WITHOUT PROVIDING ADEQUATE OPPORTUNITY AND WITHOUT CONSIDERING THE PRINCIPLES OF NATURAL JUSTICE. 6. THAT THE APPELLANT CRAVES THE LAVE TO ADD, MODIF Y, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJ UDICE TO EACH OTHER. 3. APROPOS ISSUE OF DISALLOWANCE U/S. 14A, LD. COUN SEL OF THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING TH E GROUNDS RAISED IN GROUND NO. 3 & 4 OF THE GROUNDS OF APPEAL. ACCO RDINGLY, WE DISMISS THESE GROUNDS RAISED BY THE ASSESSEE. I.T.A. NO. 2554/DEL/2013 3 3.1 FURTHER LD. COUNSEL OF THE ASSESSEE SUBMITTED T HAT ONLY EFFECTIVE GROUND IN THIS CASE IS THAT LD. CIT(A) ER RED IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S. 80IC IN RESPECT OF PROFIT DERIVED FROM POANTA SAHIB UNIT. 4. IN THIS CASE ASSESSEE COMPANY HAS THREE UNITS A S UNDER:- - UNIT I AT NOIDA, WHICH IS ENGAG ED IN THE MANUFACTURING / ASSEMBLING OF AIR SPRING AND SUSPENSION SYSTEM OF INDUSTRIAL SEGMENTS ONLY. - UNIT II AT GREATER NOIDA, WHICH IS ENGAGED IN THE MANUFACTURING OF AIR SPRINGS FOR AUTOMOTIVE SEGMENT AND; - UNIT III AT PAONTA SAHIB, WHICH IS ENGAGED IN THE MANUFACTURING/ ASSEMBLING OF AIR SPRING AND SUSPENSION SYSTEM FOR RAILWAYS ONLY. 4.1 THE ASSESSEE CLAIMED DEDUCTION U/S. 80IB OF 30 % FOR NOIDA UNIT AND DEDUCTION U/S. 80IC OF 100% FOR PONTA SAHI B UNIT. THE ASSESSING OFFICER REFERRED TO VARIOUS EXPENSES OF A LL THE UNITS AND OBSERVED THAT THE EXPENSES CLAIMED IN RESPECT OF PO NTA SAHIB UNIT ARE MUCH LESS VIS-A-VIS THE EXPENSE FOR NOIDA AND G REATER NOIDA UNITS. ASSESSING OFFICER WAS OF THE OPINION THAT E VEN THE TOTAL INVESTMENT IN FIXED ASSETS OF PONTA SAHIB UNIT WAS LESS AND IN WHICH CASE THE OTHER TWO UNITS SHOULD HAVE SHOWN HIGHER PRODUCTIVITY AND RETURNS. ASSESSING OFFICER ALSO REFERRED TO THE INVESTMENT IN PLANT AND MACHINERY IN THE UNITS AND THE NET PROFI T MARGIN THEREOF. ASSESSING OFFICER WAS NOT CONVINCED BY THE EXPLANAT ION GIVEN BY THE ASSESSEE IN THE CONTEXT OF PROFITABILITY OF THE UNI TS. ASSESSING OFFICER OPINED THAT THE DISCREPANCY COULD ONLY BE D UE TO THE FACT THAT HIGHER PROFIT REFLECTED FOR PONTA SAHIB UNIT WAS FOR CLAIMING DEDUCTION UNDER CHAPTER VI-A. 4.2 FURTHER, THE ASSESSING OFFICER REFERRED TO THE CONTRACT AWARDED TO THE PONTA SAHIB UNIT BY THE MINISTRY OF RAILWAY S. REFERRING TO THE I.T.A. NO. 2554/DEL/2013 4 WORK AWARD, ASSESSING OFFICER HELD THAT THE WORK A WARD WAS FOR SUPPLY OF AIR SPRINGS MANUFACTURED BY M/S CONTY TECH, GERMANY. HENCE, ASSESSING OFFICER OBSERVED THAT IT IS CLEAR THAT ASSESSEE COMPANY WAS NOT MANUFACTURING AIR SPRINGS AND EMERG ENCY BUMPER AS CLAIMED BY THE ASSESSEE COMPANY. HE OBSERVED T HAT THE ASSESSEE HAS BEEN SPECIFICALLY GIVEN THE DIRECTION TO PROVIDE THE AIR SPRINGS AND BUMBER DULY MANUFACTURED BY M/S CONTITE CH/GERMANY. ASSESSING OFFICER FURTHER REFERRED TO THE HEAVY EXP ENSES BEING INCURRED ON FREIGHT AND CARTAGE. FROM THE ABOVE, THE ASSESSING OFFICER INFERRED THAT NO MANUFACTURING ACTIVITY IS BEING CARRIED OUT BY PONTA SAHIB UNIT WHICH CAN BE CLAIMED AS ELIGIBL E FOR DEDUCTION U/S. 80IC. ACCORDINGLY, ASSESSING OFFICER DISALLOWE D THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S. 80IC. 5. BEFORE THE LD. CIT(A) ASSESSEE CLAIMED THAT IT U NDERTOOK VARIOUS OPERATIONS IN THE NATURE OF ASSEMBLY, FASTE NING, FABRICATING, TESTING ETC. TOWARDS EMERGENCE OF THE FINAL PRODUC T AND NEW PRODUCT IS FORMED BY THE ACTIVITIES UNDER TAKEN BY THE ASSESSEE. IT WAS SUBMITTED THAT ASSEMBLY IN THIS CASE AMOUNT S TO MANUFACTURING. ASSESSEE FURTHER SUBMITTED DETAILED SUBMISSIONS AND FLOW PROCESS TO JUSTIFY THAT ACTUAL MANUFACTURI NG ACTIVITY WAS BEING CARRIED OUT AT THE PONTA SAHIB UNIT. IT WAS CLAIMED THAT RUBBER PARTS WERE IMPORTED FROM GERMANY AND THE METAL PAR TS WERE MANUFACTURED AT THE PONTA SAHIB UNIT. ASSESSEE FURT HER SUBMITTED THAT SINCE THE FINAL PRODUCT IS DIFFERENT FROM THE PRODUCT IMPORTED BY IT. IT IS ELIGIBLE FOR THE REQUISITE DEDUCTION U/S . 80IC OF THE ACT. IT WAS EMPHASIZED THAT THE INDUSTRIAL ACTIVITIES CARR IED OUT BY THE ASSESSEE TANTAMOUNT TO MANUFACTURING OR PRODUCTION OF ARTICLE OR THINGS. I.T.A. NO. 2554/DEL/2013 5 5.1 HOWEVER, LD. CIT(A) DID NOT ACCEPT THE ABOVE CO NTENTION. IN THIS REGARD, LD. CIT(A) REFERRED TO THE PROVISIONS OF SECTION 80IC. HE ALSO REFERRED TO THE SEVERAL CASES LAWS IN THIS REG ARD. LD. CIT(A) CONCLUDED AS UNDER:- APPLYING THE ABOVE TESTS, IF THE PRESENT CASE IS ANALYZED, IT EMERGES THAT IN CASE OF THE APPELLANT, THE ORIGINAL ARTICLE I.E. AIR SPRINGS, AS THE PHOTOGRAP HS FURNISHED INDICATE, DO NOT UNDERGO A SUBSTANTIAL CH ANGE AND A COMMERCIALLY DIFFERENT PRODUCT WITH DISTINCT IVE NAME, CHARACTER AND USE DOES NOT COME IN TO EXISTE NCE. EVEN THE METAL ATTACHMENTS ARE BEING MANUFACTURED A T THE NOIDA UNITS FROM WHERE THEY ARE BEING TRANSPORT ED TO A PAONTA SAHIB UNIT. THE GOODS BEING IMPORTED FROM GERMANY ARE REFERRED TO AS AIR SPRINGS AND SO ARE THE GOODS BEING SOLD TO THE RAILWAYS. EVEN THE MACHINER Y INSTALLED AT THE PAONTA SAHIB UNIT REFLECTS THE ACT IVITY OR THE LACK OF IT BEING UNDERTAKEN AT THE UNIT. THE T OTAL MACHINERY INSTALLED WORTH RS. 44 LACS IS A MERE EYE WASH TO CLAIM MANUFACTURING ACTIVITIES AT THE PAONTA SAH IB UNIT PREMISES. THE NATURE OF THE EMPLOYEES, THEIR QUALIFICATION, THE WAGES BEING PAID TO THEM, AND TH E WORK ASSIGNED TO EACH ALSO SHOW THAT THE MANUFACTURING ACTIVITY CLAIMED TO BE CARRIED OUT PAONTA SAHIB UNI T IS A MERE EYE WASH. ON THE BASIS OF THE FACTS PRESENTE D, THE CONCLUSION THAT INEVITABLY FOLLOWS IS THAT THE AP PELLANT COMPANY CANNOT BE SAID TO HAVE UNDERTAKEN BUSINESS ACTIVITIES WHICH AMOUNT TO MANUFACTURE OR PRODUCTI ON OF AN ARTICLE DIFFERENT FROM THE AIR SPRING MANUFACTUR ED BY M/S CONTITECH AND THEREFORE DOES NOT MERIT REQUISIT E DEDUCTION UNDER SECTION 80-IC(2) OF THE ACT. IN LIG HT OF THE I.T.A. NO. 2554/DEL/2013 6 FOREGOING DISCUSSION AND THE GIVEN SET OF FACTS, TH E APPELLANT COMPANY IS NOT ELIGIBLE FOR DEDUCTION UND ER SECTION 80IC OF THE ACT, AS IT CANNOT BE SAID TO HA VE MANUFACTURED OR PRODUCED ANY ARTICLE OR A THING. TH E DECISION OF THE AO IS, THEREFORE, CONFIRMED. 6. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IN FACT IS ENGAGED IN MANUFACTURING OF AIR SPRINGS ASSEMBLY A ND OTHER METAL PARTS WHICH ARE SUPPLIED TO INDIAN RAILWAYS IN ITS PONTA SAHIB UNIT. THE PROFIT DERIVED FROM THIS UNIT WHICH IS LOCATED IN PONTA SAHIB, HIMACHAL PRADESH QUALIFIED FOR DEDUCTION U/S. 80IC NOT ONLY IN THE YEAR UNDER APPEAL, BUT SINCE EARLIER YEARS I.E. IN THE ASSESSMENT YEAR 2007-08. LD. COUNSEL FURTHER SUBMITTED THAT T HE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2007-08 WAS PASSED U/S. 1 43(3) OF THE I.T. ACT AND DEDUCTION U/S. 80IC WAS ALLOWED. THIS CLAI M FOR DEDUCTION U/S. 80IC WAS ALSO MADE FOR ASSESSMENT YEAR 2008-09 AND WAS ALSO ALLOWED. THEREFORE, THE LD. COUNSEL OF THE ASSESSE E SUBMITTED THAT THERE IS NO JUSTIFICATION FOR DENYING THIS DEDUCTIO N IN THE YEAR UNDER APPEAL WHEN THE FACTS ARE BEING IDENTICAL. LD. CO UNSEL OF THE ASSESSEE IN THIS REGARD REFERRED TO THE FOLLOWING D ECISION FOR THE PROPOSITION THAT DEDUCTION IF ALLOWED IN INITIAL YE ARS CANNOT BE DENIED IN SUBSEQUENT YEARS. SUBHASH CHANDRA SEHGAL VS. DCIT 1126/DEL/2008 DAT ED 27.2.2009 (PAGE 127) 88 ITD 313 (CHD.) (3 RD MEMBER) DEDUCTION UNDER S. 80J ALLOWABILITY CLAIM ALLO WED IN EARLIER YEARS ONCE THE CLAIM FOR DEDUCTION UNDER SECTION 80J HAS BEEN ALLOWED TO THE ASSESSEE IN FIRST YEAR BY I.T.A. NO. 2554/DEL/2013 7 THE TRIBUNAL AND ALSO FOR SUBSEQUENT TWO YEARS, SU CH DEDUCTION IS ALLOWABLE FOR SUBSEQUENT ASSESSMENT YE AR FALLING WITHIN THE PERIOD OF FIVE YEARS CIT VS. M ODI INDUSTRIES LTD. 48 DTR 364 (DELHI). 8. FURTHERMORE, LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT PRINCIPLE OF CONSISTENCY HAS BEEN EMPHASIZED IN THE FOLLOWING CASE LAWS :- I) 245 ITR 490 (DEL.) II) 193 ITR 321 (SC) III) CIT VS. EXCEL INDUSTRIES LTD. PASSED BY THE HO NBLE APEX COURT IN CIVIL APPEAL NO. 125 OF 2013 DATED 08.10.2013. 8.1 WITHOUT PREJUDICE TO THE ABOVE, LD. COUNSEL OF THE ASSESSEE MADE FURTHER SUBMISSIONS FOR THE PROPOSITION THAT A SSESSEE WAS MANUFACTURING THE AIR SPRINGS ASSEMBLY AND WAS NOT INTO TRADING OF AIR SPRINGS AS ALLEGED BY THE ASSESSING OFFICER. IN THIS REGARD, LD. COUNSEL OF THE ASSESSEE REFERRED TO THE PURCHASE OR DER RECEIVED BY THE ASSESSEE FOR THE MANUFACTURING AND SUPPLY OF AI R SPRINGS ASSEMBLY, TO SHOW THAT THE ASSESSEE IS MANUFACTURIN G AIR SPRING ASSEMBLY WHICH IS DIFFERENT FROM AIR SPRING IMPORTE D BY THE ASSESSEE. LD. COUNSEL OF THE ASSESSEE FURTHER POIN TED OUT THAT THESE PURCHASE ORDER CLEARLY REFLECTS THE SPECIFIC TECHNI CAL SPECIFICATIONS TO WHICH THE MANUFACTURED PRODUCT HAS TO CONFORM TO SH OW THAT THE AIR SPRINGS IS DIFFERENT WHERE AS THE ASSESSEE MANUFACT URES AIR SPRINGS ASSEMBLY. LD. COUNSEL OF THE ASSESSEE FURTHER REFER RED TO THE PAPER BOOK THAT BRING OUT THE TECHNICAL SPECIFICATIONS F OR THE VARIOUS VARIANTS OF AIR SPRINGS ASSEMBLY MANUFACTURED BY TH E ASSESSEE FOR INDIAN RAILWAYS. LD. COUNSEL FURTHER REFERRED T O THE PROCESS FLOW I.T.A. NO. 2554/DEL/2013 8 CHART IN THE PAPER BOOK SUBMITTED FOR THE AIR SPR INGS ASSEMBLY MANUFACTURED BY THE ASSESSEE. LD. COUNSEL OF THE A SESSEE ALSO REFERRED TO THE CROSS SECTIONAL DIAGRAM OF AIR SPR INGS ASSEMBLY SUPPLIED TO THE INDIAN RAILWAYS TO SHOW THAT THERE ARE SEVERAL PARTS OF THE ASSEMBLY AND IT IS NOT THE AIR SPRINGS AND C ONICAL SPRINGS ALONE. FURTHERMORE, LD. COUNSEL OF THE ASSESSEE FU RTHER REFERRED TO THE LETTER OF APPROVAL ISSUED BY THE RESEARCH & DE SIGN AND STANDARDS ORGANIZATION, COPIES OF CENTRAL EXCISE I NVOICES, ASSESSMENT ORDER PASSED BY THE DISTRICT TAXATION OF FICER, COPY OF REGISTRATION CERTIFICATE ISSUED BY THE EXCISE AND T AXATION DEPARTMENT TO BUTTRESS THE PROPOSITION THAT THE ASS ESSEE WAS A MANUFACTURER AND WAS ENGAGED IN MANUFACTURING. 8.2 LD. COUNSEL FOR THE ASSESSEE FURTHER REFERRED TO THE OBSERVATIONS OF THE ASSESSING OFFICER WHERE ASSESSI NG OFFICER HAS MADE ADVERSE OBSERVATIONS REGARDING THE EXPENDITURE INCURRED BY THE ASSESSEE AND THE PROFITABILITY SHOWN. THE LD. C OUNSEL SUBMITTED THAT ASSESSING OFFICER TOTALLY ERRED IN HIS APPROAC H AND HAS NOT BEEN ABLE TO APPRECIATE THE FACTS OF THE CASE PROPERLY. 8.3 LD. D.R. ON THE OTHER HAND RELIED UPON THE ORDE RS OF THE ASSESSING OFFICER AND LD. CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. AT THE OUTSET, WE NOTE THAT THIS IS NOT TH E FIRST YEAR OF ASSESSEES CLAIM FOR DEDUCTION U/S. 80IC FOR ITS P ONTA SAHIB UNIT. IT IS INFACT THE 3 RD YEAR. IN THE EARLIER ASSESSMENT YEARS 2007-08 & 2008-09, THE ASSESSEE HAD BEEN DULY GRANTED DEDUCT ION U/S. 80IC. THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2007-0 8 SHOWS THAT THE DEDUCTION U/S. 80IC HAS BEEN ALLOWED EVEN IN AS SESSMENT U/S. 143(3) OF THE ACT. I.T.A. NO. 2554/DEL/2013 9 9.1 IN THIS REGARD, THE DECISION REFERRED BY THE LD . COUNSEL OF THE ASSESSEE IN C.I.T. VS. MODI INDUSTRIES (SUPRA) IS GERMANE. IN THIS CASE, THE DEDUCTION WAS WITH RESPECT TO SECTION 80J . IT WAS OBSERVED THAT THE CLAIM WAS ALLOWED IN THE EARLIER YEARS. H ENCE, IT WAS HELD THAT ONCE THE CLAIM FOR DEDUCTION U/S 80J HAS BEEN ALLOWED TO THE ASSESSEE IN THE FIRST YEAR BY THE TRIBUNAL AND ALSO FOR THE SUBSEQUENT TWO YEARS, SUCH DEDUCTION WAS ALLOWABLE IN THE SUBS EQUENT ASSESSMENT YEARS WITHIN THE PERIOD OF 5 YEARS. 9.2 FURTHER THE HONBLE APEX COURT IN THE CASE OF C.I.T. VS. EXCEL INDUSTRIES LTD. (SUPRA) HAS REITERATED THE EXPOSITI ON GIVEN BY THE APEX COURT IN THE CASE OF RADHA SOAMI SATSANG 193 I TR 321 AND PARSHURAM POULTRY WORKS 106 ITR 1. IT WAS HELD THA T AS IN SEVERAL ASSESSMENT YEARS THE REVENUE ACCEPTED THE ORDER OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND DID NOT PURSUE THE MATTE R ANY FURTHER, IT CANNOT BE ALLOWED TO FLIP FLOP ON THE ISSUE AND IT OUGHT LET THE MATTER REST RATHER THAN SPEND THE TAX PAYERS MONEY IN PUR SUING LITIGATION FOR THE SAKE OF IT. 10. IN OUR CONSIDERED OPINION, AS DISCUSSED ABOVE T HE ASSESSEE HAS BEEN GRANTED DEDUCTION U/S. 80IC IN EARLIER YEA RS AND THAT ALSO IN ASSESSMENT U/S. 143(3) OF THE ACT. NOW IN THE 3 RD YEAR THE REVENUE CANNOT SUDDENLY TAKE UP THE GROUND THAT T HE ASSESSEE IS NOT DOING ANY MANUFACTURING AND THEREFORE, IS NOT ENTITLED FOR DEDUCTION U/S. 80IC. THE CASE LAWS DISCUSSED HEREIN BOVE AMPLY SUPPORT THIS PROPOSITION. 11. APART FROM ABOVE, WE FIND THAT ON THE MERITS A LSO ASSESSEE HAS COGENT CASE THAT ASSESSEE WAS MANUFACTURING AIR SPRING ASSEMBLY AND SUPPLYING IT TO INDIAN RAILWAYS AND IT WAS NOT MERELY TRADING AS ALLEGED BY THE REVENUE. I.T.A. NO. 2554/DEL/2013 10 12. IN THIS REGARD, WE CAN GAINFULLY REFER TO THE P ROVISIONS OF SECTION 80IC:- [ SPECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKIN GS OR ENTERPRISES IN CERTAIN SPECIAL CATEGORY STATES. 80-IC. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB- SECTION (2), THERE SHALL, IN ACCORDANCE WITH AND SU BJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS, AS SPECIFIED IN SUB-SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE, ( A ) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODU CE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDU LE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THIN G SPECIFIED IN THE THIRTEENTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PER IOD BEGINNING ( I ) ON THE 23RD DAY OF DECEMBER, 2002 AND ENDING BEF ORE THE 1ST DAY OF APRIL, [2007], IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ES TATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEM E PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTI FIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF SIKKIM; OR ( II ) ON THE 7TH DAY OF JANUARY, 2003 AND ENDING BEFOR E THE 1ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUC TURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR IN DUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF HIMACHAL PRADESH OR TH E STATE OF UTTARANCHAL; OR ( III ) ON THE 24TH DAY OF DECEMBER, 1997 AND ENDING BEF ORE THE 1ST DAY OF APRIL, 2007, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED I NFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ES TATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEM E PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTI FIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN ANY OF THE NORTH-EAST ERN STATES; ( B ) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODU CE ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING , SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN TH AT SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING ( I ) ON THE 23RD DAY OF DECEMBER, 2002 AND ENDING BEF ORE THE 1ST DAY OF APRIL, [2007], IN THE STATE OF SIKKIM; OR I.T.A. NO. 2554/DEL/2013 11 ( II ) ON THE 7TH DAY OF JANUARY, 2003 AND ENDING BEFOR E THE 1ST DAY OF APRIL, 2012, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTAR ANCHAL; OR ( III ) ON THE 24TH DAY OF DECEMBER, 1997 AND ENDING BEFO RE THE 1ST DAY OF APRIL, 2007, IN ANY OF THE NORTH-EASTERN STATES. (3) THE DEDUCTION REFERRED TO IN SUB-SECTION (1) SH ALL BE ( I ) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REF ERRED TO IN SUB-CLAUSES ( I ) AND ( III ) OF CLAUSE ( A ) OR SUB-CLAUSES ( I ) AND ( III ) OF CLAUSE ( B ), OF SUB-SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR TEN ASSESSMENT Y EARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR; ( II ) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REF ERRED TO IN SUB-CLAUSE ( II ) OF CLAUSE ( A ) OR SUB-CLAUSE ( II ) OF CLAUSE ( B ), OF SUB-SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER, TWENTY-FIVE PER CENT (OR THIRTY PER CEN T WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. (4) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY: ( I ) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONST RUCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF A N UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-ESTABLISHMENT, RECONST RUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN TH AT SECTION; ( II ) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINE SS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION. THE PROVISIONS OF EXPLANATIONS 1 AND 2 TO SUB-SECTION (3) OF SECTION 80-IA SHALL APPLY FOR THE PURPOSES OF CLAUSE ( II ) OF THIS SUB-SECTION AS THEY APPLY FOR THE PURPOSE S OF CLAUSE ( II ) OF THAT SUB-SECTION. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTION 10A OR SECTION 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKING OR ENTERPRISE. (6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SECTION, OR UNDE R THE SECOND PROVISO TO SUB-SECTION (4) OF SECTION 80-IB OR UNDER SECTION 10C , AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. (7) THE PROVISIONS CONTAINED IN SUB-SECTION (5) AND SUB-SECTIONS (7) TO (12) OF SECTION 80-IA SHALL, SO FAR AS MAY BE, APPLY TO THE ELIGIBLE UNDE RTAKING OR ENTERPRISE UNDER THIS SECTION. I.T.A. NO. 2554/DEL/2013 12 (8) FOR THE PURPOSES OF THIS SECTION, ( I ) 'INDUSTRIAL AREA' MEANS SUCH AREAS, WHICH THE BO ARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SC HEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; ( II ) 'INDUSTRIAL ESTATE' MEANS SUCH ESTATES, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SC HEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; ( III ) 'INDUSTRIAL GROWTH CENTRE' MEANS SUCH CENTRES, WH ICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; ( IV ) 'INDUSTRIAL PARK' MEANS SUCH PARKS, WHICH THE BOA RD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SC HEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; ( V ) 'INITIAL ASSESSMENT YEAR' MEANS THE ASSESSMENT YE AR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE BEGINS TO M ANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR COMMENCES OPERATION OR COMPLETES SUBSTAN TIAL EXPANSION; ( VI ) 'INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE' ME ANS SUCH CENTRES, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECI FY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; ( VII ) 'NORTH-EASTERN STATES' MEANS THE STATES OF ARUNAC HAL PRADESH, ASSAM, MANIPUR, MEGHALAYA, MIZORAM, NAGALAND AND TRIPURA; ( VIII ) 'SOFTWARE TECHNOLOGY PARK' MEANS ANY PARK SET UP IN ACCORDANCE WITH THE SOFTWARE TECHNOLOGY PARK SCHEME NOTIFIED BY THE GOVERNMENT O F INDIA IN THE MINISTRY OF COMMERCE AND INDUSTRY; ( IX ) 'SUBSTANTIAL EXPANSION' MEANS INCREASE IN THE INV ESTMENT IN THE PLANT AND MACHINERY BY AT LEAST FIFTY PER CENT OF THE BOOK VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF T HE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN; ( X ) 'THEME PARK' MEANS SUCH PARKS, WHICH THE BOARD, M AY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAM ED AND NOTIFIED BY THE CENTRAL GOVERNMENT . ] 13. FROM THE ABOVE, IT IS EVIDENT THAT DEDUCTION U/ S. 80IC IS GRANTED PARTICULARLY TO UNDERTAKING/ENTERPRISE REFE RRED TO IN EITHER CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (2), TO CL AIM RELIEF U/S. 80IC, THE SAID UNDERTAKING/ ENTERPRISE MUST MANUFACTURE OR PRODUCE AN I.T.A. NO. 2554/DEL/2013 13 ARTICLE OR THING. WHAT THE TERMS TO MANUFACTURE O R PRODUCE ANY ARTICLE OR THING SIGNIFIES HAS NOT BEEN SPECIFICA LLY DEFINED IN THE ACT. HOWEVER, REFERENCE IN THIS REGARD CAN BE MADE TO SEVERAL CASE LAWS ON THIS ISSUE. DEPUTY CST VS. PIO FOOD PACKERS (1980) 46 STC 63, 65 THERE ARE SEVERAL CRITERIA FOR DETERMINING WHETHER A COMMODITY IS CONSUMED IN THE MANUFACTURE OF ANOTHE R. THE GENERALLY PREVALENT TEST IS WHETHER THE ARTICLE PRO DUCED IN THE TRADE, BY THOSE WHO DEAL IN IT, AS DISTINCT IN IDEN TITY FROM THE COMMODITY INVOLVED IN ITS MANUFACTURE. COMMONLY, MANUFACTURE IS THE END RESULT OF ONE OR MORE PROCES SES THROUGH WHICH THE ORIGINAL COMMODITY IS MADE TO PAS S. THE NATURE AND EXTENT OF PROCESSING MAY VARY FROM ONE C ASE TO ANOTHER, AND INDEED THERE MAY BE SEVERAL STAGES OF PROCESSING AND PERHAPS A DIFFERENT KIND OF PROCESSING AT EACH STAGE. WITH EACH PROCESS SUFFERED, THE ORIGINAL COMMODITY EXPERIENCES A CHANGE. BUT IT IS ONLY WHEN THE CHANG E, OR A SERIES OF CHANGES, TAKE THE COMMODITY TO THE POINT WHERE COMMERCIALLY IT CAN NO LONGER BE REGARDED AS THE OR IGINAL COMMODITY BUT INSTEAD IS RECOGNIZED AS A NEW AND DI STINCT ARTICLE THAT A MANUFACTURE CAN BE SAID TO TAKE PLAC E. SIMILARLY, THE APEX COURT IN THE CASE OF C.I.T. VS. NC BHUDHIRAJA, 204 ITR 413 (SC), HAS HELD AS UNDER:- THE TEST FOR DETERMINING WHETHER MANUFACTURE CAN BE SAID TO HAVE TAKEN PLACE IS WHETHER THE COMMODITY WHICH IS SUBJECTED TO THE PROCESS OF MANUFACTURE CAN NO LONGER BE REGA RDED AS THE ORIGINAL COMMODITY BUT IS RECOGNISED IN THE TRA DE AS A NEW AND DISTINCT COMMODITY. I.T.A. NO. 2554/DEL/2013 14 IN THE CASE OF ASPINWALL AND CO. LTD. VS. CIT 251 I TR 323 (SC), THE FOLLOWING OBSERVATIONS AT P. 327 ARE ALSO IMPOR TANT:- THE WORLD MANUFACTURE HAS NOT BEEN DEFINED IN THE ACT, IN THE ABSENCE OF A DEFINITION OF THE WORD MANUFACTUR E IT HAS TO BE GIVEN A MEANING AS IS COMMON PARLANCE. IT IS TO BE UNDERSTOOD AS MEANING THE PRODUCTION OF ARTICLES FO R USE FROM RAW OR PREPARED MATERIAL BY GIVING SUCH MATERIALS NEW FORMS, QUALITIES OR COMBINATIONS WHETHER BY HAND LABOUR OR MACHINES. IF THE CHANGE MADE IN THE ARTICLE RESULTS IN A NEW AND DIFFERENT ARTICLE THEN IT WOULD AMOUNT TO A MANUFACTURING ACT IVITY. AS OBSERVED BY THE SUPREME COURT IN ADITYA MILLS LT D. VS. UNION OF INDIA, AIR 1988 SC 2237, MANUFACTURE IS CO MPLETE AS SOON AS THE RAW MATERIAL UNDERGOES SOME CHANGE AND A NEW SUBSTANCE OR ARTICLE IS BROUGHT INTO EXISTENCE, HAV ING ITS OWN CHARACTER AND USE. KANATAKA HIGH COURT IN THE CASE OF C.I.T. VS. DARSH AK LTD. 247 ITR 480 EXPLAINED THE WORD MANUFACTURE AS UNDER:- THE WORD MANUFACTURE IS TO BE UNDERSTOOD IN A WIDE SENSE. MANUFACTURE WOULD IMPLY A CHANGE AND A TRANSFORMATI ON. A NEW AND DIFFERENT ARTICLE MUST EMERGE HAVING A DIST INCT AND DIFFERENT CHARACTER AND USE. IN C.I.T. VS. PREMIER TOBACCO PACKERS P. LTD. (2003 ) 284 ITR 222 (MAD.) IT WAS HELD :- THE WORD MANUFACTURE HAS NOT BEEN DEFINED IN THE INCOME TAX ACT. IN THE ABSENCE OF A DEFINITION, THE WORD MANUFACTURE HAS TO BE GIVEN A MEANING AS IS UNDERSTOOD IN COMMON PARLANCE. IT IS TO BE UNDERSTOOD AS MEANING THE PRODUCTION OF ARTICLES I.T.A. NO. 2554/DEL/2013 15 FOR USE FROM RAW OR PREPARED MATERIALS BY GIVING SUCH MATERIALS NEW FORMS, QUALITIES OR COMBINATIONS WHETHER BY HAND OR MACHINES. IF THE CHANGE MADE IN THE ARTICLE RESULTS IN A NEW AND DIFFERENT ARTICLE THEN IT WOULD AMOUNT TO MANUFACTURING ACTIVITY. IN CIT VS. JAMAL PHOTO INDUSTRIES (I) PVT. LTD. 285 ITR 209 (MAD.) IT WAS HELD:- THE EXPRESSION MANUFACTURE INVOLVES THE CONCEPT OF CHANGES EFFECTED TO THE BASIC RAW MATERIAL RESULTI NG IN THE EMERGENCE OF, OR TRANSFORMATION INTO, A NEW COMMERCIAL COMMODITY. BUT IT IS NOT NECESSARY THAT THE ORIGINAL ARTICLES OR MATERIAL SHOULD HAVE LOST ITS IDENTITY COMPLETELY. ALL THAT IS REQUIRED IS TO F IND OUT WHETHER AS A RESULT OF THE OPERATION IN QUESTION, A DIFFERENT COMMODITY HAS BEEN PRODUCED HAVING ITS OW N NAME, IDENTITY OR END USE. 14. THUS, FROM THE ABOVE, IT IS EVIDENT THAT ESSEN CE OF MANUFACTURING IS THAT WHAT IS MADE SHALL BE A DIFFE RENT THING FROM THAT OUT OF WHICH IT IS MADE DESPITE THE ORIGINAL M ATERIAL NOT LOSING ITS IDENTITY COMPLETELY. MANUFACTURING PROCESS POS TULATES SOME CHANGE IN THE SHAPE OF NEW THINGS WITH A DISTINCT N AME, CHARACTER OR USE. IN THE PRESENT CASE, ASSESSEE HAS MADE ELABORA TE SUBMISSIONS IN THE PAPER BOOK TO JUSTIFY THAT ASSESSEE IS ENGAG ED IN THE MANUFACTURE OR PRODUCTION OF ARTICLE OR THING. IN THIS REGARD, LD. COUNSEL OF THE ASSESSEE HAS MADE ELABORATE SUBMISSI ONS ALONGWITH PAPER BOOK, ANNEXURES, DIAGRAMS PROCESS CHART AND P HOTOGPRAH. FOLLOWING SUBMISSIONS EXTRACTED FROM THE PAPER BOOK SUBMITTED BY THE LD. COUNSEL OF THE ASSESSEE CAN BE GAINFULLY RE FERRED:- I.T.A. NO. 2554/DEL/2013 16 A. THE APPELLANT IS INDEED ENGAGED IN MANUFACT URE. 1. BESIDES THE OBJECTION AS TO THE INTER SE INTER SE INTER SE INTER SE PROFITABILITY PERCENTAGE OF THE THREE UNITS, MAIN FINDING OF THE LD. ASSESSING OFFICER IS THAT THE APPELLANT IS NOT UNDE RTAKING MANUFACTURE AT THE PAONTA SAHIB UNIT AND THEREFORE THE CLAIM FOR EXEMPTION UNDER SECTION 80IC IS NOT PROPE R. THE APPELLANT SUBMITS THAT THIS FINDING OF THE LD. ASSE SSING OFFICER IS GROSSLY INACCURATE, CONTRARY TO THE FACT UAL POSITION AS CERTIFIED BY VARIOUS GOVERNMENTAL AUTHO RITIES AND IS BASED UPON AN INCORRECT APPRAISAL OF THE WOR K ORDER PLACED UPON THE APPELLANT BY INDIAN RAILWAYS IN TERMS OF WHICH THE APPELLANT IS UNDERTAKING THE MANUFACTURING ACTIVITY AT THE PAONTA SAHIB UNIT. 2. THE APPELLANT SUBMITS THAT THE ACTIVITY UNDERTAK EN BY THE APPELLANT AT THE PAONTA SAHIB UNIT INDEED AMOUNTS T O MANUFACTURE OF AIR SPRING SYSTEM FOR INDIAN RAILWAY S AND THUS THE CLAIM FOR EXEMPTION UNDER SECTION 80IC IS WELL FOUNDED. THE APPELLANT IS SEQUENTIALLY EXPLAINING I N THE FOLLOWING PARAGRAPHS THE MANNER IN WHICH THE ACTIVI TIES ARE UNDERTAKEN AT THE PAONTA SAHIB UNIT AMOUNTING T O MANUFACTURE OF AIR SPRING SYSTEM FOR INDIAN RAILWAY S. 3. THE PROCESS WAS INITIATED WITH THE FLOATING OF TEND ERS BY THE INDIAN RAILWAYS FOR SUPPLY OF AIR SPRING SYSTEM S TOWARDS FITMENT IN THE RAILWAY COACHES MANUFACTURED AT THE INTEGRATED COACH FACTORY (ICF), CHENNAI. THE APPELLANT BID FOR THE TENDERS AND WAS ONE OF THE PA RTIES WHO WERE AWARDED THE TENDER FOR MANUFACTURE AND SUPPLY OF THESE AIR SPRING SYSTEMS. IT MUST HERE BE I.T.A. NO. 2554/DEL/2013 17 POINTED OUT THAT AS FAR AS INDIAN RAILWAYS IS CONCE RNED, AIR SPRING ASSEMBLY IS A NEW SUSPENSION DESIGN WORK ING ON COMPRESSED AIR FOR FITMENT IN THE EXISTING BOGIE S OF INDIAN RAILWAYS. IT CATERS TO THE INCREASED PAYLOAD DEMANDS AND WEIGHT IMBALANCES INHERENT TO THE EXIST ING COACHES. 4. PURSUANT TO THE AWARD OF TENDER, PURCHASE ORDERS WERE RECEIVED BY THE APPELLANT TOWARDS THE MANUFACTURE A ND SUPPLY OF AIR SPRING ASSEMBLIES. ILLUSTRATIVE COPIE S OF THESE PURCHASE ORDERS ARE ENCLOSED HEREWITH AS ANNEXURE - 2. . . . THESE PURCHASE ORDERS CLEARLY REFLECT THAT THE PURC HASES ARE BEING MADE BY THE INDIAN RAILWAYS AGAINST THE S PECIFIC TECHNICAL SPECIFICATIONS TO WHICH THE MANUFACTURED PRODUCT HAS TO CONFORM TO. THERE ARE A NUMBER OF TH ESE TECHNICAL SPECIFICATIONS DEPENDING UPON THE VARIOUS VARIANTS OF THE AIR SPRINGS (IN VIEW OF THE DIFFERE NT TYPES OF RAILWAYS COACHES MANUFACTURED AT THE ICF, CHENNAI) AND ARE COLLECTIVELY ENCLOSED HEREWITH AS ANNEXURE-3. 5. ONE OF THE COMMON FEATURES UNDERLYING THESE TECH NICAL SPECIFICATIONS IS THAT THE AIR SPRINGS HAVE TO BE MANUFACTURED BY EMPLOYING ONLY THE SPECIFIED ITEMS IN THE MANUFACTURING PROCESS. AN UNDERSTANDING OF THE MANUFACTURING PROCESS UNDERTAKEN BY THE APPELLANT A LONG WITH AN APPRECIATION OF THE ROLE OF THE TECHNICAL SPECIFICATIONS OF RAW MATERIALS IS RELEVANT IN DETE RMINING THE CLAIM OF 'MANUFACTURE'. THEREFORE THESE PROCESS ES ARE EXPLAINED IN SOME DETAIL. 6. AIR SPRING ASSEMBLY CONSISTS OF A FLEXIBLE RUBBE R BELLOW WHOSE OPEN ENDS ARE PRESSED ONTO THE SEALING SURFAC ES OF I.T.A. NO. 2554/DEL/2013 18 THE TOP MOUNTING PLATE AND BASE PLATE TO ALLOW THE REQUIRED AIR PRESSURE TO DEVELOP IN THE AIR SPRING ASSEMBLY WITHOUT LEAKING (LIKE IN TUBELESS TYRES). IT ALSO CONSISTS OF AN EMERGENCY SPRING BUMPER, WHICH IS INTEGRATED IN THE AIR SPRING ASSEMBLY TO ENSURE THE TRAIN CONTINUES TO RUN IN EMERGENCY CONDITIONS WHEN AIR I S DEFLATED. THE APPLICATION SPECIFIC METAL PARTS ARE ESSENTIAL TO ALLOW AIR PRESSURIZATION OF THE AIR SPRING ASSEM BLY AND TO SERVE AS AN INTERFACE FOR FITMENT ON THE RAIL VE HICLE. A COPY OF THE CROSS-SECTIONAL VIEW IS ALSO ENCLOS ED HEREWITH AS ANNEXURE - 4. IN A TYPICAL AIR SPRING MANUFACTURED BY THE APPELLANT FOR THE INDIAN RAILWA YS, THERE ARE THREE MAIN COMPONENTS; (A) AIR SPRING - T OP PLATE; (B) SLIDING PLATE; AND (C) EMERGENCY SPRING AND BOTTOM PLATE. CERTAIN MANUFACTURING PROCESSES ARE UNDERTAKEN IN ORDER TO MANUFACTURE THESE THREE COMPONENTS THEMSELVES AND THEREAFTER THESE THREE COMPONENTS ARE FURTHER SUBMITTED TO MANUFACTURING PROCESSES IN ORDER TO FINALLY ARRIVE AT THE AIR SPR INGS WHICH ARE SUPPLIED TO THE INDIAN RAILWAYS. COPIES OF THE ABOVE MANUFACTURING PROCESS FOR THE COMPONENTS ARE ALSO COLLECTIVELY ENCLOSED HEREWITH AS ANNEXURE - 5. 7. IN THE ABOVE CHARTS IT MAY BE NOTED THAT OUT OF THE VARIOUS ACTIVITIES UNDERTAKEN AND THE RAW MATERIALS EMPLOYED IN ORDER TO MANUFACTURE THESE COMPONENTS THE APPELLANT IMPORTS (A) AIR SPRING COMPONENT (FIT TED IN THE TOP PLATE) AND (B) EMERGENCY AIR SPRING COMPONENT (FITTED IN THE EMERGENCY SPRING AND CALIBRATED WITH THE BOTTOM PLATE). THESE ITEMS ARE I.T.A. NO. 2554/DEL/2013 19 IMPORTED FROM GERMANY FROM M/S CONTITECH LUFTFEDERSYSTEME GMBH (HANNOVER, GERMANY). REST ALL OTHER GOODS / RAW MATERIALS REQUIRED IN THE MANUFACTURING PROCESS ARE PROCURED FROM INDIA AND EMPLOYED BY THE APPELLANT IN THE MANUFACTURING PROCESS AT THE PAONTA SAHIB UNIT. FOR ILLUSTRATION, CORROSION RESISTANT STEEL / STAINLESS STEEL; METAL PARTS; NUTS, SCREWS AND BLOTS; ETC. ARE PROCURED BY THE APPELLANT AND UTILIZATION FOR CARRYING OUT THE MANUFACTURING PROCESS AT THE PAONTA SAHIB UNIT. ILLUSTRATIVE INVOICES OF THE IMPORTED GOODS AND THE RAW MATERIALS PROCURED LOCALLY ARE COLLECTIVELY ENCLOSE D HEREWITH AS ANNEXURE - 6 AND ANNEXURE - 7 RESPECTIVELY. 8. ONCE THE THREE COMPONENTS ARE MANUFACTURED / FABRICATED BY THE APPELLANT AT THE PAONTA SAHIB UNIT, THE APPELLANT FURTHER UNDERTAKES THE ASSEMBLY PROCESS OF THESE THREE COMPONENTS IN ORDER TO MANUFACTURE THE AIR-SPRING ASSEMBLY WHICH HAS TO BE SUPPLIED TO THE INDIAN RAILWAYS. THE MANUFACTURING CHART TO THIS EFFECT IS ENCLOSED HEREWITH AS ANNEXURE - 8 ALONG WITH PHOTOGRAPHS. 9. ALL THESE RAW MATERIALS ARE PROCURED AS PER THE SPECIFICATIONS OF THE 'RESEARCH, DESIGNS & STANDARDS ORGANIZATION', OF THE MINISTRY OF RAILWAYS, GOVERNMENT OF INDIA (RDSO) IN TERMS OF THE TENDER AWARDED TO THE APPELLANT AND THE PURCHASE ORDERS. THIS IS EVIDENT FROM A BARE PERUSAL OF THE PURCHASE ORDERS WHICH SPECIFY THAT I.T.A. NO. 2554/DEL/2013 20 THE SUPPLIES SHALL BE AS PER RDSO SPECIFICATIONS. AIR SPRING ASSEMBLY IS GOVERNED BY 'SCHEDULE OF TECHNICAL REQUIREMENTS' (STR) ISSUED IN SEPTEMBER 2007 BY RDSO. 10. THE APPELLANT SUBMITS THAT IT IS MANDATORY FOR A SUPPLIER (FOR INDIAN RAILWAYS) TO REGISTER WITH RDSO AND COMPLY WITH THE REQUIREMENTS OF STR (IN TERMS OF CLAUSE 5). THE SUPPLIERS SHOULD BE ISO APPROVED AND USE COMPONENTS STRICTLY AS SPECIFIED IN STR/DRAWING APPROVED BY RDSO AND MAINTAIN STRICT CONTROL OF DIMENSIONS OF COMPONENTS AND ASSEMBLED PRODUCT. THE APPELLANT IS ACCREDITED TO ISO 9001:2008 BY AN INDEPENDENT AGENCY FOR DESIGN, MANUFACTURE AND MARKETING OF AIR SPRINGS. 11. THE APPELLANT SUBMITTED THE TECHNICAL SPECIFICATIONS OF THE PRODUCT MANUFACTURED BY M/S CONTITECH LUFTFEDERSYSTEME GMBH (HANNOVER, GERMANY) AND SOUGHT THE PERMISSION OF THE RDSO FOR EMPLOYING THE PRODUCTS MANUFACTURED BY THE SAID GERMAN PARTY FOR MANUFACTURING AIR SPRING ASSEMBLIES. THE RDSO EXAMINED IN DETAIL THESE SPECIFICATIONS AND THEREAFTER APPROVED THE SAME VIDE LETTER NO. SV AS CONTITECH DATED 21.10.2008 ADDRESSED TO THE APPELLANT WHEREIN THE SPECIFICATION OF PRODUCT MANUFACTURED BY THE SAID GERMAN PARTY WAS APPROVED TO BE EMPLOYED FOR MANUFACTURING AIR SPRING ASSEMBLIES. SIMILAR LETTERS OF APPROVAL OF THE DESIGN AND TECHNICAL SPECIFICATION OF THE PRODUCTS MANUFACTURED BY THE I.T.A. NO. 2554/DEL/2013 21 SAID GERMAN PARTY WERE ISSUED SUBSEQUENTLY BY THE RDSO TO THE APPELLANT AND THESE ARE COLLECTIVELY ENCLOSED HEREWITH AS ANNEXURE - 9. 12. IN THIS REGARD, THE APPELLANT SUBMITS THAT IN TERMS OF THE RDSO SPECIFICATIONS / INSTRUCTIONS THE 'AIR BELLOW' AND 'EMERGENCY SPRINGS' WERE REQUIRED TO BE IMPORTED FROM THE SAID GERMAN PARTY. THE APPELLANT SUBMITS THAT WHILE THERE IS NO DOUBT THAT THE 'AIR BELLOW' AND 'EMERGENCY SPRINGS' WERE IMPORTED BY THE APPELLANT BUT IT IS INCORRECT TO HOLD, AS WAS DONE BY THE LD. ASSESSING OFFICER, THAT IT IS THESE SAME 'AIR BELLOW' AND 'EMERGENCY SPRINGS' WHICH HAVE BEEN SUPPLIED BY THE APPELLANT TO THE INDIAN RAILWAYS. ON THE CONTRARY THE CORRECT FACTUAL POSITION, AS RE FLECTED IN TERMS OF THE CHARTS ABOVE, IS THAT THESE AIR BEL OW AND EMERGENCY SPRINGS ARE ONLY ONE OF THE RAW MATERIALS EMPLOYED BY THE APPELLANT IN CARRYING OUT THE MANUFACTURING ACTIVITY AT THEIR PAONTA SAHIB UNIT FOR THE MANUFACTURE OF AIR-SPRING ASSEMBLIES. 13. THE APPELLANT SUBMITS THAT THERE IS A VAST DIFF ERENCE BETWEEN THE IMPORTED ITEMS AND THE GOODS MANUFACTUR ED AND SUPPLIED BY THE APPELLANT TO THE INDIAN RAILWAY S. NOT ONLY THE APPELLANT UNDERTAKES SUBSTANTIAL OPERATION S INDEPENDENT OF THE IMPORTED GOODS BUT ALSO THE IMPO RTED ITEMS FORM ONLY A PART OF THE FINAL PRODUCT MANUFAC TURED BY THE APPELLANT. THIS IS EVIDENT FROM THE FOLLOWIN G DRAWING OF THE FINAL PRODUCT WHICH SHOWS I.T.A. NO. 2554/DEL/2013 22 THE LOCATION AND POSITIONING OF THE IMPORTED ITEMS; 14. IT IS SUBMITTED THAT THE SCOPE OF SUPPLY FOR EA CH AIR SPRING ASSEMBLY COVERS THE FOLLOWING ITEMS (AS DEFINED IN CLAUSE 4 ON PAGE 6 OF STR); S. NO. S. NO. S. NO. S. NO. ITEM ITEM ITEM ITEM QUANTITY QUANTITY QUANTITY QUANTITY 1 AIR SPRING (RUBBER BELLOW) 1 2 TOP INTERFACING PLATE WITH BOLSTER, WITH SPIGOT 1 3 SEALING 0' RINGS 2 4 BASE PLATE 1 5 EMERGENCY SPRING 1 6 HIGH TENSILE HEX SOCKET HEAD SCREWS WITH SPRING WASHERS 4 SETS 15. IN ORDER TO ARRIVE AT THE AIR SPRING ASSEMBLY T O BE SUPPLIED TO THE INDIAN RAILWAYS, THE APPELLANT UNDERTAKES THE FOLLO WING; IN ACCORDANCE WITH THE REGISTRATION AND APPROVAL OF RDSO, AIR SPRING ASSEMBLY IS MANUFACTURED BY THE APPELLANT WI TH AIR SPRING (RUBBER BELLOW) AND EMERGENCY SPRING (BUMPER ) (SI. NO. 1 & 5 ABOVE) DULY IMPORTED FROM THE SAID GERMAN PARTY. ALL THE METAL PARTS ARE FABRICATED IN THE PAONTA SA HIB WORKS. THIS INCLUDES TOP INTERFACING PLATE WITH BOLSTER, W ITH SPIGOT AND BASE PLATE (S. NO. 2 & 4 ABOVE) AND OTHER ESSENTIAL ITEMS (SLIDING PLATE). SEALING O' RINGS AND HIGH TENSILE SCREWS WITH WASHERS (SI. NO. 3 & 6 ABOVE) ARE BOUGHT OUT ITEMS. IT HAS TO BE NOTED THAT THE PROFILE OF THE TOP PLAT E AND BASE PLATE MUST PERFECTLY MATCH WITH THE PROFILE OF THE AIR BELLOW SEATING AREA TO AVOID ANY LEAKAGE DURING SERVICE. T HIS IS I.T.A. NO. 2554/DEL/2013 23 ENSURED BY PRECISE MACHINING, GRINDING AND CALIBRAT ING THE CONICAL SEALING AREA OF EACH AND EVERY METAL PART T O SUIT THE CORRESPONDING MATING AREA OF THE BELLOW ON A ONE TO ONE BASIS. FURTHER, THE APPELLANT ENSURES THAT THE SPIGOT IN T HE TOP PLATE INTERFACES WITH THE MATCHING AIR SUPPLY HOLE IN BOG IE BOLSTER AND THE BOTTOM FIXING PLATE IS FABRICATED TO SUIT T HE FIXING ARRANGEMENT IN THE BOGIE FRAME. THE METAL PARTS AND NYLON SLIDING PLATES FABRICATED AT THE UNIT ARE COMBINED WITH THE IMPORTED RUBBER BELLOWS AND EMERGENCY SPRINGS (AFTER MACHINING) AND 'O' RINGS, FASTENERS ARE PROCURED TO MANUFACTURE A COMPLETELY NEW AND DI STINCT ARTICLE NAMELY 'AIR SPRING ASSEMBLY' WITH NEW AND S PECIFIC CHARACTERISTICS OF PRESSURE, LOAD, MOVEMENT CAPABIL ITIES AND FITMENT DIMENSIONS AS PER SPECIFICATIONS OF INDIAN RAILWAYS FOR USE IN THE RAIL COACHES PRODUCED BY THEM. 25. IN TH E CONTEXT OF THE FINDING OF THE LD. ASSESSING OFFICER THAT THE A PPELLANT IS NOT MANUFACTURING THE AIR SPRING BUT THE SAME ARE MANUF ACTURED BY THE GERMAN PARTY, THE APPELLANT SUBMITS THAT THE CONCLUSION OF THE LD. ASSESSING OFFICER IF TAKEN TO THE LOGICA L END WOULD IMPLY THAT THE APPELLANT IS A MERE TRADER IN AIR SP RINGS, WHICH IS NOT TRUE. THE APPELLANT ONLY IMPORTS FROM THE SAID GERMAN PARTY THE COMPONENTS OF THE AIR SPRING ASSEMBLY AND DOES NOT IN ANY MERELY SUPPLY THESE AIR-SPRINGS TO THE INDIA N RAILWAYS. IF THAT HAD BEEN THE SITUATION THEN THE INDIAN RAILWAY S WOULD IN ANY CASE HAVE PROCURED / IMPORTED THESE COMPONENTS DIRECTLY FROM THE SAID GERMAN PARTY FOR THE CHENNAI BASED CO ACH FACTORY OF THE INDIAN RAILWAYS INSTEAD OF REQUIRING THE APPELLANT TO IMPORT IT FROM GERMANY AT THE ICD TUGHLAKABAD, N EW DELHI THROUGH MUMBAI PORT AND THEN TRANSPORTING IT TO HIM ACHAL AND THEN SENDING IT BACK AGAIN TO FOR THE CHENNAI BASED COACH FACTORY OF THE INDIAN RAILWAYS, WHICH DEFIES LOGIC ESPECIALLY FOR I.T.A. NO. 2554/DEL/2013 24 A GOVERNMENT UNDERTAKING LIKE THE INDIAN RAILWAYS. IN ANY CASE, THE APPELLANT UNDERTAKES, AT ITS FACTORY IN T HE PAONTA SAHIB UNIT VARIOUS ACTIVITIES WHICH RESULT INTO A N EW COMMODITY IMPLYING THEREBY THAT THE IMPORTED COMPONENT ARE NO T AS SUCH SUPPLIED TO THE INDIAN RAILWAYS BUT ARE SUBJECTED T O FURTHER MANUFACTURING PROCESS BEFORE SUPPLY. IN VERY BRIEF THE ACTIVITIES ON THESE VERY IMPORTED COMPONENTS ARE AS UNDER; (I) THE IMPORTED RUBBER BELLOW IS WORKED UPON TO PR OVIDE FOR ENCLOSURES ON BOTH SIDES TO SEAL THE OPEN ENDS AND PRESSURIZE THE RUBBER BELLOW WITH AIR TO BE ABLE TO FUNCTION AS AN AIR SPRING. (II) LIKEWISE THE EMERGENCY SPRING CANNOT FUNCTION ON ITS OWN. IT HAS TO BE INTEGRATED INTO THE AIR SPRING ASSEMBLY FOR W ORKING IS NO AIR (AIR DEFLATED CASE). 16. FURTHER, THE WEIGHT OF THESE TWO IMPORTED ITEMS I.E. AIR SPRING AND EMERGENCY BUMPER IS ONLY 57 KILOGRAMS (APPROX) AS AGAINST THE 156 KILOGRAMS (APPROX) BEING THE WEIGHT OF THE MANU FACTURED AIR SPRING ASSEMBLY. 17. THE APPELLANT FURTHER SUBMITS THAT THEY UNDERTA KE VARIOUS OPERATIONS IN THE NATURE OF ASSEMBLING, FASTENING, FABRICATING, TESTING, ETC. TOWARDS THE EMERGENCE OF THE FINAL PR ODUCT AND A NEW PRODUCT IS FORMED BY THE ACTIVITIES UNDERTAKEN BY T HE APPELLANT. EVEN UNDER CENTRAL EXCISE LAW, WHEREIN CENTRAL EXCI SE DUTY IS LEVIED ON ACTIVITY OF MANUFACTURE OR PRODUCTION, THESE AC TIVITIES ARE CONSIDERED AS AMOUNTING TO DIFFERENT PRODUCTS. THI S IS EVIDENT FROM THEIR RESPECTIVE CENTRAL EXCISE CLASSIFICATION, WHI CH IS AS UNDER:- CENTRAL CENTRAL CENTRAL CENTRAL EXCISE CLASSIFICATION OF RAW MATERIALS EXCISE CLASSIFICATION OF RAW MATERIALS EXCISE CLASSIFICATION OF RAW MATERIALS EXCISE CLASSIFICATION OF RAW MATERIALS S.NO S.NO S.NO S.NO . . . . RAW RAW RAW RAW MATERIAL MATERIAL MATERIAL MATERIAL USAGE USAGE USAGE USAGE CENTRAL EXCISE CENTRAL EXCISE CENTRAL EXCISE CENTRAL EXCISE CLASSIFICATION CLASSIFICATION CLASSIFICATION CLASSIFICATION REMARKS REMARKS REMARKS REMARKS RUBBER PARTS COMPONENT I.T.A. NO. 2554/DEL/2013 25 1. OF AIR SPRING ASSEMBLY IMPORTED FROM CONITECH, GERMANY AIR SPRING AIR SPRING (RUBBER BELLOW) 4016 99 90 LAYER SPRING/ CONICAL SPRING EMERGENCY SPRING 4016 99 91 2. CORROSION RESISTANT STEEL PLATS MS PLATES / IRON PLATS TOP PLATE WITH SPIGOT BOTTOM FIXING PLATE 7208 51 10 3. STEEL FORGINGS BASE PLATE 7207 11 20 4. SS FLATS SLIDING PLATES 7211 14 10 5. SLIDING PLATES (PA6) SLIDING PLATES 5010 52 2 6. SILICON GREASE LUBRICATION OF SLIDING PLATE 7. WELDING ROD FABRICATION OF METAL PARTS AND AIR SPRING ASSEMBLY. 8311 10 00 8 FASTENERS ALLEN CSK, BOLT, NUT, WASHERS SUPPLIED FOR FIXING AIR SPRING ASSEMBLEY TO RAIL COACH 9 WOODEN BOXES, PLASTIC PACKING I.T.A. NO. 2554/DEL/2013 26 SHEETS, JUTE CLOTH, HESSION CLOTH, M.S. PATTI 10 TEE POL, CLOT H CONSUMABLE 11 RED PAINT, RED OXIDE PRIMER, THINNER, MT OIL, TURPINE OIL PAINTING OF METAL PARTS 12 CUTTING WHEEL FABRICATION OF METAL PARTS 13 DRILL BITS, LOCKTITE FABRICATION OF METAL PARTS 14 CATHODES & ANODES PLASMA CUTTING CONSUMABLE ILLUSTRATIVE CENTRAL EXCISE INVOICES TO THIS EFFECT ARE COLLECTIVELY ENCLOSED HEREWITH AS ANNEXURE-10. CENTRAL EXCISE CLASSIFICATION OF MANUFACTURED PRODU CTS CENTRAL EXCISE CLASSIFICATION OF MANUFACTURED PRODU CTS CENTRAL EXCISE CLASSIFICATION OF MANUFACTURED PRODU CTS CENTRAL EXCISE CLASSIFICATION OF MANUFACTURED PRODU CTS S. S. S. S. NO NONO NO FINISHED GOODS FINISHED GOODS FINISHED GOODS FINISHED GOODS CENTRAL EXCISE CLASSIFICATION CENTRAL EXCISE CLASSIFICATION CENTRAL EXCISE CLASSIFICATION CENTRAL EXCISE CLASSIFICATION 1 AIR SPRING ASSEMBLY (C.K-106 ) 8607 99 10 2 AIR SPRING ASSEMBLY(180 KN) 8607 99 10 3 SR. RING 8485 90 00 ILLUSTRATIVE CENTRAL EXCISE INVOICES TO THIS EFFECT ARE COLLECTIVELY ENCLOSED HEREWITH AS ANNEXURE-11. .. . I.T.A. NO. 2554/DEL/2013 27 28. IT IS SUBMITTED THAT IT IS ONLY BECAUSE OF THE EXEM PTION FROM CENTRAL EXCISE DUTY (IN TERMS OF NOTIFICATION NO. 5 0/2003-CE FOR THE STATE OF HIMACHAL PRADESH) THAT NO CENTRAL EXCISE D UTY IS PAID ON THESE PRODUCTS WHEN THEY ARE MANUFACTURED AT THE PA ONTA SAHIB UNIT BY THE APPELLANT. 19. THIS FACT OF THE APPELLANT UNDERTAKING MANUFACT URING OPERATIONS AT THE PAONTA SAHIB UNIT IS ALSO CERTIFIED BY THE D EPARTMENT OF EXCISE AND TAXATION, STATE OF HIMACHAL PRADESH VIDE CERTIFICATE DATED 24.07.2009 WHEREIN THIS HAS BEEN CERTIFIED BY THE SAID GOVERNMENTAL AUTHORITY THAT THE APPELLANT IS AN IND USTRIAL UNIT DOING MANUFACTURING / ASSEMBLING OF AIR SPRING ASSEMBLY A ND SR RINGS. THIS CERTIFICATE IS ENCLOSED HEREWITH AS ANNEXURE - 12. FURTHER, EVEN THE ASSESSMENT ORDER (FOR ACCOUNTING PERIOD 20 0708 AND 2008-09 WHICH COVERS THE ASSESSMENT YEAR IN QUESTIO N) PASSED BY THE DISTRICT TAXATION OFFICER DATED 14.12.2011 CLEA RLY NOTES AND CONCLUDES THAT THE APPELLANT IS ENGAGED IN UNDERTAK ING MANUFACTURE AND SALE OF AIR SPRING ASSEMBLY. THIS ORDER IS ENCL OSED HEREWITH AS ANNEXURE - 13. FURTHER, THE PAONTA SAHIB UNIT HAS BEEN REGISTERED WITH THE FOLLOWING GOVERNMENT AUTHORITIES, AFTER TH EIR DUE CHECKS AND VERIFICATIONS, FOR THE MANUFACTURE OF AIR SPRIN GS ASSEMBLY; - DEPARTMENT OF INDUSTRIES (SINGLE WINDOW CLEARAN CE AGENCY) MENTIONING THE MANUFACTURING ACTIVITY CAPITAL INVES TMENT & EMPLOYMENT DETAILS. THE SAID AGENCY ALSO ISSUED REG ARDING ASSESSMENT OF PRODUCTION CAPACITY. - CENTRAL EXCISE OFFICE, PANTHA GHATI SHIMLA (HP) . - LABOUR DEPARTMENT (HP) AND INSPECTORATE OF FACTO RIES (HP). - EMPLOYEES STATE INSURANCE CORPORATION (ESIC), PA RWANOO (HP). - HP STATE ENVIRONMENT PROTECTION & POLLUTION CONT ROL BOARD. - DIRECTORATE OF FIRE SERVICES (HP), SHIMLA-2. I.T.A. NO. 2554/DEL/2013 28 - HIMACHAL PRADESH STATE ELECTRICITY BOARD PERMISS ION TO INSTALL DG SET. 20 . THE APPELLANT THEREFORE SUBMITS THAT THERE IS OVE RWHELMING EVIDENCE THAT THE APPELLANT IS ENGAGED IN UNDERTAKI NG MANUFACTURING ACTIVITY AT THE PAONTA SAHIB UNIT AND THUS THE LD. ASSESSING OFFICER WAS IN GROSS ERROR TO CONCLUD E THAT THE APPELLANT WAS NOT UNDERTAKING ANY MANUFACTURING ACT IVITY. 21. IT IS FURTHER SUBMITTED THAT THE LD. ASSESSING OFFI CER HAS ERRED IN APPLYING THE CORRECT LEGAL POSITION TO THE FACTUAL POSITION OF THE INSTANT CASE. 22. THE APPELLANT SUBMITS THAT THE ACTIVITIES UNDERTAKE N BY THE ASSESSEE ON A RAW MATERIAL RESULT IN THE TRANSF ORMATION OF THE ARTICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE AN D BRING INTO EXISTENCE OF A NEW AND DISTINCT ARTICLE OR THI NG. 15. FROM THE ABOVE, IT IS AMPLY CLEAR THAT THE ASSE SSEE IS ENGAGED IN MANUFACTURE AND PRODUCTION OF AN ARTICLE OR THI NG NAMED AIR SPRING ASSEMBLY. THE ASSESSEE IMPORTS (A) AIR SPRIN G COMPONENT (FITTED IN THE TOP PLATE) AND (B) EMERGENCY AIR SPR ING COMPONENT (FITTED IN THE EMERGENCY SPRING AND CALIBRATED WITH THE BOTTOM PLATE). THESE ITEMS ARE IMPORTED FROM GERMANY FROM M/S CONTITECH LUFTFEDERSYSTEME GMBH (HANNOVER, GERMANY). REST ALL OTHER GOODS / RAW MATERIALS REQUIRED IN THE MANUFACTURING PROCE SS ARE PROCURED FROM INDIA AND EMPLOYED BY THE APPELLANT IN THE MAN UFACTURING PROCESS AT THE PAONTA SAHIB UNIT. 16. THE DESCRIPTION OF MANUFACTURING PROCESS ABOV E AMPLY PROVES THAT THE IMPORTED MATERIAL AS WELL AS LOCAL MATERIALS ARE USED IN A MANUFACTURING PROCESS WHICH RESULTS IN A FINAL PRODUCT WHICH IS QUITE DISTINCT FROM THE COMPONENTS USED, AND HAS DISTINCT USAGE TOO. I.T.A. NO. 2554/DEL/2013 29 17. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND HOLD THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURING OF AIR SPRING ASSEMBLY AND IS HENCE ELIGIBLE FOR DEDUCTION U/S. 8 0IC FOR THE MANUFACTURING ACTIVITY UNDERTAKEN AT ITS PAONTA SAH IB UNIT. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/12/2013. SD/- SD/- [ [[ [R.P. TOLANI] R.P. TOLANI] R.P. TOLANI] R.P. TOLANI] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 06/12/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES I.T.A. NO. 2554/DEL/2013 30