Royal Impex, Vapi V. The Income tax Officer,Vapi Ward-3, Vapi

ITA 2971/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5950 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 10-07-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K M MAHESH
• Assessee Lawyers: M K PATEL
• Section: 80IB; 143(1); 250; 251; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' (BEFORE S/SHRI BHAVNESH SAINI,JM & A N PAHUJA,AM) ITA NO.2971/AHD/2007 (ASSESSMENT YEAR:- 2004-05) ROYAL IMPEX, SR. NO. 327/4, VILLAGE ATHAL, SILVASSA, U.T. OF DADAR & NAGAR HAVELI. [PAN:AAEFR9752Q] V/S INCOME-TAX OFFICER, VAPI WARD-3, AJITH NAGAR, CHALA, VAPI [APPELLANT] [RESPONDENT] ASSESSEE BY :- SHRI M K PATEL, AR REVENUE BY:- SHRI K M MAHESH, DR O R D E R A N PAHUJA: THIS APPEAL FILED BY THE ASSESSEE AGAINST AN ORDE R DATED 14-03-2007 OF THE LD. CIT(APPEALS), VALSAD, R AISES THE FOLLOWING GROUNDS: 01. THE ORDER OF ASSESSMENT IS CONTRARY TO THE FAC TS AND PREJUDICIAL TO THE APPELLANT. 02. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW, THE DISALLOWANCES MADE BY THE LEARNED AO AND CONFIR MED BY THE LEARNED CIT(A) ARE CONTRARY TO LAW AND BASED ON ERR ONEOUS UNDERSTANDING OF THE FACTS. 03. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND INTERPRETATION OF LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO TREATING THE ACTIVITIES OF THE APPELLANT AS A NON-MANUFACTURING ACTIVITY FOR THE PURPOSE OF GRANT ING DEDUCTION U/S 80IB OF THE INCOME-TAX ACT, 1961. THE ACTION OF THE LEARNED CIT(A) IS CONTRARY TO THE PROVISIONS OF SECTION 80IB ON A PLA IN READING AND LITERAL INTERPRETATION OF THE LAW AND HENCE DESERVES TO BE DELETED. 04. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LE ARNED AO NOT GRANTING DEDUCTION TO THE APPELLANT U/S 80IB OF THE INCOME-TAX ACT. 05. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIF Y OR ALTER THE ABOVE GROUNDS OF APPEAL AT ANY STAGE OF APPELLATE PROCEED INGS. ITA NO.2971/AHD/2007 FOR AY 2004-05 ROYAL IMPEX 2 06. THE APPELLANT HUMBLY PRAYS THAT THE APPEAL BE A LLOWED IN TOTO. 2 ADVERTING TO GROUND NOS. 2 TO 4 IN THE APPEAL, FA CTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THE RETURN DECLARING N IL INCOME AFTER DEDUCTION OF RS.37,50,732/- U/S 80IB OF THE INCOME- TAX ACT,1961[HEREINAFTER REFERRED TO AS THE ACT] FILE D ON 1-11-2004 BY THE ASSESSEE, ENGAGED IN THE BUSINESS OF CUTTING AN D POLISHING OF MARBLE STONES, AFTER BEING PROCESSED ON 25-1-2005 U /S 143(1) OF THE ACT, WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NO TICE U/S 143(2) OF THE ACT ON 25.10.2005.DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER[ AO IN SHORT] AN ALYSED THE MANUFACTURING ACTIVITY OF ASSESSEE. IT WAS FOUND TH AT THE ASSESSEE PROCURED ROUGH MARBLE BLOCKS AND CUT OR CHISELED IT USING A HAMMER AND A CHISEL. THEREAFTER, THE BLOCK WAS CUT INTO TH E SLABS, WHICH WERE PLACED UNDER A POLISHING MACHINE TO MAKE THE S URFACES SMOOTH. THEN, EDGES OF THE TILES WERE CUT, USING CI RCULAR SAW BLADES. THE PROCESSES INVOLVED IN THE ACTIVITY OF THE ASSES SEE WERE VARYING FORMS OF CUTTING - CHISELING, POLISHING AND CUTTING EDGES. CHISELING WAS CUTTING OUT UNEVEN BULGING SURFACES OF STONE US ING A HAMMER AND A CHISEL. POLISHING WAS ALSO A FORM OF CUTTING WHEREIN MINUTE UNEVEN SURFACES WERE CUT OFF USING WATER AND ABRASI VES BY EMPLOYING A POLISHING MACHINE. LIKEWISE, CUTTING OF F THE EDGES OF TILES USING A CIRCULAR SAW WAS ALSO A CUTTING ACTIV ITY. SINCE THE ACTIVITY PERFORMED BY THE ASSESSEE ON ROUGH STONE S LAB WAS MERE CUTTING, WHETHER PERFORMED BY A SCISSOR OR A HAMME R AND CHISEL OR WITH POLISHING MACHINE OR WITH CIRCULAR SAW BLADE, THE AO, IN THE LIGHT OF HIS FINDINGS FOR THE AY 2003-04, DENIED DE DUCTION U/S 80IB OF THE ACT, ESPECIALLY WHEN THE ASSESSEE DID NOT RESP OND TO A SHOW CAUSE NOTICE ISSUED BY THE AO ON 13.11.2006. INTER ALIA, THE AO DENIED DEDUCTION U/S 80IB OF THE ACT ON THE KDR INT EREST OF RS.74,017/-, RELYING UPON THE DECISIONS GIVEN BY T HE HONBLE ITA NO.2971/AHD/2007 FOR AY 2004-05 ROYAL IMPEX 3 SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS (1999) 237 ITR 579 AND PANDIAN CHEMICALS VS. CIT (2003) 262 ITR 27 8]. 3. ON APPEAL, THE LD. CIT(A) ,RELYING INTER ALI A, ON HIS OWN ORDER FOR THE AY 2003-04 UPHELD THE FINDINGS OF THE AO IN THE FOLLOWING TERMS: 6. I HAVE CAREFULLY GENE THROUGH, THE FINDINGS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT BEFORE THE ASSESSIN G OFFICER AND ALSO DURING THE APPELLATE PROCEEDINGS BEFORE ME. THE ASSESSMENT HAS BEEN FRAMED BASED ON THE FINDINGS OF THE ASSESSING OFFICER FOR A.Y. 2003-2004. IT IS WORTH WHILE TO MENTION THAT THIS OFFICE HAS UPHELD THE ASSESSMENT ORDER FOR A.Y 2003-2004. IN THE ASSESSMENT ORDER FOR A.Y.2003 -2004 WHILE DISCUSSING ABOUT THE VARIOUS STAGES OF MANUFACTURIN G PROCESS THE ASSESSING OFFICER ARRIVED AT THE FOLLOWING CONCLUSI ON: [A] STAGE:- 1 IS A MANUAL ACTIVITY AND IS A FORM OF CUTTING. THE APPELLANT HAS PRESENTED THIS ACTIVITY OF PEELING AND DRESSING AS A MANUFACTURING ACTIVITY WITHOUT PUTTING FORTH THE ACTUAL TRUTH. TH US PEELING AND DRESSING IS NOT A PROCESS BUT A SIMPLE CUTTING ACTIVITY DONE FO R EASY POLISHING. BY NOT BRINGING OUT THESE FACTS, THE AUTHORIZED REPRESENTA TIVE OF THE APPELLANT HAS ATTEMPTED TO PRESENT BEFORE THE DEPARTMENT THAT A S ERIES OF PROCESSES ARE DONE BY THE APPELLANT. [B] STAGE 2 IS DONE ONLY TO SETTLE THE HOLES AND RA CKS IN THE MARBLE BLOCKS TO MAKE EFFICIENT CUTTING AND CAN NOT BE CON SIDERED AS MANUFACTURING ACTIVITY. [C] STAGE 3 IS NOTHING BUT SIMPLE CUTTING OF MARBL E BLOCKS IN TO SLABS AS PER THE DESIRED THICKNESS. [D] STAGE-4 IS ACTUALLY A SIMPLE PROCESS. ANYBODY C AN PURCHASE STONES WITHOUT POLISHING AND POLISHING CAN THEREAFTER BE D ONE WITH A POLISHING MACHINE. THIS DOES NOT MEAN THAT THEY ARE CREATING A NEW ARTICLE AND THAT THEY ARE MANUFACTURING OR PRODUCING A COMMODITY. AT THE MOST IT CAN BE CALLED A SIMPLE PROCESS WHICH DOES NOT TRANSFORM TH E ORIGINAL MATERIAL EITHER IN TERMS OF USE, CHARACTERISTICS OR NAME. [C] STATE-5 IS NOTHING BUT RE POLISHING AND THERE I S NO TRANSFORMATION OF THE ORIGINAL COMMODITY UPON WHICH THE ABOVE PROCESS (ES) WERE APPLIED. 6.1 THE AO IN SUPPORT OF HIS ABOVE REFERRED ARGUMEN TS THAT THE ACTIVITIES OF THE APPELLANT WERE NOT MANUFACTURING, RELIED UPON VARIOUS JUDICIAL PRONOUNCEMENTS, SUCH AS NIEMLA TEXTILES FI NISHING MILLS (P) LTD. ITA NO.2971/AHD/2007 FOR AY 2004-05 ROYAL IMPEX 4 VS. ITO 152 ITR -129 (P&H), M/S. V. M. SALGOCAR BRO S. PVT. LTD. VS. CIT 297 MR 849), CIT VS. CIT 297 ITR 849, CIT VS. GEM I NDIA MANUFACTURING CO. 240 ITR 307 (SC), LUCKY MINMAT PVT. LTD. VS. CI T 245 ITR 380 (SC) ETC. ACCORDING TO THE ASSESSING OFFICER, IN THE CAS E OF M/S, NIEMLA TEXTILES FINISHING MILLS (P) LTD. (SUPRA), IT HAS BEEN HELD THAT, GIVING A GOOD FINISH TO A PARTICULAR ARTICLE ALREADY MANUFACTURED OR PRO DUCED TO MAKE A BETTER MARKETABLE COMMODITY, IS NOT MANUFACTURING1. SIMILA RLY, THE ASSESSING OFFICER HAS POINTED OUT THAT IN THE CASE OF V. M. S ALGOCAR BROS. (P) LTD. CIT 271 ITR 849 (KAR), IT HAS BEEN HELD THAT IMPROVING MARKETABILITY OF AN ARTICLE DID NOT CONSTITUTE MANUFACTURING. AGAIN, AC CORDING TO THE ASSESSING OFFICER, IN THE CASE OF M/S. GEM INDIA MANUFACTURIN G CO. (SUPRA) THE HONORABLE SUPREME COURT OF INDIA HAS HELD THAT CUTT ING AND POLISHING OF RAW AND UNCUT DIAMONDS DID NET AMOUNT TO MANUFACTUR E / PRODUCTION. THE ASSESSING OFFICER HAS FURTHER GIVEN A FINDING THAT THE APPELLANT'S ROUGH STONE UNDERGOES VARIOUS PROCESS(ES) INCLUDING CHISE LING AND EDGE CUTTING, WHICH ARE ALL ONLY VARIOUS FORMS OF CUTTING. 6.2 THE ASSESSING OFFICER HAS FURTHER OBSERVED IN T HE ASSESSMENT ORDER FOR AY 2003-2004 THAT THE WORD MANUFACTURING HAS NO T BEEN DEFINED IN THE ACT AND THEREFORE, THE DEFINITION OF THE WORD AS GI VEN BY THE HONORABLE SUPREME COURT OF INDIA N VARIOUS JUDGMENTS SHOULD B E APPLIED KEEPING IN VIEW THE FACTS OF THIS CASE. FURTHER IN HIS OBSERVA TION THE ASSESSING OFFICER LAID EMPHASIS ON THE VIEW THAT WHILE DETERMINING A PARTICULAR ACTIVITY AS MANUFACTURING OR NOT, THE TEST AS LAID DOWN BY THE HONORABLE SUPREME COURT OF INDIA SHOULD BE APPLIED TO THE FACTS OF TH E CASE AND IT SHOULD BE DETERMINED ACCORDINGLY AS TO WHETHER THE ACTIVITY I S MANUFACTURING OR NOT. 6.3 HERE, IT IS NECESSARY TO POINT OUT THE DEFINITI ON OF THE EXPRESSION MANUFACTURING AS GIVEN BY THE HONORABLE SUPREME COU RT OF INDIA WHILE DECIDING THE ISSUES RELATING TO IT IN VARIOUS CASES OVER THE TIME: [A] IN THE CASE OF EMPIRE JUTE INDUSTRIES LIMITED V /S. UNION OF INDIA (1986) 162 ITR 846 (SC), IT HAS BEEN HELD THAT THE MOMENT THERE IS TRANSFORMATION A NEW COMMODITY HAVING ITS OWN CHARA CTER, NAME AND USE WHETHER AS A RESULT OF ONE PROCESS OR SEVERAL PROCE SSES, MANUFACTURE TAKES PLACE. [B] IN THE CASE OF DY. CST VS. PIO FOOD PACKERS (19 80) 46 STC 63 SCC 174, THE HONORABLE SUPREME COURT HAS HELD AS UN DER: 'ONLY MANUFACTURING IS THE END RESULT OF ONE OR MOR E PROCESSES THROUGH WHICH THE ORIGINAL COMMODITY IS MADE TO PASS. THE N ATURE AND EXTENT OF PROCESSING MAY VARY FROM ONE CASE TO ANOTHER AND IN DEED THERE MAY BE SEVERAL STAGES OF PROCESSING AND PERHAPS DIFFERENT KIND OF PROCESSING AT EACH STAGE. WITH EACH PROCESS SUFFERED, THE COMMODI TY EXPERIENCES A CHANGE. BUT IT IS ONLY WHEN THE CHANGE OR A SERIES OF CHANGES, TAKE THE COMMODITY TO POINT WHERE COMMERCIALLY IT CAN NO LON GER BE REGARDED AS ITA NO.2971/AHD/2007 FOR AY 2004-05 ROYAL IMPEX 5 THE ORIGINAL COMMODITY BUT INSTEAD IS RECOGNIZED AS A NEW AND DISTINCT ARTICLE THAT A MANUFACTURE CAN BE SAID TO TAKE PLAC E.' [C] IN THE CASE OF ADITYA MILLS VS/ UNION OF INDIA (1979) 73 STC 195, AIR 1988 SC 2237, THE HONORABLE COURT HAS HELD THE SAME VIEW WHILE DEFINING THE WORD MANUFACTURING. THE HONORABLE COUR T HAS HELD AS UNDER: 'MANUFACTURE' IS COMPLETE AS SOON AS BY THE APPLICA TION OF ONE OR MORE PROCESS, THE RAW MATERIAL UNDERGOES SOME CHANG ES AND A NEW SUBSTANCE OR ARTICLE IS BROUGHT INTO EXISTENCE. THE NEW SUBSTANCE OR ARTICLE MUST HAVE A DISTINCT NAME, CHA RACTER OR USE. THE NEW COMMODITY MUST BE A COMMERCIALLY SEPARATE A ND DISTINCT COMMODITY HAVING ITS OWN CHARACTER AND USE. [D] IN THE CASE OF UNION OF INDIA V/S. DELHI CLOTH & GENERAL MILLS CO. LTD. AIR 1963 SC 791, II HAS BEEN HELD BY THE HONOR ABLE COURT THAT TO BECOME GOODS AN ARTICLE MUST BE SOMETHING WHICH C AN ORDINARILY COME TO THE MARKET TO BE BROUGHT AND SOLD. [E] LATER ON IN THE CASE OF CIT VS. N. C. BUDHARAJA & ANOTHER 204 ITR 412 THE HONORABLE SUPREME COURT OF INDIA HIS AGAIN RELIED ON THE MEANING OF EXPRESSION 'MANUFACTURE' AS WAS CONSIDERED BY TH E SAME COURT IN THE CASE OF DY.CST VS. PIO KOOD PACKERS (1980) 46 STC 6 3 SCC 174, AS HAS BEEN QUOTED ABOVE. 6.4 FROM THE MEANING OF THE EXPRESSION MANUFACTURE AS GIVEN BY THE HONORABLE SUPREME COURT OF INDIA (AS DISCUSSED ABOV E), IT IS FOUND THAT THE EXPRESSION 'MANUFACTURE' DENOTES THE END RESULT OF ONE OR MORE PROCESS(ES), THE ORIGINAL MATERIAL / COMPONENT IS M ADE TO UNDERGO. THE NATURE AND EXTENT OF PROCESSING MAY DIFFER FROM ONE CASE TO ANOTHER AND THERE MAY RE SEVERAL STAGES OF PROCESSING CARRIED O UT IN A DIFFERENT WAY AT EACH STAGE, AGAIN, AS A RESULT OF EACH PROCESS WHEN THE ORIGINAL COMMODITY IS REGARDED DIFFERENT THAN THE ORIGINAL C OMMODITY IN COMMERCIAL TERMS AND IS RECOGNIZED AS NEW AND DISTINCT ARTICLE , A MANUFACTURE IS SAID TO HAVE TAKEN PLACE. 6.5 ACCORDING TO THE ASSESSING OFFICER IN THE LIGHT OF LIE MEANING OF THE EXPRESSION MANUFACTURING AS CONSIDERED BY THE HON ORABLE SUPREME COURT OF INDIA IN VARIOUS JUDICIAL PRONOUNCEMENTS, THE ACTIVITY AS CARRIED BY THE APPELLANT CANNOT BE REGARDED AS MANUFACTURING. ON THE OTHER HAND, THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT HAD STATED THAT THE ROUGH MARBLE STONE WAS MADE TO PASS THROUGH VARIOUS PROCE SS(ES) AND THE END PRODUCT IS RECEIVED IN THE FORM OF MARBLE TILES WHI CH IS A COMMERCIALLY NEW ARTICLE OR THING AND IS CERTAINLY DIFFERENT THAN TH E ROUGH MARBLE STONE. IT HAS BEEN FURTHER POINTED OUT BY THE AUTHORIZED REPRESEN TATIVE IN HIS DETAILED SUBMISSION DIAL AFTER CARRYING OUT VARIOUS PROCESSE S AS SUCH THE FINAL PRODUCT IS RECEIVED IN THE FORM OF MARBLE STONE TIL ES WHICH IS A ITA NO.2971/AHD/2007 FOR AY 2004-05 ROYAL IMPEX 6 COMMERCIALLY NEW ARTICLE OR THING AND IS CERTAINLY DIFFERENT THAN THE ROUGH MARBLE STONE. IT HAS BEEN FURTHER POINTED OUT BY TH E AUTHORIZED REPRESENTATIVE IN HIS DETAILED SUBMISSION THAT AFTE R CARRYING OUT VARIOUS PROCESSES AS SUCH THE FINAL PRODUCT IS RECEIVED IN THE FORM OF MARBLE STONE TILES WHICH IS FIT FOR USE OF THE CUSTOMERS IN THE FORM OF END PRODUCT. THE AUTHORIZED REPRESENTATIVE HAS ALSO SUBMITTED THAT I N THE END MARBLE BLOCKS ARE TRANSFORMED INTO THE FORM OF MARBLE TILES AND I TS ORIGINAL FORM IS FINALLY CONSUMED INTO A NEW FORM I.E. TILES. 6.6 IN HIS FINDINGS FOR A.Y. 2003-2004 THE AO HAS C ITED VARIOUS CASE LAWS AND AFTER RELYING UPON THE JUDICIAL FINDINGS I N SUCH CASE LAWS HELD THAT THE ACTIVITY OF THE APPELLANT IS NOT MANUFACTURING. THE CASE LAWS RELIED UPON BY THE ASSESSING OFFICER ARE (I) CIT VS. GEN I NDIA MFG. CO. (2001) 219 ITR 307 (SC); (II) M/S. LUCKY MINMAT PRIVATE LI MITED VS. CIT (2000) 215 ITR 380 (SC); (III) CIT VS. RELISH FOODS (1999) 237 ITR 59 (SC); (IV) CIT V/S. GEORGE MAIJO (2001) 250 ITR 440 (MAD.); (V ) CIT V/S. LUCKY MINERAL PRIVATE LIMITED (1997) 226 ITR 245 (RAJ.) A ND (VI) INDIA CINE AGENCIES V/S. CIT, (2002) 261 ITR 491 (MAD.) ETC. I N RESPONSE TO THE FINDINGS OF THE ASSESSING OFFICER BASED ON THE ABOV E JUDGMENTS, A.R. HAD DISTINGUISHED THE NATURE OF ACTIVITY CARRIED OUT BY THE ASSESSEE IN THE ABOVE CASES VIS-A-VIS THE ACTIVITY CARRIED OUT BY T HE APPELLANT AND MADE A DETAILED SUBMISSION AT THE TIME OF ASSESSMENT PROCE EDINGS AS WELL AS AT THE TIME OF APPELLATE PROCEEDINGS. THE SUBMISSION O F THE AR DISTINGUISHING THE COMMENT OF THE AO IN THIS REGARD ARE MENTIONED ABOVE IN HIS ORDER AND THE SAME FACTS ARE NOT REPEATED HERE. IN SUPPOR T OF HIS CONTENTION, THE AR RELIED UPON THE FINDINGS OF HON'BLE SUPREME COUR T IN THE CASE OF ASPINWALL & CO. VS. CIT (2001) 251 ITR 232 (SC); CI T VS. MYSORE MINERALS LIMITED 250 ITR 725 (KAR); CIT VS. MYSORE MINERALS LTD. (NO.2) 250 ITR 728 (KAR), CIT VS. SESE GOA LTD. (2004) 271 ITR 033 1 (SC); CIT VS. BEST CHEM AND LIME STONE INDUSTRIES P LTD. 210 ITR 883 ( RAJ). SHOWING THE SIMILARITY OF THE FACTS OF THE CASE OF THE APPELLAN T WITH THE ABOVE CASES, THE AR STATED THAT HERE IN THIS CASE, IN THEIR CASE THE APPELLANT CONVERTED MARBLE BLOCK, A MINERAL INTO POLISHED MARBLE TILES, READY TO USE AS A FLOORING MEDIA AS AN ENTIRELY DIFFERENT MARKETABLE COMMODITY AND THEREFORE THE FINDINGS OF THE COURT IS COMPLETELY APPLICABLE TO THE FACTS OF THE CASE OF THE APPELLANT. 6.7 THE AR OF THE APPELLANT HAS STRONGLY RELIED UPO N THE FINDINGS OF THE HON'BLE APEX COURT IN THE CASE OF CIT VS. SESE GOA LTD. 266 ITR 126 IN HIS SUBMISSION MADE BEFORE ME DURING THE APPELLATE PROCEEDINGS. THE AR SUBMITTED BEFORE ME THAT IN THIS CASE THE HONORABLE APEX COURT WHILE AFFIRMING THE DECISION OF BOMBAY HIGH COURT IN CIT VS. SESA GOA LTD. 266 ITR 126 HAS HELD THAT EXTRACTION AND PROCESSING OF IRON ORE AMOUNTS TO PRODUCTION WITHIN THE MEANING OF THE WORD IN SECT ION 32A(1) OF THE ACT. THE APEX COURT ALSO HELD THAT EXCAVATING AND PROCES SING ORES AMOUNT TO PRODUCTION WITHIN THE MEANING OF SECTION 80I AND WO ULD QUALIFY FOR THE SPECIAL DEDUCTION HERE UNDER. ITA NO.2971/AHD/2007 FOR AY 2004-05 ROYAL IMPEX 7 6.8 AFTER A PERUSAL OF THE HONORABLE MUMBAI HIGH CO URTS DECISION IN SESA GOA LTD. SUBSEQUENTLY UPHELD BY THE HONORABLE APEX COURT, IT IS FOUND THAT THE FACTS OF THE CASE OF THE APPELLANT A RE SIMILAR THOUGH NOT THE SAME AS IN THE CASE OF SESA GOA LTD.S CASE. 6.9 FINALLY THE AUTHORIZED REPRESENTATIVE OF THE AP PELLANT HAS ALSO, SUBMITTED A RECENT DECISION OF ITAT MUMBAI BENCH IN THE CASE OF AKASH STONE INDUSTRIES LTD. ITA NO. 2968/MUM/2004. THE AU THORIZED REPRESENTATIVE OF THE APPELLANT VEHEMENTLY ARGUED T HAT IN THAT CASE THE FACTS OF THE CASE ARE SAME AS THAT OF THE APPELLANT . THE ASSESSEE IN THAT CASE WAS LOCATED AT DADRA AND NAGAI HAVELI AND WAS ENGAGED IN THE BUSINESS OF BUYING ROUGH MARBLE BLOCKS AND SELLING THE SAME AFTER CUTTING AND POLISHING. IT WAS CLAIMED ON BEHALF OF THE APPE LLANT THAT THE MANUFACTURING PROCESS UNDERTAKEN BY THE APPELLANT A ND M/S. AAKASH STONE INDUSTRIES LIMITED ARE THE SAME AND THAT THE FINISHED PRODUCTS ARE ALSO THE SAME. AFTER CONSIDERING THE FACTS OF THE C ASE AND THE OBSERVATION OF THE CBDT IN CIRCULAR NO. 693 DATED 17-1-1994 THE HONORABLE TRIBUNAL CONCLUDED THAT THE ASSESSEE IN THAT CASE IS ENGAGED IN MANUFACTURING / PRODUCTION OF POLISHED MARBLE SLABS AND TILES. THE HONORABLE TRIBUNAL ALSO FORTIFIED ITS VIEW BY RELYING ON THE OBSERVATION OF THE HE HONORABLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO'S CASE REPORTED IN 196 ITR 188 HIGHLIGHTING THAT A PROVISION, IN A TAXING STATUTE GRANTING INCENTIVE FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUE D LIBERALLY; AND SINCE A PROVISION FOR PROMOTING ECONOMIC GROWTH HAS TO BE INTERPRETED LIBERALLY, THE RESTRICTION EN IT TOO HAS TO BE CONS IDERED SO AS TO ADVANCE THE OBJECTIVE OF THE PROVISION AND NOT TO FRUSTRATE IT. 6.10 FROM THE ASSESSMENT ORDER FOR A.Y. 2003-2004 AND THE FACTS AND ARGUMENTS ADVANCED BY THE LEARNED COUNSEL APPEARING ON BEHALF OF THE APPELLANT, IT IS FOUND THAT THE FACTS OF THE CASE O F THE APPELLANT ARE SIMILAR THOUGH NOT THE SAME AS IN THE CASE OF MYSORE MINERA LS LIMITED 'S EASE. IN A RECENT DECISION OF' THE ITAT JAIPUR BENCH IN THE CASE OF SURAJ MARBLES (P) LIMITED V/S. ITO REPORTED IN 314 ITJ 192, IT WA S HELD THAT CUTTING OF MARBLE BLOCKS INTO SIZES AND POLISHING IT RESULTS I N THE EMERGENCE OF A NEW COMMODITY. 6.11 IN THE CASE OF ARIHANT TILES & MARBLES (P) LT D. VS. ITO REPORTED IN 104 TTJ (JD) (TM) 149 THE HONORABLE ITAT JODHPUR DI VISION BENCH HAS HELD THAT EXCAVATION OF MARBLE BLOCKS AND CUTTING T HE SAME INTO SLABS AND TILES BY MECHANICAL PROCESS DO NOT INVOLVE MANUFACT URING PROCESS. IT WAS ALSO HELD BY THE JODHPUR TRIBUNAL THAT IN THE CASE OF ARIHANT TILES & MARBLES (P) LTD. THE FACTS OF THE CASE ARE DIFFEREN T FROM THE FACTS OF THE CASE OF SESA GOA AND MYSORE MINERALSS LTD. WHEREIN THE ASSESSEE WAS ENGAGED IN EXTRACTION AND MINING AND SUBSEQUENT PRO CESSING FOR THE PURPOSE OF SELLING THE FINISHED PRODUCTS. IN THE CA SE OF CCE VS FINE MARBLES & MINERALS (P) LTD. 1985 22 ELT 128 THE CEG AT HAS SPECIFICALLY ITA NO.2971/AHD/2007 FOR AY 2004-05 ROYAL IMPEX 8 POINTED OUT THAT CUTTING OF MARBLE BLOCKS INTO MARB LE SLABS DOES NOT AMOUNT TO MANUFACTURING / PRODUCTION OF ARTICLE OR THING. THE MARBLE BLOCKS THAT ARE MERELY SAWN INTO THE MARBLE SLABS CANNOT B E CALLED A DISTINCT COMMODITY. THE END PRODUCT WHICH WOULD COME INTO EX ISTENCE AFTER THE ACTIVITY IS COMPLETED WOULD STILL BE CALLED MARBLE. THUS, THE ORIGINAL U ENTITY CONTINUES DESPITE THE SEVERAL PROCESSES UNDERGONE. IN THE TRADE CIRCLES, MARBLE SLABS OR THE MARBLE TILES THAT ARE MANUFACTU RED AFTER CUTTING THE EDGES, TRIMMING, POLISHING AND OTHER PROCESS, CONTI NUE TO BE KNOWN AS MARBLE. UNLESS IT PROVED THAT BY VIRTUE OF THE SAWI NG PROCESS, A DIFFERENT OR DISTINCT COMMODITY COMES INTO EXISTENCE, THE PROCES S CANNOT BE EQUATED TO MANUFACTURE. IT IS WRONG TO SAY THAT BY THE APPL ICATION OF ONE OR MORE PROCESSES, IF THE RAW MATERIAL INDICATES A CHANGE, THAT CHANGE WOULD NECESSARILY AMOUNT TO MANUFACTURE. IN ORDER TO FALL WITHIN THE AMBIT OF 'EXCISABLE GOODS', THE PROCESS APPLIED SHOULD RESUL T IN GOODS WHICH COULD ORIGINALLY COME TO THE MARKET TO BE BROUGHT AND SOL D. 6.12 MARBLE' AS NOTICED FROM ENCYCLOPEDIA BRITANNI CA OFTEN OCCURS AS METAMORPHIT ROCKS. THE QUARRY OF MARBLE IS VERY LIM ITED. CHANNELING MACHINES ARE UTILIZED TO MAKE CUTS WIDE AND DEEP. T HE MARBLE BLOCKS OUTLINED BY JOINTS AND CUTS ARE SEPARATED BY DRIVIN G WEDGES INTO FRILL HOLES. IT FURTHER READS MILL-SAWING INTO SLABS IS DONE WI TH SETS OF PARALLEL IRON BLADES THAT MOVE BACK AND FORTH AND ARE FED BY SAND AND WATER. THE MARBLE MAY BE MACHINED WITH LATHES AND CARBORUNDUM WHEELS AND IS THEN POLISHED WITH INCREASINGLY FINGER GRADES OF ABRASI VE. IT IS THEREFORE SEEN THAT ONLY AFTER MACHINING AND POLISHING AND SUCH OT HER PROCESS ARE APPLIED TO THE CUT SLABS DO THEY BECOME A MARKETABLE COMMOD ITY VIZ. MARBLE TILES. IN SHORT THE MANUFACTURE OF AN ARTICLE KNOW N AS MARBLE COULD BE SAID TO BE COMPLETE ONLY AFTER ALL OR MOST OF THESE PROC ESS(ES) ARE UNDERGONE TO RESULT IN A DISTINCTLY DIFFERENT COMMODITY. IN THE CASE OF THE APPELLANT, THE A.R. APPELLANT FAILED TO SUBMIT EITHER BEFORE THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR BEFORE ME D URING THE COURSE OF THIS APPEAL PROCEEDINGS THE EXACT NATURE OF MANUFAC TURING PROCESS WHICH HAS GIVEN RISE TO THE BIRTH OF A NEW PRODUCT WHICH IS DIFFERENT FROM THE ORIGINAL INPUT I.E. MARBLE SLABS. 6.13 IN THE CASE OF SOURUBH STONE INTERNATIONAL, A S RELIED UPON BY THE APPELLANT, THE ASSESSEE IN THAT CASE HAS SUBMITTED ITS MANUFACTURING PROCESS AND ESTABLISHED THAT A NEW PRODUCT HAS COME INTO EXISTENCE AS A RESULT OF VARIOUS PROCESS(ES) EMPLOYED BY IT. IN TH E CASE OF THE APPELLANT IT HAS NOT BEEN SUBMITTED ON BEHALF OF THE APPELLANT A NYWHERE IN ITS WRITTEN SUBMISSION AS TO THE EXACT NATURE OF MANUFACTURING PROCESS WHICH HAS GIVEN RISE TO THE BI IN OF A NEW PRODUCT WHICH IS D IFFERENT FROM THE ORIGINAL INPUT I.E. MARBLE SLABS. THE ASSESSING OFFICER HAS GIVEN A FACT FINDING THAT THE PROCESS EMPLOYED BY THE APPELLANT IS SIMPLE CUT TING OF MARBLE BLOCKS FOR THE PURPOSES OF BRINGING IT INTO VARIOUS SIZES AS DESIRED BY THE CUSTOMERS THE APPELLANT HAS GIVEN THE OBSERVATION O F THE CBDT AS REGARDS VALUE ADDITION IN THE CASE OF POLISHED GRAN ITE. THIS ALSO DOES NOT ITA NO.2971/AHD/2007 FOR AY 2004-05 ROYAL IMPEX 9 HELP THE APPELLANT. THE APPELLANT HAS NO WHERE BROU GHT FORTH BEFORE ME THAT THE APPELLANTS ACTIVITIES GIVE RISE TO A NEW COMMODITY. UNDER THE CIRCUMSTANCES I HAVE NO HESITATION IN HOLDING THAT THE APPELLANT IS NOT MANUFACTURING OR ENGAGED N THE PRODUCTION OF A NEW COMMODITY DIFFERENT FROM ITS RAW MATERIALS BASED OR THE FACTS PRESENTED BEFORE ME. THE SAME VIEW HAS BEEN TAKEN BY THIS OFFICE WHILE DECIDING T HE APPEAL DECISION OF THE APPELLANT FIRM FOR A. Y. 2003-2004 AS WELL. 4. THE ASSESSEE IS NOW APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A).THE LEARNED AR ON BEHALF OF THE ASSESSEE WHILE RELYING UPON AN ORDER DATED 12.2.2010 OF THE ITAT AHMEDABAD BENCH-C IN THE ASSESSEES OWN CASE IN ITA NO.1207/A HD/2007 FOR AY 2003-04, CONTENDED THAT THE ISSUE IS SQUARELY C OVERED IN THEIR FAVOUR . ON THE OTHER HAND, THE LEARNED DR DID NOT OPPOSE THESE SUBMISSIONS ON BEHALF OF THE ASSESSEE. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROU GH THE FACTS OF THE CASE AS ALSO THE DECISION OF THE ITAT RELIED UP ON BY THE LD. AR. WE FIND THAT THE ITAT VIDE THEIR AFORESAID ORDER D ATED 12.2.2010 IN THE ASSESEES OWN CASE FOR THE AY 2003-04 WHILE REL YING UPON DECISION OF THE HONBLE APEX COURT IN THE CASE OF I TO VS. ARIHANT TILES & MARBLES P LTD.,320 ITR 79(SC) CONCLUDED TH AT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB OF THE ACT. HOWEV ER, SINCE WORKING OF CALCULATION REQUIRED VERIFICATION AT THE END OF THE AO, MATTER WAS RESTORED TO THE FILE OF THE AO WITH THE DIRECTIONS TO VERIFY THE WORKING AND ALLOW DEDUCTION U/S 80IB OF THE ACT IN ACCORDAN CE WITH LAW. 5.1. IN THE LIGHT OF AFORESAID CONCLUSION OF A CO-O RDINATE BENCH IN THE APPEAL FOR THE AY 2003-04 AND RELYING UPON DECISION OF THE HONBLE APEX COURT IN THE CASE OF ARIHANT TILES & MARBLES P LTD.(SUPRA), ESPECIALLY WHEN FACTS IN THE YEAR UNDER CONSIDERATI ON ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES OBTAINING IN THE AY 200 3-04 , WE HAVE NO HESITATION IN ALLOWING THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IB OF THE ACT. HOWEVER, AS OBSERVED BY THE ITAT I N THEIR DIRECTIONS ITA NO.2971/AHD/2007 FOR AY 2004-05 ROYAL IMPEX 10 FOR AY 2003-04, THE AO SHALL VERIFY THE CALCULATIO N OF DEDUCTION U/S 80IB AND ALLOW THE SAME IN ACCORDANCE WITH LAW, AF TER ALLOWING SUFFICIENT OPPORTUNITY TO THE ASSESSEE. WITH THESE DIRECTIONS, GROUND NOS. 2 TO 4 ARE DISPOSED OF. 6. GROUND NOS. 1 & 6 IN THE APPEAL BEING GENERAL IN NATURE, DO NOT REQUIRE ANY SEPARATE ADJUDICATION WHILE NO ADDITION AL GROUND HAVING BEEN RAISED IN TERMS OF THE RESIDUARY GROUND NO. 5, ALL THESE GROUNDS ARE DISMISSED. 7. IN THE RESULT, APPEAL IS PARTLY ALLOWED BUT FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT TODAY ON 11-06-2010 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 11-06-2010 COPY OF THE ORDER FORWARDED TO : 1. ROYAL IMPEX, SR. NO. 327/4, VILLAGE ATHAL, SILVA SSA, U.T. OF D & N. H. 2. THE INCOME-TAX OFFICER, VAPI WARD-3, AJITH NAGAR , CHALA, VAPI 3. CIT CONCERNED 4. CIT(A)-VALSAD 5. THE DR, C BENCH ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT, AHMEDABAD