M/S Shree Bhavani Minerals, Panaji V. CIT, Panaji

ITA 68/PAN/2013

• Counselvise Citation: 6824114 RSA 2013
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NISHANT K
• Assessee Lawyers: N N NAIK GAUNEKAR; V Y PAWAR
• Keywords: Business income; Retrospective amendment; Competent authority
• Section: 143(3); 10AA; 80HHC; 10B; 27

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI P.K. BANSAL, HONBLE ACCOUNTANT MEMBER AND SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER ITA NO. 68/PNJ/2013 : (ASST. YEAR : 2009 - 10) M/S. SHREE BHAVANI MINERALS PANAJI, GOA PAN : ABGFS0924C (APPELLANT) VS. COMMISSIONER OF INCOME TAX PANAJI, GOA. (RESPONDENT) APPELLANT BY : V.Y. PAWAR, CA & N.N. NAIK GAUNEKAR, CA RESPONDENT BY : NISHANT K., DR DATE OF HEARING : 22/08/2013 DATE OF PRONOUNCEMENT : 13 /09/2013 O R D E R PER P.K. BANSAL : 1. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DT. 31.1.2013 FOR A.Y. 2009 - 10 BY TAKING THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL : 1) THE ORDER OF THE LEARNED CIT (A) IS AGAINST FACTS OF THE CASE AND THE PRINCIPLES OF LAW. 2) THE LEARNED CIT (A) ERRED ON THE FACTS OF THE CASE AND EXISTING LEGAL POSITION IN CONFIRMING THE VIEW TAKEN BY THE LEARNED ASSESSING OFFICER THAT THE APPELLANT IS NOT ENTITLED TO DEDUCTION U/S. 10B ALTHOUGH THE APPELLANT HAS FULFILLED ALL THE CONDITIONS RE QUIRED FOR ALLOWANCE OF DEDUCTION U/S. 10B. ON THE OTHER HAND, THE CIT (A) OUGHT TO HAVE ALLOWED DEDUCTION U/S. 10B TO THE APPELLANT FOR HAVING FULFILLED ALL THE CONDITIONS FOR ALLOWANCE OF 10B. 3) THE LEARNED CIT (A) ERRED IN COMING TO THE CONCLUSION IN PARA 7 OF HIS ORDER THAT THE APPELLANT CLAIMED THAT THEIR ACTIVITY AMOUNTED TO MANUFACTURE 2 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) THERE BY CLAIMING THAT THEY WERE A MANUFACTURING CONCERN, WHEREAS THE APPELLANT HAD BEEN CLAIMING THAT THEIR ACTIVITY WOULD AMOUNT TO MANUFACTURE/PRODUCTION, LAYING MORE STRESS ON PRODUCTION. 4) THE LEARNED CIT (A) ERRED IN COMING TO THE CONCLUSION IN PARA 7.1 OF HIS ORDER THAT THE APPELLANT AS WELL AS M/S. SESA GOA LTD., ARE ENGAGED IN THE SAME LINE OF BUSINESS I.E. EXPORT OF IRON ORE AND AS SUCH THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF M/S. SESA GOA LTD., IS DIRECTLY APPLICABLE TO THE CASE OF THE APPELLANT. FACTUALLY, ALTHOUGH THE APPELLANT AND M/S. SES A GOA LTD., ARE BOTH INVOLVED IN THE EXPORT OF IRON ORE, THEIR PROCESS INVOLVED IN MANUFACTURE/PRODUCTION AS ALSO THE RAW MATERIAL USED FOR PRODUCING THE FINISHED PRODUCT ARE TOTALLY DIFFERENT. THE LEARNED CIT (A) FAILED TO CONSIDER THIS FACTUAL ASPECT AND ARRIVED AT THE INCORRECT DECISION THAT THE APPELLANT IS NOT ENTITLED TO DEDUCTION U/S.10B. 5) THE LEARNED CIT(A) ERRED IN NOT CORRECTLY INTERPRETING THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF M/S. SESA GOA LTD. IN THIS DECISION, THE HONO URABLE SUPREME COURT HAS GIVEN BENEFIT TO THE ASSESSEE, BY HOLDING ON THE FACTS OF THAT CASE THAT EXTRACTION AND PROCESSING OF IRON ORE AMOUNTS TO PRODUCTION. THE HONOURABLE SUPREME COURT HAS NO WHERE IN THE ORDER GIVEN A GENERAL FINDING EITHER IN THE FORM OF RATIO DESCIDENDI OR OBIETER DICTUM THAT 'EXTRACTION AND PROCESSING' OF IRON ORE WOULD ALONE AMOUNT TO PRODUCTION. THE RAW MATERIAL AND THE PRODUCTION PROCESS OF THE APPELLANT BEING TOTALLY DIFFERENT FROM THAT OF M/S. SESA GOA LTD., THE LEARNED CIT (A) OUGHT TO HAVE HELD THAT THE DECISION OF THE HONOURABLE SUPREME COURT AND THE CASE OF M/S. SESA GOA LTD., WOULD NOT BE APPLICABLE TO THE FACTS OF THE CASE OF THE APPELLANT IN DETERMINING WHETHER THE PROCESS EMPLOYED BY THE APPELLANT WOULD AMOUNT TO 'PRODUCT ION'/ MANUFACTURE. ACCORDINGLY THE LEARNED CIT (A) OUGHT TO HAVE CONSIDERED THE CASE OF THE APPELLANT INDEPENDENTLY ON ITS FACTS TO DECIDE WHETHER THE PROCESS OF THE APPELLANT AMOUNTS TO PRODUCTION, BASED ON VARIOUS DECISIONS OF THE HONOURABLE COURTS AND O UGHT TO HAVE COME TO JUDICIOUS DECISION WHICH THE LEARNED CIT (A) FAILED. 6) THE LEARNED CIT (A) ERRED IN COMING TO THE CONCLUSION IN PARAS 7.3 AND 7.4 OF HIS ORDER THAT THE HIGHER MARGIN OF PROFIT IN THE BUSINESS OF THE APPELLANT PROVES THAT THE RAW MATE RIAL IS NOT A WASTE, WHICH OTHERWISE IT WOULD NOT HAVE FETCHED SUCH HIGH RETURNS. INFACT, ON THE OTHER HAND IT GOES TO SHOW THAT THE ELABORATE PROCESS EMPLOYED BY THE APPELLANT HAS CONVERTED A WASTE MATERIAL WHICH WAS PURCHASED AT PREVAILING LOW MARKET PRI CE INTO SUCH A HIGH VALUE PRODUCT WHICH EVEN HAS GOOD MARKET ABROAD AND THE SAME IS EXPORTED. THUS ON THE BASIS OF THIS FACT ALSO, THE LEARNED CIT (A) OUGHT TO HAVE COME TO THE LOGICAL CONCLUSION THAT THE ELABORATE PROCESS OF CONVERTING TAILING REJECTS AND MINERAL 3 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) WASTE INTO IRON ORE FINES, BY THE APPELLANT CLEARLY AMOUNTED TO 'PRODUCTION'/ MANUFACTURE OF A HIGH VALUE PRODUCT FROM A WASTE MATERIAL WHICH HE FAILED TO DO. 7) THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THE CASE LAWS RELIED UPON THE BY THE APPELLANT IN THEIR FAVOUR AND IN SUPPORT OF THEIR CLAIM FOR ALLOWANCE OF DEDUCTION U/S. 10B AND OUGHT TO HAVE ALLOWED THEIR CLAIMS OF DEDUCTION U/S. 10B TREATING THEIR PROCESS AS 'PRODUCTION' / MANUFACTURE. 8) FOR THESE REASONS AND OTHER GROUNDS T HAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED AND THE APPELLANT MAY BE GRANTED DEDUCTION U/S. 10B AS CLAIMED BY THEM IN THE RETURN OF INCOME. 2. THE ONLY ISSUE INVOLVED IN THE GROUNDS TAKEN BY THE ASSESSEE IN THE APPEAL IS DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S 10B BY THE REVENUE. 3 . THE BRIEF FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM , FILED THE RETURN FOR THE IMPUGNED ASSESSMENT YEAR ON 17.9.2009 AT AN INCOME OF RS.1,05,11,410/ - . THE ASSESSEE CLAIMED EXEMPTION U/S 10B AMOUNTING TO RS.8,39,57,651/ - . THE AO ASKED FOR THE JUSTIFICATION OF THE EXEMPTION. THE ASSESSEE POINTED OUT THAT TH E ASSESSEE IS A 100% EXPORT - ORIENTED UNIT. THE ASSESSEE PURCHASES UNUSABLE TAILING REJECTS AND MINERAL WASTE WHICH HAS VERY LOW FE CONTENT IN THE RANGE OF 38 - 43%. THE ASSESSEE CONVERTS IT INTO USABLE IRON ORE FINES WITH HIGH FE CONTENT OF MORE THAN 58% A ND EXPORTS THE SAME TO CHINA B Y CARRYING OUT THE VARIOUS PROCESSES THROUGH VARIOUS MACHINES INSTALLED BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THE WHOLE MANUFACTURING PROCESS BRINGS A CHANGE BY WAY THAT THE EARLIER COMMODITY I.E. RAW MATERIAL AND WASTEFUL TAILINGS AND MINERAL WASTE LOSES ITS ORIGINAL IDENTITY AND THEIR EMERGES A MARKETABLE AND COMMERCIALLY SALEABLE PRODUCT OF IRON ORE CONCENTRATES/FINES OF +58% FE WHICH IS USED BY THE VARIOUS STEEL MILLS IN CHINA. RELIANCE WAS PLACED ON THE DEFINITION OF MANUFACTURE GIVEN U/S 2(29BA). THE AO DID NOT AGREE WITH THE ASSESSEE AND DISALLOWED THE EXEMPTION AS CLAIMED U/S 10B OF THE INCOME TAX ACT BY OBSERVING AS UNDER : 4 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 4.6 IT IS TO BE HELD IN MIND THAT S.10B IS APPLICABLE ONLY TO THE UNITS THAT MANUFACTURE OR PRODUCE. THE ACTIVITIES OF THE ASSESSEE OF IMPROVING THE GRADE OF PURCHASED IRON ORE, CAN AT BEST BE TERMED AS PROCESSING. HOWEVER, IT DOES NOT AMOUNT TO MANUFACTURE OR PRODU CTION OF ANY ARTICLE OR THING. THEREFORE THE CLAIM OF THE ASSESSEE THAT IT IS CARRYING ON MANUFACTURING/PRODUCTION DOES NOT HOLD WATER. IT IS A SETTLED PRINCIPLE OF TAX JURISPRUDENCE THAT THE PROVISIONS REGARDING EXEMPTIONS AND CONCESSIONS NEED TO BE CONSTRUED STRICTLY IN ACCORDANCE WITH THE WRITTEN LANGUAGE OF THE STATUTE. THE PLAIN MEANING OF THE PROVISION NEEDS TO BE APPLIED. THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). CIT(A) CONFIRMED THE ORDER OF THE AO DENYING THE EXEMPTION TO THE ASSESSEE U/S 10B BY OBSERVING AS UNDER : 7 . IT CAN BE SEEN THAT THROUGH EXPLAINING THE PROCEDURE OF ENRICHMENT OF IRON ORE AND RELYING UPON VARIOUS JUDICIAL PRONOUNCEMENTS. THE ASSESSEE HAS TRIED TO ESTABLISH THAT IT IS A MANUFACTURING CONCERN ELIGIBLE FOR CLAIM OF DEDUCTION U/S 10B OF THE IT ACT, 1961. 7.1 THE ASSESSING OFFICER HAS ALREADY CONSIDERED THESE ARGUMENTS OF THE ASSESSEE IN HIS ASSESSMENT ORDER. IT IS A FACT THAT BOTH M/S. SESA GOA LTD., AND THE ASSESSEE ARE ENGAGED IN THE SAME LINE OF BUSINESS I.E. EXPORT OF IRON ORES, AND THEREFORE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF M/S SESA GOA LTD. IS DIRECTLY APPLICABLE IN THE CASE OF THE ASSESSEE. THE HONOURABLE S UPREME COURT HAS EXPLAINED THE MEANING OF PRODUCTION AND MANUFACTURE IN THE CASE OF MINING ACTIVITIES. IT CLEAR FROM THE DECISION OF THE APEX COURT THAT 'EXTRACTION AND PROCESSING' AMOUNTS TO PRODUCTION, WHEREAS IN THE INSTANT CASE, THE ASSESSEE HAS DONE O NLY THE PROCESSING PART, AND THEREFORE, THE ACTIVITIES OF THE ASSESSEE WOULD NOT AMOUNT TO MANUFACTURE/PRODUCTION. IT IS IMPORTANT THAT BOTH THE ACTIVITIES OF EXTRACTION AND PROCESSING BE CARRIED OUT SIMULTANEOUSLY TO QUALIFY FOR PRODUCTION AS PER THE ABOV E QUOTED DECISION. 7.2 THE ASSESSEE HAS STATED THAT A.Y 2009 - 2010 IS THE FIRST YEAR OF OPERATION, WHICH IS FACTUALLY INCORRECT. THE ASSESSEE STARTED ITS BUSINESS FROM THE A.Y 2006 - 2007 RELEVANT TO THE A.Y 2007 - 2008, WHICH CAN BE SEEN FROM THE RETURNS OF I NCOME FILED BY THE ASSESSEE. 7.3 THE ASSESSEE HAS CLAIMED A NET PROFIT OF 9.63 CRORES ON A GROSS TURNOVER OF 12.45 CRORES WHICH IS MORE THAN 75% OF THE TURNOVER AND EXPENDITURE DEBITED TOWARDS BENEFICIATION/PROCESSING IS VERY SMALL COMPARED TO THE TURNOVE R AND PROFIT, DISCLOSED. 5 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 7.4 SUCH A FANTASTIC PROFIT MARGIN ALSO PROVES THAT RAW IRON ORE IS NOT WASTE AS CLAIMED BY THE ASSESSEE, OTHERWISE IT WOULD NOT FETCH SUCH HIGH RETURNS. 8. THEREFORE, IN VIEW OF THE FACTS OF THIS CASE AND LEGAL ISSUES INVOLVED IN THIS CASE I DO NOT SEE ANY INFIRMITY IN THE ORDER PASSED BY THE AO. RESPECTFULLY FOLLOWING THE DECISION GIVEN BY THE HONOURABLE SUPREME COURT IN THE CASE M/.S SESA GOA, THE ORDER OF THE AO IS CONFIRMED AND APPEAL OF THE ASSESSEE ON THIS GROUND IS DISMISSED. 3 .1 BEFORE US, THE LD. AR SUBMITTED THE WRITTEN SUBMISSION AS UNDER : SUBMISSION OF WRITTEN ARGUMENTS IN THE ABOVE CASE ON BEHALF OF THE APPELLANT : THE ABOVE MENTIONED APPELLANT HAS PREFERRED AN APPEAL BEFORE THE HONORABLE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, PANAJI, AGAINST THE ORDER OF THE LEARNED CIT, (APPEALS), PANAJI, GOA BEARING NO.ITA NO.510/PNJ/11 - 12 DATED 31 - 01 - 2013 FOR THE ASSESSMENT YEAR 2009 - 10. IN THIS REGARD THE APPELLANT PRAYS TO SUBMIT THEIR WRITTEN ARGUMENTS BEFORE THE HONORABLE BENCH FOR KIND CONSIDERATION. THE APPEAL BEFORE THE HONORABLE ITAT ARISES OUT OF THE ORDER OF THE LEARNED CIT - (APPEALS), PANAJI, GOA, WHEREIN HE HAS C ONFIRMED THE ASSESSMENT ORDER PASSED BY THE ACIT, CIRCLE 1(1) PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, ON 21 - 01 - 2013. THE ONLY CONTENTIOUS ISSUE INVOLVED IN THIS APPEAL RELATES TO DISALLOWANCE OF THE CLAIM OF DEDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961, BY THE LEARNED ASSESSING OFFICER, WHICH WAS CONFIRMED BY THE LEARNED CIT, (APPEALS). THE APPELLANT IS CHALLENGING THE ORDER OF THE CIT, APPEALS, PANAJI, GOA, BEFORE THE HONORABLE ITAT IN THIS APPEAL. THE APPELLANT IS AN 100% EXPO RT ORIENTED UNIT. THE BUSINESS OF THE APPELLANT CONSISTS OF PURCHASE OF UNUSABLE TAILING REJECTS AND MINERAL WASTE WHICH HAS VERY LOW FE CONTENT WHICH IS IN THE RANGE OF 38 TO 43%, AND CONVERTING THE SAME BY INVOLVING A SERIES OF PROCESSES INTO USABLE IRON ORE FINES (I.E., WITH HIGH FE CONTENT OF MORE THAN 58%) AND EXPORT THE SAME TO CHINA. THE ENTIRE HIGH QUALITY IRON ORE FINES PRODUCED BY THE APPELLANT IS EXPORTED AND NO PORTION OF IT IS SOLD IN DOMESTIC MARKET. FOR THE PURPOSES OF THIS BUSINESS, THE APP ELLANT HAS TAKEN NECESSARY APPROVAL FROM THE OFFICE OF THE DEVELOPMENT COMMISSIONER, SEEPZ SPECIAL ECONOMIC ZONE, MINISTRY OF COMMERCE AND INDUSTRY, MUMBAI, WHICH IS GIVEN BASED ON THE APPROVAL FOR THE EOU SCHEME DATED 02 - 02 - 2007 IN THE FORM OF MEMORANDUM OF THE MINUTES OF THE BOARD DATED 19 - 01 - 2007. AS SUCH, THE APPELLANT IS AN 100% EXPORT ORIENTED UNIT WHICH HAS FULFILLED THE NECESSARY TERMS AND LEGAL REQUIREMENTS OF SEEPZ SPECIAL ECONOMIC ZONE. FOR THE PURPOSES OF CARRYING ON THIS BUSINESS, THE 6 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) APPELLANT HAS SET UP ITS UNIT IN GOA CONSISTING OF LARGE NUMBER OF MACHINERIES WHICH ARE UTILIZED IN VARIOUS PROCESSES WHICH CONVERTS THE TAILING REJECTS AND MINERAL WASTE WHICH IS OTHERWISE A WASTE MATERIAL INTO USABLE, VALUABLE AND EXPORTABLE IRON ORE FINES. LIST OF MACHINERIES UTILIZED IS ENCLOSED HEREWITH AS ANNEXURE 'A'. IT HAS TO BE MENTIONED THAT THE PHYSICAL COMPOSITION AND FORM OF THE RAW MATERIAL AND FINISHED GOODS ARE TOTALLY DIFFERENT - THE RAW MA T ERIAL IS MOSTLY IN THE SEMI LIQUID FORM, IN THE FORM OF A SLURRY WHEREAS THE FINISHED GOODS ARE IN THE FORM OF DRY POWDER. SIMILARLY, THE CHEMICAL COMPOSITION OF THE RAW MATERIAL AND FINISHED GOODS ARE TOTALLY DIFFERENT - THE RAW MATERIAL CONTAINS IMPURITIES, WATER AND ALSO ITS FE CONTENT IS IN THE RANGE OF 38% TO 43% WHERE AS THE FINISHED GOODS IS FREE FROM IMPURITIES, AND ITS FE CONTENT IS MORE THAN 58%. FOR CONVERSION OF THE WASTEFUL RAW MATERIAL INTO EXPORTABLE AND VALUABLE FINISHED GOODS, A SERIES OF MECHANICAL AND CHEMICAL PROCESSES ARE INVOLVED. SINCE THE TAILING REJECTS AND MINERAL WASTE IS OTHERWISE NOT USABLE OR CONSUMABLE, AND IS AVAILABLE IN ABUNDANCE, IF NOT SOLD IT INVOLVES SUBSTANTIAL FURTHER EXPENDITURE FOR DISPOSAL OF THE TAILING REJECTS AND MINERAL WASTE AS PER THE NORMS PRESCRIBED BY POLLUTION CONTROL BOARD AND AS SUCH THIS RAW MATERIAL IS SOLD AT VERY LOW PRICE IF A BUYER IS FOUND FOR THIS MATERIAL. THE APPELLANT CLAIMED DEDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961, FOR THIS PROCESS OF CONVERSION OF TAILING REJECTS AND MINERAL WASTE INTO EXPORTABLE FINISHED GOODS SINCE THIS AMOUNTS TO MANUFACTURE/PRODUCTION AS CONTEMPLATED IN SECTION 10B OF THE I.T. ACT, 1961. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT PRODUCED BEFORE THE ASSESSING OFFICER ALL THE RELEVANT MATERIAL WHICH FORMS THE REQUIREMENTS OF SECTION 10B OF THE I.T. ACT, 1961. IT CAN BE OBSERVED FROM THE ASSESSMENT ORDER A S WELL AS THE ORDER OF CIT (APPEALS) THAT BOTH THE AUTHORITIES HAVE CONCLUDED THAT THE APPELLANT HAS FULFILLED ALL THE REQUIREMENTS FOR ALLOWABILITY OF DEDUCTION UNDER SECTION 10B EXCEPT THAT THEY HAVE HELD THAT THE PROCESS OF THE APPELLANT DOES NOT FIT WI THIN THE DEFINITION OF MANUFACTURE/PRODUCTION AS CONTEMPLATED IN SECTION 10B OF THE INCOME TAX ACT READ WITH SECTION 2(29BA). ONLY ON THE GROUND THAT THE APPELLANT'S PROCESS DOES NOT FIT WITHIN THE DEFINITION OF MANUFACTURE/PRODUCTION THAT THE DEDUCTION UN DER SECTION 10B HAS BEEN DENIED. AS SUCH THE ONLY ISSUE INVOLVED IN THIS APPEAL BEFORE THE HONORABLE ITAT IS TO DETERMINE WHETHER THE PROCESS OF THE APPELLANT FALLS WITHIN THE DEFINITION AND PURVIEW OF MANUFACTURE/PRODUCTION AS CONTEMPLATED IN SECTION 10B AND IF THE ANSWER IS YES, THE APPELLANT WILL BE ENTITLED TO DEDUCTION UNDER SECTION 10B, ALL THE OTHER PRE - REQUISITES OF SECTION 10B HAVING BEEN FULFILLED. THE LEARNED ASSESSING OFFICER AS ALSO THE LEARNED CIT, (APPEALS) HAVE ESSENTIALLY BASED THEIR CONCL USION THAT THE APPELLANT'S PROCESS DOES NOT AMOUNT TO MANUFACTURE/PRODUCTION ON THE DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF CIT VS SESA, GOA, REPORTED AT 271 ITR 331. IT IS SUBMITTED THAT THE LEARNED ASSESSING OFFICER AS ALSO THE LEARNED CIT < (APPEALS) HAVE IN CORRECTLY APPLIED THE 7 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) RATIO OF THE ABOVE DECISION TO THE CASE OF THE APPELLANT MAINLY FOR THE FOLLOWING TWO REASONS: 1. THE FACTS OF THE CASE OF THE APPELLANT AND THE FACTS OF THE CASE OF SESA, GOA, REFERRED TO ABOVE AS SEEN IN THE ABOVE D ECISION ARE NOT IDENTICAL IN SO FAR AS THE APPELLANT PURCHASES TAILING REJECTS AND MINERAL WASTE AND USING MECHANICAL AND CHEMICAL PROCESSES, CONVERTS THE SAME INTO EXPORTABLE IRON ORE FINES WHEREAS M/S. SESA, GOA WAS INVOLVED IN EXTRACTION OF IRON ORE FRO M ITS MINES AND THE SAME WAS TRANSPORTED AND PROCESSED INVOLVING REMOVAL OF IMPURITIES AND PROCESSING IT TO FORM IRON ORE OF UNIFORM CONSISTENCY. 2. IN THE CASE OF THE APPELLANT, ISSUE INVOLVED RELATES TO CLAIM OF DEDUCTION UNDER SECTION 10B, WHICH HAS BEEN CLAIMED ON THE GROUND THAT THE APPELLANT'S PROCESS AMOUNTS TO MANUFACTURE/PRODUCTION WHEREAS IN THE CASE OF SESA, GOA, THE ISSUE INVOLVED WAS CLAIM OF INVESTMENT ALLOWANCE U/S 32A ON TIPPERS ETC., WHICH TRANSPORTED THE EXTRACTED IRON ORE FROM MINING SITES TO THE PROCESSING UNIT TREATING THEM AND PLANT AND MACHINERY. FURTHER, THE HONORABLE SUPREME COURT HELD THAT THE ACT OF EXTRACTION AND PROCESSING OF IRON ORE AMOUNTS TO MANUFACTURE/PRODUCTION FOR PURPOSES OF CLAIM OF INVESTMENT ALLOWANCE FOR TIPPERS ETC., TREATING THEM AS MACHINERIES USED IN THE MANUFACTURE/PRODUCTION OF IRON ORE. IT HAS NOWHERE GIVEN A DECISION OR FINDING THAT PROCESSING OF IRON OR E IN ITSELF DOES NOT AMOUNT TO MANUFACTURE/PRODUCTION. THE ISSUE THAT WHETHER EXTRACTION OF IRON ORE AS WELL AS PROCESSING OF IRON ORE IF TAKEN INDEPENDENTLY OF EACH OTHER WOULD ALSO AMOUNT TO MANUFACTURE/PRODUCTION INDEPENDENT OF EACH OTHER WAS NOT DELIBE RATED AND ANSWERED SINCE IT WAS NOT THE ISSUE BEFORE THE HONORABLE SUPREME COURT. THUS THE LEARNED ASSESSING OFFICER AS ALSO THE LEARNED CIT,(APPEALS) WRONGLY APPLIED THE DECISION OF THE HONORABLE SUPREME COURT REFERRED TO ABOVE TO THE CASE OF THE APPELLAN T AND HELD THAT THE APPELLANT'S PROCESS DOES NOT AMOUNT TO MANUFACTURE/PRODUCTION SINCE THE APPELLANT DOES NOT EXTRACT AND PROCESS IRON ORE AND AS SUCH WRONGLY DENIED THE DEDUCTION UNDER SECTION 10B TO WHICH THE APPELLANT WAS LEGALLY AND RIGHTFULLY ENTITLE D TO. ON THE OTHER HAND THE CASE OF THE APPELLANT IS SQUARELY COVERED BY THE DECISION OF THE HONORABLE ITAT, PANAJI BENCH, PANAJI IN THE CASE OF SESA GOA LTD., PANAJI VS. JCIT, RANGE 1, PANAJI FOR THE ASSESSMENT YEAR 2009 - 10 IN ITA NO.72/PNJ/2012. IN THIS CASE THE HONORABLE ITAT HAS CATEGORICALLY AND UNAMBIGUOUSLY HELD THAT PROCESSING OF TAILING REJECTS AND MINERAL WASTE AND CONVERTING THE SAME INTO IRON ORE FINES AMOUNTS TO MANUFACTURE AND THE ASSESSEE IN SUCH CASES IS ENTITLED TO DEDUCTION UNDER SECTION 10B IF ALL THE OTHER REQUIREMENTS LAID DOWN IN SECTION 10B OF THE INCOME TAX ACT, 1961, ARE FULFILLED. IN THE CASE OF SESA GOA LTD., DECIDED BY 8 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) THE HONORABLE ITAT REFERRED TO ABOVE, M/S. SESA GOA HAD 3 UNITS WHERE MINING ACTIVITY WAS CARRIED ON. IN THE CAS E OF CODLI UNIT, THE PROCESS INVOLVED WAS ONLY CONVERSION OF TAILING REJECTS AND MINERAL WASTE INTO EXPORTABLE IRON ORE AS IS IDENTICAL IN THE CASE OF THE APPELLANT. IN THE CASE OF CODLI UNIT ALSO, THE HONORABLE ITAT HAS SPECIFICALLY HELD THAT THE PROCESS INVOLVED AMOUNTS TO MANUFACTURE. RELEVANT EXTRACT ON PAGE NO. 135 OF THE ORDER .OF THE HONORABLE ITAT IN PARAGRAPH NO.43.5 WHICH IS REPRODUCED BELOW: 'DURING THE CONVERSION OF CRUDE ORE INTO LUMPS AND FINES, WASTE IS GENERATED WHICH IS CALLED TAILING AND DISCHARGED INTO TAILING POND. IN CODLI UNIT THESE TAILINGS WHICH ARE IN LIQUID FORM ARE CONVERTED INTO ULTRA FINE. IN OUR OPINION AS WE NOTED FROM THIS PHYSICAL SAMPLE ALSO CRUDE ORE IS ENTIRELY DIFFERENT FROM THE LUMPS AND FINE IN PHYSICAL APPEARANCE USED AND CHEMICAL COMPOSITIONS EVEN TECHNICALLY NAMES ARE ALSO DIFFERENT, SIMILARLY WHAT COMES AS OUTPUT FROM THE INPUT IN CODLI UNIT THAT IS ALSO DIFFERENT IN PHYSICAL APPEARANCE AND CHEMICAL COMPOSITION. WE DO NOT AGREE WITH THE LEARNED D.R. THAT THERE IS NO ANY CHANGE IN PHYSICAL AND CHEMICAL COMPOSITION OF THE OUTPUT THAN THE INPUT AS IS BEING PROCESSED IN THE THREE UNITS. IF WE GO TO SECTION 2(29BA) INSERTED W.E.F. 1 - 4 - 2009, WE FIND CLAUSE (B) OF THIS SECTION CLEARLY STATES THAT BRINGING INTO EXISTENCE OF NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE TANTAMOUNT TO 'MANUFACTURE'. THE CRUDE ORE ONCE PROCESSED IS MADE MARKETABLE AND HAD A DIFFERENT CHEMICAL AND PHYSICAL COMPOSITION THAN THE ROM (CRUDE O RE) EVEN THOUGH IN COMMON PARLANCE BOTH MAY BE CALLED IRON ORE. IT IS NO MORE REMAINS AS CRUDE ORES. TAILING NO MORE REMAINS TAILING BUT CONVERTED INTO A POWDER. IN VIEW OF THIS CLAUSE AND THE DECISION OF THE SUPREME COURT IN THE CASE OF CHOWGULE & CO., IT CAN BE HELD THAT THE ASSESSEE IS ENGAGED IN THESE UNITS IN 'MANUFACTURING'. THE HONORABLE ITAT BENCH HAS IN THE ORDER DISCUSSED VARIOUS OTHER DECISIONS IN COMING TO THIS CONCLUSION. THE HONORABLE BENCH DISTINGUISHED THE DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF CIT VS SESA GOA, REPORTED AT 271 ITR 331 AND HELD THAT THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE CASE. FURTHER THE BENCH HAS RELIED ON THE DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF CIT, N.C BUDHARAJA & CO., R EPORTED AT 204 ITR 412 TO DETERMINE THE MEANING OF PRODUCTION AND MANUFACTURE. THE HONORABLE BENCH HAS SQUARELY RELIED ON THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF TATA TEA LTD., VS. ACIT REPORTED AT 338 ITR 285, AS ALSO THE DECISION OF ITAT SPE CIAL BENCH, KOLKATA IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD., VS. DCIT, CIRCLE 1, KOLKATA REPORTED AT (2012) 137 ITD 0377 AMONGST CATENA OF OTHER DECISIONS. THE HONORABLE BENCH HAS RELIED ON THE DECISION OF THE KERALA HIGH COURT IN THE CASE OF TATA TEA LTD., VS ACIT REPORTED AT 338 ITR 285 AND HELD THAT EVEN IF THE ASSESSEE IS ENGAGED IN PROCESSING AND IS RECOGNIZED AS 100% EOU, IT WILL BE 9 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) SUFFICIENT FOR IT TO BE ENTITLED FOR EXEMPTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961. (PARAGRAPH NO.43. 12 ON PAGE NO.141 OF THE ORDER) IN CONCLUSION AT PARAGRAPH NO.45.9 ON PAGE NO. 154 OF THE SAID ORDER, THE HONORABLE BENCH HAS HELD 'THUS IN VIEW OF THE DECISION OF THE SPECIAL BENCH AND OTHER DECISIONS DISCUSSED IN THE PRECEDING PARAGRAPHS AND THAT OF HON ORABLE SUPREME COURT IN THE CASE OF CHOWGULE & CO., AS WELL AS DEFINITION OF 'MANUFACTURE' AS INSERTED W.E.F. 1 - 4 - 2009 BY WAY OF SECTION 2 (29AB) OF THE INCOME TAX ACT, AS REFERRED TO BY BOTH THE PARTIES, WE HOLD THAT ALL THE THREE 100% EOU ENGAGED IN PROC ESSING SO AS TOMAKE CRUDE ORE AND WASTE, I.E., TAILING USABLE OR MARKETABLE ARE ENTITLED FOR EXEMPTION UNDER SECTION 10B SUBJECT TO THE OTHER CONDITIONS FOR EXEMPTION UNDER SECTION 10B ARE BEING FULFILLED.' THE LEARNED AO AS WELL AS THE CIT (APPEALS) HAV E RELIED ON THE DECISION OF THE HONORABLE ITAT BENCH PANAJI WITH THE CASE OF M/S CHOWGULE & CO LTD IN ITA NO. 162 & 184/PNJ/2006. THE AO AND CIT(APPEALS) HAVE OPINED THAT THE HONORABLE ITAT PANAJI HAS HELD IN THIS CASE, RELYING ON THE DECISION OF HONORABLE SUPREME COURT IN THE CASE OF SESA GOA REPORTED AT 271 ITR 331 THAT ONLY EXTRACTION OF IRON ORE AND PROCESSING AMOUNTS OF MANUFACTURE/PRODUCTION. HOWEVER THE HONORABLE ITAT PANAJI IN THE CASE OF SESA GOA (SUPRA) HAVE ELABORATELY DISCUSSED THE ISSUE IN THEI R ORDER AND HAVE HELD THAT THE DECISION IS NOT BINDING AND APPLICABLE ON FACTS OF THE CASE AND HAVE DIFFERED FROM THE SAME. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT THE CASE OF THE APPELLANT IS A COVERED CASE OF THE BENCH OF THE SAME HONORABLE TRIBUNAL ON FACTS AND LEGAL ISSUE FULLY. IT IS THEREFORE PRAYED THAT IN VIEW OF THE DECISION OF THE HONORABLE TRIBUNAL REFERRED TO ABOVE, THE APPEAL OF THE APPELLANT MAY BE ALLOWED, CANCELLING THE ORDER OF THE HONORABLE CIT, APPEAL, PANAJI AND HOLDING THAT THE APPE LLANT IS ENTITLED TO DEDUCTION UNDER SECTION 10B ON THE FACTS OF THE CASE. IN THE APPELLATE ORDER PASSED BY THE CIT, APPEAL, PANAJI , A REFERENCE HAS BEEN MADE TO THE HIGHER RATE OF PROFIT THAN NORMAL. THE LEARNED CIT, APPEALS HAS GIVEN A FINDING THAT SUCH A FANTASTIC PROFIT MARGIN ALSO PROVES RAW IRON ORE IS NOT A WASTE AS CLAIMED BY THE ASSESSEE, OTHERWISE IT WOULD NOT FETCH SUCH HIG H RETURNS. THE FINDING OF THE LEARNED CIT< (APPEALS) IS CONTRARY TO FACTS. IT IS A WELL KNOWN FACT THAT TAILING REJECTS AND MINERAL WASTE IS THE DISCARDED END PRODUCT OF THE MINING PROCESS WHICH IS IN SEMI LIQUID FORM AND IS DUMPED INTO TAILING POND. IN FA CT TO DISPOSE IT OFF AS PER THE NORMS OF POLLUTION CONTROL BOARD, IT INVOLVES SUBSTANTIAL EXPENDITURE AND AS SUCH THE MINERS ARE MORE THAN WILLING TO SELL IT AT THROW AWAY PRICE IF THEY FIND A BUYER SINCE THIS WASTE IS GENERATED IN HUGE QUANTITIES AND IS A VAILABLE IN ABUNDANCE. THIS BEING THE CASE THE APPELLANT HAS PURCHASED THE TAILING REJECTS AND MINERAL WASTE AT THE PREVAILING MARKET PRICE AND DUE TO THE VALUE ADDITION MADE AFTER INCORPORATING VARIOUS MECHANICAL AND CHEMICAL PROCESSES THE OTHER WISE WAST E IS CONVERTED INTO VALUABLE FINISHED GOODS. THE 10 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) APPELLANT HAS DECLARED THE PROFIT CORRECTLY BASED ON THE ACTUAL EXPENDITURE INVOLVED IN THE PROCESS. THEREFORE THE FINDING OF THE LEARNED CIT, APPEALS, NEED NOT BE GIVEN ANY CREDENCE. IN ADDITION TO THE ABO VE CONTENTIONS, THE APPELLANT WOULD LIKE TO PLACE STRONG RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF THEIR CLAIM. 1. TATA TEA LTD VS. ACIT, REPORTED AT 338 ITR 285 KERALA. 2. MADHU JAYANTHI INTERNATIONAL LTD., VS. DCIT, CIRCLE - 1, KOLKATTA REPORTED A T (2012) 137 ITD 0377. COPIES OF THE BOTH THE ABOVE DECISIONS HAVE BEEN SEPARATELY INCLUDED IN THE PAPER BOOK, FILED SEPARATELY. RELEVANT PARAGRAPHS AND PORTI O NS OF THE CASE LAWS HAVE BEEN HIGHLIGHTED. BRIEFLY STATED THE FACTS OF THE CASES AND THE DECISIO NS AND FINDINGS OF THE HONORABLE SPECIAL BENCH IN CASE NO. 1 AND HONORABLE HIGH COURT OF KERALA IN CASE NO.2 ARE AS UNDER: 1. IN THE CASE OF TATA TEA LTD., (SUPRA) THE ASSESSEE WAS INVOLVED IN PURCHASE OF TEA OF VARIOUS QUALITIES AND PARTLY IMPORTING SOME VAR IETIES OF TEA WHICH WERE BLENDED AS PER SPECIFICATIONS AND REQUIREMENTS AND IMPURITIES WERE REMOVED THEREFROM AND THEN WERE SUBSEQUENTLY REPACKED INTO PACKETS OF VARYING SIZES AND EXPORTED. THE ASSESSING OFFICER DENIED DEDUCTION UNDER SECTION 10B OF THE IN COME TAX ACT, TO THE ASSESSEE ON THE GROUND THAT THE ASSESSEE WAS NOT INVOLVED IN MANUFACTURE/PRODUCTION. IT WAS CONTENDED BY THE ASSESSING OFFICER THAT WHAT WAS PURCHASED WAS TEA AND WHAT WAS OBTAINED AFTER THE PROCESSING WAS ALSO TEA WHICH WAS EXPORTED. IT WAS HELD BY THE ASSESSING OFFICER THAT THIS BEING THE CASE THERE IS NO CHANGE IN PHYSICAL FORM AND AS SUCH THE PROCESS CANNOT BE CONSTRUED AS MANUFACTURE/PRODUCTION. HOWEVER, THE HONORABLE HIGH COURT OF KERALA AFTER ELABORATELY EXAMINING THE ISSUE AND C ONSIDERING VARIOUS CASE LAWS CONCLUDED THAT THE PROCESS OF THE ASSESSEE AMOUNTS TO MANUFACTURE/PRODUCTION AND AS SUCH ALLOWED DEDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961. 2. IN THE CASE OF M/S. MADHU JAYANATHI INTERNATIONAL LTD., (SUPRA), THE FAC TS OF THE CASE AND THE PROCESS INVOLVED WERE IDENTICAL AS IN THE CASE OF M/S. TATA TEA LTD AND THE ASSESSEE WAS INVOLVED IN PURCHASE OF TEA FROM VARIOUS SOURCES, BLENDING THEM AND REPACKING IN PACKETS OF VARIOUS SIZES. THE MATTER WAS REFERRED TO SPECIAL BE NCH OF THE ITAT AND THE SPECIAL BENCH GAVE THE VERDICT IN THIS CASE GRANTING DEDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961. WHILE ARRIVING AT THE CONCLUSION, THE HONORABLE SPECIAL BENCH OF THE ITAT TOOK INTO CONSIDERATION THE DETAILED FACTS OF TH E CASE AS ALSO WENT INTO THE DEFINITIONS OF THE WORDS 'MANUFACTURE, PRODUCTION AND PROCESSING'. THE DEFINITION OF MANUFACTURE 11 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) GIVEN IN THE SPECIAL ECONOMIC ZONE ACT 2005 IN SECTION 2(R) WAS ALSO TAKEN INTO CONSIDERATION. THE LEARNED SPECIAL BENCH SQUARELY RELIED ON THE DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF M/S. CHOWGULE & CO. PVT. LTD., VS. UNION OF INDIA (1981) 1 SCC 653 AIR 1981 SC 014, ASPINWALL & CO. LTD., VS. CIT (251) ITR 323 (SC), BROOKE BOND LIPTON INDIA LTD., VS. STATE OF KARNATAKA (1998) 109 STC 235(KAR.), GIRNAR INDUSTRIES VS. CIT (2011) 338 ITR 277, KERALA AND ALSO TATA TEA LTD., (SUPRA). THE HONORABLE HIGH COURT TOOK INTO CONSIDERATION THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. SESA GOA LTD., REPORTED AT 271 ITR 33 1 AND DISTINGUISHED THE SAME FROM THE FACTS OF THE CASE. IN SPITE OF TAKING INTO CONSIDERATION, THE DECISION OF THE HONORABLE SUPREME COURT IN THE CASE OF SESA GOA, (SUPRA), THE HONORABLE HIGH COURT RELYING ON THE DECISIONS CITED ABOVE HELD THAT THE ASSESS EE'S PROCESS AMOUNTED TO MANUFACTURE /PRODUCTION AND AS SUCH HELD THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 10B OF THE INCOME TAX ACT, 1961. THE APPELLANT WOULD ALSO LIKE TO DRAW KIND ATTENTION OF THE BENCH TO THE DECISION OF THE HONOURABLE SUPREME COURT IN THE CASE OF CHOWGULE & CO. PVT. LTD. CS. UNION OF INDIA (1981) 1 SCC 653 AIR 1981 SC O14 IN THE SALES TAX MATTER WHERE THE QUESTION OF WHET HER PROCESSION OF IRON ORE WITH A VIEW TO DEVELOPMENT OR PREPARATION TO THE MARKET WOULD AMOUNT TO MANUFACTURE THE HONOURABLE SUPREME COURT HAD CATEGORICALLY HELD THOUGH WITH REFERENCE TO SALES TAX THAT THE PROCESSION OF IRON ORE INTO A MARKETABLE COMMODIT Y AMOUNTED TO MANUFACTURE. IN VIEW OF THIS DECISION THE PROCESS OF THE APPELLANT OF CONVERTING TAILING REJECTS AND MINERAL WASTES INTO IRON ORE FINES WOULD CERTAINLY AMOUNT TO MANUFACTURE SINCE MORE INTENSE AND ELABORATE PROCESS IS INVOLVED IN THE CASE OF THE APPELLANT AS COMPARED TO MERE PROCESSING OF IRON ORE. IT CAN BE OBSERVED THAT AS PER THE LATEST LEGAL POSITION PREVAILING EVEN THE PROCESS OF BLENDING AND REPACKING OF TEA HAS BEEN HELD TO AMOUNT TO MANUFACTURE/PRODUCTION AND AS SUCH ENTITLED TO DEDUC TION U/S 10B. IN THE CASE OF THE APPELLANT THE PROCESS INVOLVED IS FAR MORE INTENSE AND COMPLEX IN SO FAR AS THE USE OF MECHANICAL AND CHEMICAL PROCESS INVOLVES CHANGE OF THE RAW MATERIAL IN ITS PHYSICAL FORM AS ALSO IN ITS CHEMICAL COMPOSITION WHEN IT IS ULTIMATELY CONVERTED INTO FINISHED GOODS. FURTHER, THE PROCESS INVOLVES UTILIZATION OF LARGE NUMBER OF MACHINERIES TO CONVERT THE RAW MATERIAL INTO FINISHED GOODS. ALSO THE PROCESS OF THE APPELLANT CONVERTS THE OTHERWISE WASTEFUL MATERIAL INTO VALUABLE EXP ORTABLE COMMODITY. THEREFORE IF THE ACT AND PROCESS OF MERE BLENDING AND REPACKING OF TEA CAN BE CONSTRUED TO AMOUNT TO MANUFACTURE/PRODUCTION, AND ENTITLED TO DEDUCTION U/S 10B IT IS OBVIOUS AND IMPERATIVE THAT THE PROCESS OF THE APPELLANT ALSO MUST BE TR EATED TO AMOUNT TO MANUFACTURE/PRODUCTION AND THEREBY ENTITLED TO DEDUCTION U/S 10B. 12 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) IN VIEW OF THE ABOVE FACTS AND DECISIONS IT IS SUBMITTED THAT THE PROCESS OF THE APPELLANT MAY PLEASE BE HELD TO AMOUNT TO MANUFACTURE/PRODUCTION AND THE APPELLANT MAY BE GRANTED DEDUCTION UNDER SECTION 10B SINCE ALL OTHER CONDITIONS NECESSARY FOR GRANT OF DEDUCTION SEC TION 10B ARE ALREADY FULFILLED. 3 .2 THE LD. DR, ON THE OTHER HAND, VEHEMENTLY RELIED ON THE ORDER OF THE AUTHORITIES BELOW AND CONTENDED THAT THE PROCESS ADOPTED BY THE ASSESSEE DOES NOT TANTAMOUNT TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE. RELIANCE WAS PLACED ON THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF CIT VS. SESA GOA , 271 ITR 331 FOR THE PROPOSITION THAT FOR MANUFACTURE, THERE MUST BE EXTRACTION AS WELL AS PROCESSING OF THE ORE. THE ASSESSEE IS NOT CARRYING ON ANY EXTRACTION ACTIVITY. THE ASSESSEE WAS BUYING THE ORE, MAY BE REJECTIONS HAVING LOW DENSITY OF IRON. WHAT THE ASSESSEE WAS PRODUCING WAS ALSO IRON ORE WHICH HAS FE CONTENT OF MORE THAN 58%. THERE IS NO CHANGE IN THE MECHANICAL COMPOSITION OF THE RAW MATERIALS AS WELL AS THE FINISHED PROD UCT. 3 .3 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE HAVE ALSO GONE THROUGH THE CASE LAWS AS HAS BEEN RELIED ON BEFORE US. THE ONLY ISSUE INVOLVED BEFORE US IS WHETHER THE ASSESSEE IS PROCESSING THE TAILIN G REJECTS INTO IRON ORE WHETHER IT CAN BE SAID THAT THE ASSESSEE IS ENGAGED IN MANUFACTURE SO THAT THE ASSESSEE CAN BE ENTITLED FOR EXEMPTION U/S 10B. THE AO REJECTED THE CLAIM OF THE ASSESSEE ONLY ON THE BASIS THAT IN HIS OPINION THE ASSESSEE WAS NOT ENG AGED IN THE MANUFACTURING OR PRODUCTION OF AN ARTICLE. THE ACTIVITY OF THE ASSESSEE OF IMPROVING THE GRADE OF PURCHASED IRON ORE CAN AT BEST BE TERMED AS PROCESS BUT CANNOT TANTAMOUNT TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. WE NOTED THAT THI S TRIBUNAL VIDE ORDER DT. 8.3.2013 IN ITA NO. 72/PNJ/2012 IN THE CASE OF ACIT VS. SESA GOA LTD. DECIDED A SIMILAR ISSUE. ONE OF THE UNIT I.E. CODLI UNIT OF SESA GOA LTD. WAS CARRYING ON A SIMILAR PROCESS CONVERTING THE TAILING REJECTS AND MINERAL WASTE IN TO EXPORTABLE IRON ORE. IN RESPECT OF THIS UNIT ALSO SESA GOA CLAIMED EXEMPTION U/S 10B. THE 13 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) AO REJECTED THE CLAIM FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SESA GOA, 271 ITR 331. WHEN THE MATTER WENT TO THE TRIBUNAL, THI S TRIBUNAL DEALT WITH THE ISSUE WHAT DOES THE WORD MANUFACTURE OR PRODUCTION OF AN ARTICLE MEANS IN THE FOLLOWING MANNER : 42.7 IN OUR OPINION, THE COMMON ISSUE INVOLVED ON THE FACTS OF THE CASE IN THE CASE OF THE ASSESSEE IS WHETHER ALL THE THREE UNITS IN RESPECT OF WHICH THE ASSESSEE CLAIMED THE EXEMPTION U/S 10B ARE ENGAGED IN ANY MANUFACTURE OR PRODUCTION OF ARTICLE OR THING FOR THE PURPOSE AVAILING OF EXEMPTION U/S 10B. IF ENGAGED IN PROCESSING, WHETHER ASSESSEE IS ENT ITLED FOR EXEMPTION U/S 10B IN RESPECT OF ALL THESE THREE UNITS. THE NATURE OF ACTIVITIES IN THE CASE OF AMONA PLANT AS WELL AS CHITRADURGA IS SIMILAR AS EXPLAINED IN THE EARLIER PARAS. BOTH THESE UNITS AS WELL AS CODLI PLANT ARE APPROVED AS 100% EOU UNIT S. THE NECESSARY BOARD APPROVALS ARE PLACED IN RESPECT OF EACH UNIT BY THE ASSESSEE ON RECORD. FOR CODLI UNIT, APPROVAL WAS GIVEN INITIALLY FOR FIVE YEARS, WHICH WAS SUBSEQUENTLY EXTENDED TO WHICH WE ARE SATISFIED AS THE REVENUE DID NOT PROVE THAT THE LET TER ISSUED IS BOGUS OR FORGED ONE. TO DECIDE THE ISSUE WHETHER ALL THESE UNITS ARE ENGAGED IN ANY MANUFACTURING OR PRODUCTION OF ARTICLE OR THING, IT IS NECESSARY TO REFER TO THE RELEVANT PROVISIONS OF THE INCOME - TAX ACT, 1961. 43. PROVISION OF SEC. 10A OF THE ACT WHICH DEALS WITH THE SPECIAL PROVISIONS IN RESPECT OF THE NEWLY ESTABLISHED UNDERTAKINGS IN FREE - TRADE ZONE, ETC., AND SEC. 10AA OF THE ACT WHICH DEALS WITH THE SPECIAL PROVISIONS IN RESPECT OF THE NEWLY ESTABLISHED UNITS IN SPECIAL ECONOMIC ZO NES; AND ALSO SEC. 10B OF THE ACT WHICH DEALS WITH THE SPECIAL PROVISIONS IN RESPECT OF THE NEWLY ESTABLISHED 100% EXPORT ORIENTED UNDERTAKINGS WERE INSERTED BY THE FINANCE ACT, 1988 W.E.F. 01/04/1989. SEC. 10B PROVIDES THAT ANY PROFITS AND GAINS DERIVED B Y AN ASSESSEE FROM A 100% EOU SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THIS PROVISION APPLIES TO ANY UNDERTAKING WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING. EXPLANATION (I) TO SEC. 10B PROVIDES THAT THE EXPRESSION 100% EXPORT OR IENTED UNIT MEANS AN UNDERTAKING WHICH HAS BEEN APPROVED BY THE BOARD APPOINTED IN THIS BEHALF BY THE CENTRAL GOVERNMENT IN EXERCISE OF THE POWERS CONFIRMED BY SEC. 14 OF THE INDUSTRIES (DEVELOPMENT ®ULATION) ACT, 1951 AND THE RILES MADE THERE UNDER. EXPLANATION (III) WHICH WAS THERE AT THE TIME OF THE SAID SEC. 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 INFO RMATION 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 THIN G SHALL INCLUDE PRODUCTION OF COMPUTER PROGRAMME. CBDT 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 14 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) THE SAID NEW SEC. 10B HAD BEEN INSERTED IN THE STATUTE 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 FALLI NG WITHIN THE BLOCK OF EIGHT ASSESSMENT YEARS. THE EXEMPTION 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 EXP RESSION MANUFACTURE FOR THE PURPOSE OF BOTH SECTIONS 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. 43.1 THIS DEFINITION OF MANUFAC TURE WAS REMOVED WHEN SEC. 10A AND 10B OF THE ACT WERE AMENDED 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: - EXPLANATION (IV) FOR THE PURPOSE OF THIS SECTION, MANUFACTURE OR PRODUCE SHALL INCLUDE THE CUTTING AND POLISHING OF PRECIOUS AND SEMI - PRECIOUS STONES. 43.2 THE EOUS WERE ALLOWED TO SELL 25% PRODUCTION WITHIN THE COUNTRY. WITH A VIEW TO RA TIONALIZE THE CONCESSION AND TO PHASE THESE OUT BY THE END OF THE ASSESSMENT YEAR 2009 - 10, THE PROVISIONS OF SEC. 10A AND 10B WERE SUBSTITUTED BY THE NEW PROVISIONS BY THE FINANCE ACT, 2000. CBDT VIDE CIRCULAR NO. 794 DATED 09/08/2000 245 ITR ST. 21, 34 - 35 UNDER PARA 15.3 EXPLAINED THAT THE DEDUCTION U/S 10B WOULD BE GRANTED IN RESPECT OF PROFITS AND GAINS DERIVED BY AN UNDERTAKING WHICH MANUFACTURES OR PRODUCES ARTICLE OR THINGS OR COMPUTER SOFTWARE AND DERIVED PROFITS AND GAINS FROM THE EXPORTS THEREOF. T HE SAID EXEMPTION WAS AVAILABLE FOR A PERIOD OF 10 CONSECUTIVE YEARS IN A GRADED MANNER. THE NEW PROVISIONS CONTAINED THE FOLLOWING ADDITIONAL CONDITIONS: I. THE SALE PROCEEDS OF ARTICLES OR THINGS OR COMPUTER SOFTWARE EXPORTED OUT OF INDIA, SHOULD BE RECEIV ED IN OR BROUGHT INTO INDIA WITHIN A PERIOD OF 6 MONTHS FROM THE END OF THE PREVIOUS YEAR OR WITHIN SUCH FURTHER PERIOD AS THE COMPETENT AUTHORITY MAY ALLOW SUB - SECTION (3); II. THE PROFITS DERIVED FROM THE EXPORT OF ARTICLES OR THINGS OR COMPUTER SOFTWARE SHALL BE THE AMOUNT WHICH BEARS TO THE PROFITS OF THE BUSINESS, THE SAME PROPORTION, AS THE EXPORT TURNOVER IN RESPECT OF SUCH ARTICLE OR THINGS OR COMPUTER SOFTWARE BEARS TO THE TOTAL TURNOVER OF BUSINESS SUB - SECTION (4); III. THE ASSESSEE MUST FURNISH IN T HE PRESCRIBED FORM NO. 56G, ALONG WITH HIS RETURN OF INCOME, THE REPORT OF A CHARTERED ACCOUNTANT CERTIFYING THAT THE 15 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) DEDUCTION HAS BEEN CORRECTLY CLAIMED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 10B SUB - SECTION (5); IV. WHERE THE ASSESSEE AVAILS OF THE BENEFITS OF SECTION 10A OR SECTION 10B, IT WILL NOT BE ELIGIBLE FOR OTHER TAX EXEMPTIONS AVAILABLE UNDER OTHER PROVISIONS OF THE ACT DURING THE PERIOD OF 10 YEARS SUB - SECTION (6); V. MANUFACTURE SHALL HAVE THE SAME MEANING AS ASSIGNED TO IT IN CLAUSE (R ) OF SECTION 2 OF THE SPECIAL ECONOMIC ZONES ACT, 2005. 43.3 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 HUSBANDRY, FLORICULTURE, HORTICULTURE, PISCI CULTURE, POULTRY, SERICULTURE, AVICULTURE AND MINING. 43.4 THIS DEFINITION WAS ADOPTED BY THE LEG ISLATURE 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. 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 TH E 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 ARTICL E 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. 43.5 IN CHOWGULE & CO. PVT. LTD. VS. UNION OF INDIA (1981) 1 SCC 653 HONBLE SUPREME COURT, AFTER CONSIDERING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN 16 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 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 DEPE NDS 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 MEANING. WEBSTERS 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 MARKETABLE FORM AS LIVESTOCK BY SL AUGHTERING, 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 VARY FROM CASE TO CASE; IN ONE CASE THE PROCESSING MA Y 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 T O 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 TH E 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 C OMPOSITION 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 17 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) AND PHYSICAL COM POSITION, BECAUSE WHAT IS PRODUCED BY SUCH BLENDING 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 ORE 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 Q UANTITIES FOR SUCH ORE ON THE CONVEYOR BELT OF 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 DIFFERE NT 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. THUS THE HONBLE SUPREME COURT ACCEPTED THAT THERE IS CHANGE IN CHEMICAL COMPOSITIONS AFTER PROCESSING OF THE IRON ORE IN THIS CASE.FROM THE SAID DECISION OF THE APEX COURT, IT IS APPARENT THAT HONBLE APEX COURT HELD EVEN BLENDING OF IRON ORE FOR THE PURPOSE OF EXPORT INVOLVES CHANGE IN THE CHEMICAL AND PHYSICAL COMPOSITION OF IRON ORE. BUT IF WE LOOK TO THE FACTS IN THE IMPUGNED CASE OF THE ASSESSEE, THE ASSESSEE IS NOT ONLY BLENDING IRON ORE BUT CARRYING OUT VARIOUS PROCESSES AS TO MAKE IRON ORE CALLED CRUDE ORE USEABLE TO ISPAT INDUSTRIES. THE ACTIVITY OF THE UNITS OF THE ASSESSEE FOR AMONA AND CHITRADURGA INVOLVED CONVERTING INPUT INTO OUTPUT CONSIST OF CRUSHING (CRUDE ORE CALLED ROM WHICH APPEARED TO BE PIECES OF ROCKS AS WE NOTED DURING THE COURSE OF HEARING ON THE BASIS OF SAMPLE SHOWN TO US) SCREENING, WASHING, STACKING, LOADING IN BARGES, RIVER TRANSPORTATION TO THE BOAT AND EXPORT IN SHIPS. THE FINISHED PRODUCT WHICH COMES OUT ARE CALLED LUMPS AND FINES WHICH ARE USED FOR ISPAT INDUSTRIES AND BROUGHT BY THE FOREIGN BUYERS. THE FINISHED PRODUCT TECHNICALLY AFTER PROCESSING HAD DIFFERENT NAME. AS SHOWN TO US DURING THE COURSE OF HEAR ING WE NOTED THAT THE LUMPS AND FINES ARE ENTIRELY DIFFERENT FROM CRUDE ORE. DURING CONVERSION OF CRUDE ORE INTO LUMPS AND FINES, WASTE IS GENERATED WHICH IS CALLED TAILING AND DISCHARGED INTO TAILING POND. IN CODLI UNIT THESE TAILINGS WHICH ARE IN LIQUID FORM ARE CONVERTED INTO ULTRA FINE. IN OUR OPINION AS WE NOTED FROM THIS PHYSICAL SAMPLE ALSO CRUDE ORE IS ENTIRELY DIFFERENT FROM THE LUMPS AND FINE IN PHYSICAL APPEARANCE USED AND CHEMICAL COMPOSITIONS EVEN TECHNICALLY NAMES ARE ALSO DIFFERENT, SIMILARL Y WHAT COMES AS OUTPUT FROM THE INPUT IN CODLI UNIT THAT IS ALSO DIFFERENT IN PHYSICAL APPEARANCE AND CHEMICAL COMPOSITION. WE DO NOT AGREE WITH THE LEARNED D.R THAT 18 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) THERE IS NOT ANY CHANGE IN PHYSICAL AND CHEMICAL COMPOSITION OF THE OUTPUT THAN THE INPUT AS IS BEING PROCESSED IN ALL THE THREE UNITS. IF WE GO TO SECTION 2(29BA) INSERTED W.E.F. 1.4.2009, WE FIND CLAUSE (B) OF THIS SECTION CLEARLY STATES THAT BRINGING INTO EXISTENCE OF NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COM POSITION OR INTEGRAL STRUCTURE TANTAMOUNT TO MANUFACTURE. THE CRUDE ORE ONCE PROCESSED IS MADE MARKETABLE AND HAD A DIFFERENT CHEMICAL AND PHYSICAL COMPOSITION THAN THE ROM (CRUDE ORE) EVEN THOUGH IN COMMON PARALANCE BOTH MAY BE CALLED IRON ORE. IT IS NO MORE REMAINS AS CRUDE ORES. TAILING NO MORE REMAINS TAILING BUT CONVERTED INTO A POWDER.IN VIEW OF THIS CLAUSE AND THE DECISION OF SUPREME COURT IN THE CASE OF CHOWGULE & CO. (SUPRA), IT CAN BE HELD THAT THE ASSESSEE IS ENGAGED IN THESE UNITS IN MANUFAC TURING. FURTHER, IN CIT VS N.C. BUDHARAJA & CO. (1993) 204 ITR 412 (SC), HONBLE 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 WORD 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 EXIS TENCE 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. 43.6 IN CHRISTIAN MICA INDUSTRIES LTD. VS. STAT E OF BIHAR (1961) 12 STC 150 (SC), HONBLE 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 PRODUCTION 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 F OR 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. 43.7 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 EMPLOYING THE WORD PRODUCED OBVIOUSLY WAS TO INTRODUCE AN ELEMENT OF VOLITI ON AND EFFORT INVOLVING THE EMPLOYMENT OF SOME PROCESS FOR BRINGING INTO EXISTENCE SOME GOODS. 19 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 43.8 IN PARAGRAPH 7 OF ITS IN THE CASE OF CHOWGULE & C0 (P) LTD. VS. UOI (SUPRA), HONBLE APEX 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 SECTION 8(A), SO AS TO PRECLUDE THE ASSESSES FROM BEING ENTITLED TO DEDU CT THEIR TURNOVER UNDER SECTION 8(A), SO AS TO PRECLUDE THE VALUE OF THE TEA PURCHASED BY THEM. THE RELEVANT OBSERVATIONS MADE BY THE HONBLE SUPREME COURT IN THIS RESPECTIVE ARE QUOTED AND 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 UNDER THE BOMBAY SALES TAX ACT, 1953 AND THEY PURCHASED IN BULK DIVERS E BRANDS OF TEA AND WITHOUT THE APPLICATION OF ANY MECHANICAL OR CHEMICAL PROCESS 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 AUT HORITIES 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 T HE 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 M EANING 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 ARGUME NT 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 ASSESSE S 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, BUT 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 D IFFERENT 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 PROCESS ING OF THE DIFFERENT BRANDS OF TEA, BECAUSE THESE BRANDS OF TEA EXPERIENCED, AS A RESULT OF MIXING, QUALITATIVE CHANGE, IN THAT THE TEA MIXTURE WHICH CAME INTO EXISTENCE WAS OF DIFFERENT QUALITY AND FLAVOR THAN 20 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) THE DIFFERENT BRANDS OF TEA WHICH WENT INTO T HE MIXTURE. 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 PRO DUCING THE TEA MIXTURE, THE 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 WE DO NOT THINK THAT IS THE CORRECT TEST TO BE APPLIED FOR THE PURPOSE OF DETERMINING WHETHER THERE IS PROCESSING. THE QUESTION 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 43.9 IN DE CIDING THE SAID QUESTION, THE HONBLE SUPREME COURT AFTER CONSIDERING THE JUDGMENT OF THE HONBLE 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 PROCE SSING FOR THE DIFFERENT BRANDS OF TEA, BECAUSE THESE BRANDS 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 F ORCE IN PRODUCING THE TEA MIXTURE, THE 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 CORREC T 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 OF THE OPERATION ON THE COMMODITY THAT IS MATERIAL FOR THE PURPOSE OF DETERMINING WHETHER THE OPERATION CONSTITUTES PROCESSING. 21 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 43.10 THEREFORE, HONBLE 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 PR OCESSING OF THE COMMODITY WITHIN THE MEANING OF CENTRAL SALES TAX ACT, 1956. HONBLE 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 TEA CO. [1959] 10 STC 500, HONBLE 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 PLAIN LY 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 DIFFERENT BRANDS OF TEA WHICH WENT INTO THE MIXTURE. 43.11 HONBLE 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, T EA PACKETS AND BULK TEA PACKS IN THE CASE OF TATA TEA LTD. VS. ACIT 338 ITR 285. THE ASSESSEES UNIT WAS RECOGNIZED AS 100% EOU. THE ASSESSEE CLAIMED EXEMPTION U/S 10B OF THE ACT FOR THE ASSESSMENT YEAR 1996 - 97 ONWARDS WHICH WAS GRANTED UP TO THE ASSESSMEN T YEAR 2000 - 2001, BUT FOR THE ASSESSMENT YEARS 2001 - 02 AND 2002 - 03 THE EXEMPTION WAS DENIED FOR THE REASON THAT BY THE FINANCE ACT, 2000, THE DEFINITION OF MANUFACTURE WHICH INCLUDED PROCESSING CONTAINED IN SEC. 10B OF THE ACT WAS DELETED W.E.F. 01/04/20 01. (THE SAME REASONING AS HAS BEEN GIVEN BY THE COORDINATE BENCH IN THE CASE OF CHOWGULE & CO. ITA 162 & 184 HEAVILY RELIED BY THE DEPARTMENT UNDER PARA 14 OF THEIR ORDER DT. 12.7.2007.) HONBLE HIGH COURT NOTED IN THAT CASE THAT THE REVENUES STAND IS TH AT 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 PRODU CTION OF AN ARTICLE QUALIFYING FOR EXEMPTION. HONBLE 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 O F THE ACT AND THE EXEMPTION AVAILABLE TO 100% EOU U/S 10B OF THE ACT ARE VERY SIMILAR IN NATURE AND THE WORDINGS OF THE STATUTORY PROVISIONS ARE SIMILAR IN NATURE. HONBLE KERALA HIGH COURT ALSO CONSIDERED THE JUDGMENT IN THE DECISION OF SUPREME COURT IN T ARA AGENCIES (292 ITR 444 (SC) RELIED UPON BY THE SR. STANDING COUNSEL FOR THE REVENUE, WHEREIN HONBLE SUPREME COURT CLEARLY HELD THAT BLENDING OF TEA DOES NOT AMOUNT TO MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING, BUT IS ONLY PROCESSING. HONBLE 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 22 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) WAS RECOGNIZED AS A 100% EOU DIVISION AND THE DEP ARTMENT HAD NO CASE THAT THE ASSESSEES 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 ASSESSEES 100% EOU , IT WOULD DEFEAT THE VERY OBJECT OF SECTION 10B OF THE ACT. (SIMILAR TO ASSESSEES 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 CONT INUE 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. HONBLE HIGH CO URT 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, REFRIGE RATION, ETC. IT WAS NOTICED BY THIS COURT THAT THE DEFINITIONS OF MANUFACTURE 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 R EMOVAL 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 DEFINIT ION 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 AS 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 PERTINENT TO NOTE THE PRODUCTS FOR WHICH THE ASSESSEES UNIT IS RECOGNIZED AS A 100 PER CENT EXPORT O RIENTED 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 CE NT EXPORT ORIENTED UNIT BY THE CONCERNED AUTHORITY WITHIN THE MEANING OF THAT TERM CONTAINED IN THE DEFINITION CLAUSE OF SECTION 10B OF THE INCOME - TAX ACT AND THE DEPARTMENT HAS NO CASE THAT THE ASSESSEES 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 EXEMPTION IS DENIED ON THE GROUND THAT PRODUCTS EXPORTED ARE NOT PRODUCED OR MANUFACTURED IN THE INDUSTRIAL UNIT OF THE ASSESSEES 100 PER CENT EXPORT ORIENTED UNIT, THE SAME WOULD DE FEAT THE VERY OBJECT OF SECTION 10B. 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, WILL CONTINUE TO ENJOY TAX EXEMPTION UNDER SECTION 10A AND SECTI ON 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 VIEW, THE DECISION OF THE SUPREME COURT IN 23 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 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 JUD GMENT 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, PACKING 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 APPELLANTS ENTITLEMENT FOR EXEMPTION. 43.12 HONBLE 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 I N THE 100% EXPORT ORIENTED UNIT, THE SAME WOULD DEFEAT THE VERY OBJECT OF SECTION 10B. THE HONBLE HIGH COURT TOOK THE VIEW THAT THE DECISION OF THE HONBLE SUPREME COURT IN TARA AGENCYS CASE 292 ITR 444 WILL NOT APPLY EVEN THOUGH HONBLE 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 HONBLE KERALA HIGH COURT IN THE CASE OF TATA TEA LTD. (SUPRA) GAVE THE CLEAR CUT FINDING IMPLIEDLY THAT EVEN IF THE ASSES SEE IS ENGAGED IN PROCESSING AND IS RECOGNIZED AS 100% EOU, IT WILL BE ENTITLED FOR EXEMPTION CLAIMED U/S 10B OF THE ACT. 43.13 THE CRUX OF THE SUBMISSIONS OF THE LD. SPECIAL COUNSEL FOR THE DEPARTMENT IS THAT THE ASSESSEE IS ENGAGED IN THESE 100% EXPOR T ORIENTED UNITS ONLY IN PROCESSING OF IRON ORE AND BY PROCESSING IT GET IT UPGRADED FOR EXPORT, THEREFORE IT IS NOT ENTITLED FOR EXEMPTION U/S 10B DOES NOT HAVE ANY LEG TO STAND IN VIEW OF THE DECISION OF KERALA HIGH COURT (SUPRA), SUPREME COURT IN THE C ASE OF CHOWGULE & CO(SUPRA). EVEN ON THIS ISSUE WE HAVE GONE THROUGH THE DECISION OF HONBLE 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? 4 4. 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 THAT SECTION. THE ASSESSEE BUYS TEA FROM 24 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 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 QUALITY NOT PRODUCED IN INDIA. IT FURTHER CONCEDED THE FA CTUAL 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 ASSESSEE OF EXEMPTION U/S 10B IN RESPECT OF EXPORT OF BLENDING OF TEA. THE REJECTION OF EXEMPTION U/S 10B WA S 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 ACT, SPECIAL ECONOMIC ZONES (INCLUDING UNITS THEREIN) WERE ALL ALONG TREATED L IKE 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 E XISTENCE 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, ADMITTE DLY ALL SPECIAL ECONOMIC ZONES WERE ALSO 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 S ECTION 2(R) OF THE SPECIAL ECONOMIC ZONES 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 REFRIGERATION, CUTTING, POLISHING, BLENDING, REPAIR, REMAKING, RE - ENGINEERING AND INCLUDES AGRICULTURE, AQUACULTURE, ANIMAL HUSBANDLY, FLORICULTURE, HORTICULTURE, PISCICULTURE, POULTRY, SERICULTURE, VITICULTURE AN D 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 MACHINE, A NEW PRODUCT HAVING A DISTINCTIVE NAME, CHARACTER 25 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) OR USE AND SHALL INCLUDE PROCESSES SUCH AS REFRIGERATION, REPACKING, POLISHING AND LABELING. 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, EVEN 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 MAKING 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 S EPAR ATELY 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 'MANUFACTURER', 'BUYER', 'PACKET TEA', 'TEA BAG', - 'G REEN 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 AN D MARBLES PVT. LTD. (2010) 320 ITR 79, 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 THE 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 ALL IMPORTED AND SOPHISTICATED AUTOMATIC PLANT AND MACHINERIES WITH THE HELP OF OVER 26 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 100 WORKMEN ENG AGED 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 FALTA 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. ASSESSEE COMPANY IS DULY REGISTERED AS A 100% EOU BY THE GOVERNMENT OF INDIA, MINISTRY OF INDUSTRY, DEPAR TMENT 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 DECEMBE R, 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 UNIT SHALL MAKE VALUE ADDITION TO A MINIMUM EXTENT OF 79%. UNDISPUTEDLY, THE EXPORTED CONSUMER PRODU CTS, 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. 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 W ITH THE EXIM POLICY DECLARED BY THE GOVERNMENT OF INDIA IN PARLIAMENT AND IN THE LIGHT OF ALLIED 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 ASSESSEE 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. OF 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. 01.04.2001. THE ARGUMENT OF THE DEPARTME NT 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. 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. 27 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 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 ALSO 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 PROCESSING. 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 THE 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 ADUL TERATION RULES, 1955, TEA (MARKETING) CONTROL ORDER, 2003, ETC. WE ALSO FIND THAT THE DEFINITION OF 'MANUFACTURE' 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 HIG H COURT IN THE CASE OF GIRNAR INDUSTRIES (SUPRA) HAD HELD SUCH AMENDMENT IN SECTION 10AA TO BE OF CLARIFICATORY 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 ENTITLED FOR EXEMPTION UNDER SECTION 10B OF THE ACT ON ACCOUNT OF BLENDI NG OF TEA. SIMILARLY, IN OUR VIEW, THE INDUSTRIAL UNITS ENGAGED 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 ANS WER 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 BLENDING 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 28 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 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. 44.1 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. 45. WE HAVE ALSO GONE THROUGH THE DECISION OF HONBLE SUPREME COURT IN INDIAN CINE AGENCIES VS CIT 308 ITR 98. IN THIS CASE THE QUESTION BEFORE THE HONBLE SUPREME COURT WAS: WHEN THE ASSESSEE WAS ENGAGED IN THE ACTIVITY OF CUTTING JUMBO ROLL FILM S INTO FLAT AND SMALL ROLLS IN DESIRED SIZES, WHETHER SUCH ACTIVITY UNDERTAKEN BY THE ASSESSEE WAS MANUFACTURE OR PRODUCTION? IN THIS CASE, THE HONBLE SUPREME COURT AFTER DISCUSSING VARIOUS CASES, THE PROVISIONS OF DIFFERENT ACTS AND THE DICTIONARY MEANIN G TOOK THE VIEW THAT THE ASSESSEE WAS ENGAGED IN MANUFACTURE / PRODUCTION. WHILE HOLDING SO UNDER PARA 12 OF ITS ORDER, HONBLE SUPREME COURT HAS GIVEN THE SAME ANALOGY FOR THE PURPOSE OF ELIGIBILITY OF DEDUCTION UNDER SECTION 80HH AND 80 - I AS HAS BEEN GIV EN 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 REFERRING TO ITEM 10 OF ELEVENTH SCHEDULE FOR THE PURPOSE OF EXCLUSION DOES NOT ARI SE. FROM THIS JUDGMENT, THUS, IT IS APPARENT THAT THE HONBLE APEX COURT ACCEPTED THAT MANUFACTURE/PRODUCTION INCLUDES PROCESSING ALSO. 45.1 WE HAVE ALSO GONE THROUGH THE DECISION OF HONBLE 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, HONBLE SUPREME COURT, AFTER DISCUSSING THE DEFINITION OF MANUFACTURE GIVEN IN SECTION 2(29BA) OF THE INCOME - TAX ACT, 1961 AND ALSO DISCUSSING THE PROVISIONS O F 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. BUDHARAJA 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 B LOCK DOES NOT REMAIN THE MARBLE BLOCK, IT BECOMES A 29 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) SLAB OR TILE. IN THE CIRCUMSTANCES, NOT ONLY THERE IS MANUFACTURE BUT ALSO AN 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 INCOME TAX ACT, 1961. 23. BEFORE C ONCLUDING, 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 P RODUCTION UNDER SECTION 80IA WILL HAVE DISASTROUS CONSEQUENCES, PARTICULARLY IN 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 MANUFACTUR E. KEEPING IN MIND THE ABOVE FACTORS, WE ARE OF THE VIEW THAT IN THE PRESENT CASES, 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 INCOM E TAX ACT, 1961. 45.2 IN THIS CASE ALSO, HONBLE 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 DULY CONSIDERED, IN OUR OPINION, WHETHER THE ACTIVITY OF PROCESSING IS MANUFACTURE / PRODUCTION. 45.3 NOW, WE WOULD LIKE TO DEAL WITH THE SUBMISSIONS OF THE REVENUE WHETHER THIS ISSUE SHOULD BE SENT TO SPECIAL BENCH OR NOT. WE HAV E GONE THROUGH THE DECISION OF THIS TRIBUNAL IN ITA NO. 162/PNJ/2006 DT. 12 TH JULY, 2007 READ WITH MISC. APPLICATION IN MA NO. 23/PNJ/2007 DT. 19 TH JULY, 2007 IN THE CASE OF CHOWGULE & CO. IN THIS CASE WE NOTED THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS INTERPRETED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SESA GOA 271 ITR 331 THAT EXTRACTION AND PROCESSING OF MINING ORE AMOUNTS TO PRODUCTION; AND ONE SHOULD READ THE EXPRESSION EXTRACTION AND PROCESSING TOGETHER (THIS DECISION WAS NOT RE NDERED IN RESPECT OF EXEMPTION AVAILABLE U/S 10B). EVEN THE COORDINATE BENCH OF THIS TRIBUNAL FURTHER HELD THAT IF SECTION 10B PROVIDES EXEMPTION FOR PROCESSING ALSO, THE LAW WOULD HAVE MADE IT VERY CLEAR BY APPARENTLY STATING THAT PROCESSING IS ALSO ENTI TLED FOR EXEMPTION. WHEN THE EXPRESSION PROCESSING IS OMITTED IN SECTION 10B, WE ARE NOT SUPPOSED TO FILL UP THE OMISSION. IF SOMETHING IS NOT THERE WE SHOULD ACCEPT AS IT IS NOT THERE. WE SHOULD NOT PROVIDE FOR THE OMISSION THAT AMOUNTS TO JUDICIAL LEGI SLATION. THERE IS NO CONFUSION IN THE PROVISION OF LAW PROVIDED UNDER SECTION 10B. THE EXEMPTION IS AVAILABLE ONLY TO MANUFACTURE OR PRODUCTION. IT IS NOT AVAILABLE FOR PROCESSING. ALTHOUGH SUBSEQUENTLY 30 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) THIS TRIBUNAL HAS RECTIFIED THE ORDER UNDER SECTION 254 VIDE ORDER DATED 19 TH JULY, 2007 ON THE APPLICATION OF THE ASSESSEE AND TOOK THE VIEW THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION UNDER SECTION 10B AS THE ASSESSEE - COMPANY ITSELF IS EXTRACTING THE ENTIRE IRON ORE FROM OWN MINES AND MINES TAKEN ON LEASE AND THEREAFTER PROCESSING THE SAME. WE CANNOT LOOK INTO THE FINDING OF THE COORDINATE BENCH WHETHER THEY HAVE CORRECTLY INTERPRETED THE DECISION OF SUPREME COURT IN 271 ITR 331 OR NOT. THE LD. AR VEHEMENTLY CONTENDED THAT THE DECISION DT. 12 TH JULY, 2007 OF THIS TRIBUNAL IN THAT CASE GOT OVERRULED BY THE DECISION OF THIS TRIBUNAL VIDE ORDER DT. 19 TH JULY, 2007 BUT WE DO NOT AGREE ON THIS WITH THE LD. AR. WE HAVE GONE THROUGH THE ORDER DT. 12 TH JULY, 2007 AS WELL AS ORDER DT. 19 TH JULY, 2007 BUT WE NOTED TH AT THE TRIBUNAL RECTIFIED THE ORDER AS THE TRIBUNAL NOTED THE ASSESSEE ITSELF WAS EXTRACTING THE ENTIRE ORES AND PROCESSING THE SAME. THUS, THE ASSESSEE COMPLIED WITH BOTH THE CONDITIONS OF EXTRACTING AND PROCESSING OF IRON ORE. THIS TRIBUNAL DID NOT REVER SE THE FINDING THAT THE PROCESSING IS NOT ENTITLED FOR THE EXEMPTION. THE TRIBUNAL DID NOT REVERSE THE FINDING THAT EXTRACTION AND PROCESSING SHOULD GO TOGETHER. EVEN THAT BENCH / TRIBUNAL DID NOT VISUALIZE THAT 100% EOU IS APPROVED FOR A PARTICULAR LOCATI ON AND ITS BOUNDRY CANNOT EXTEND BEYOND THAT LOCATION. IT IS ONLY THE PROFIT DERIVED BY THE 100% EOU UNIT SITUATED WITHIN THAT LOCATION, CAN BE REGARDED TO BE THE PROFIT DERIVED BY THE 100% EOU. THE ASSESSEE IN THAT CASE HAS TAKEN THE MINES ON LEASE WHICH WERE NOT APPROVED AS PART OF 100% EOU BUT STILL THE ASSESSEE WAS ALLOWED EXEMPTION U/S 10B EVEN THOUGH THE IRON ORE EXTRACTED FROM THOSE MINES WHICH WERE TAKEN ON LEASE WERE NOT PART OF THE 100% EOU 45.4 NO DOUBT THE DECISION OF THE COORDINATE BENCH IS BINDING ON US IN VIEW OF THE SETTLED JUDICIAL PRINCIPLES IN THE VARIOUS DECISIONS EVEN RELIED ON BY THE LD. CCIT BUT THERE ARE CERTAIN EXCEPTIONS TO THIS CARDINAL PRINCIPLE OF JUDICIAL DISCIPLINE. ONCE THE DECISION OF SPECIAL BENCH OR THIRD MEMBER HAS COME ON SIMILAR ISSUE SUBSEQUENTLY, THE DECISION OF THE SPECIAL BENCH WILL BE BINDING ON US. IF THE DECISION OF JURISDICTIONAL HIGH COURT / SUPREME COURT HAS COME SUBSEQUENTLY ON THE SIMILAR ISSUE, IN VIEW OF THE ARTICLE 141 OF THE CONSTITUTION OF INDIA TH AT DECISION WILL BE BINDING ON US. EVEN THIS WILL BE REGARDED A MISTAKE OF LAW IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS SAURASHTRA KUTCH STOCK EXCHANGE 305 ITR 227 (SC).IF THERE IS NO JURISDICTIONAL HIGH COURT DECISION AND SU BSEQUENTLY ANY OTHER HIGH COURT HAS DECIDED THE SIMILAR ISSUE, THIS IS THE SETTLED PRINCIPLE OF LAW THAT THE DECISION OF THAT HIGH COURT HAS TO BE FOLLOWED AS THE HIGH COURT IS ALWAYS SUPERIOR TO THE TRIBUNAL IN PREFERENCE TO THE DECISION OF COORDINATE BEN CH. THE DECISION SO PRONOUNCED SUBSEQUENTLY IF AFFECTS THE ISSUE RELATING TO THE ASSESSEE, IN OUR OPINION, THESE SUBSEQUENT DECISIONS ARE BINDING ON US AS JUDICIAL DISCIPLINE REQUIRE THAT. THIS TRIBUNAL IS BOUND TO CONSIDER THOSE DECISIONS AND THE TRIBUNA L IS NOT BOUND WITH THE DECISION OF THE COORDINATE BENCH. THE JURISDICTIONAL BOMBAY HIGH COURT IN THE CASE OF H.A. SHAH & CO. VS. CIT (1956) 30 ITR 618, 625 (BOM.) EVEN TOOK THE VIEW THAT IN CASE FRESH MATERIAL FACTS CAME TO THE KNOWLEDGE OF SUBSEQUENT BE NCH, THE DECISION OF COORDINATE BENCH IS NOT BINDING. IN THIS REGARD, HONBLE HIGH COURT OBSERVED AS UNDER : - 31 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) NOR ARE WE SATISFIED THAT IN ORDER TO ENABLE THE SECOND TRIBUNAL TO DEPART FROM THE FINDING OF THE FIRST TRIBUNAL IT IS ESSENTIAL THAT THERE MUST BE SOME FRESH FACTS WHICH MUST BE PLACED BEFORE THE SECOND TRIBUNAL WHICH WERE NOT PLACED BEFORE THE FIRST TR IBUNAL. IF THE FIRST TRIBUNAL FAILED TO TAKE INTO CONSIDERATION MATERIAL FACTS, FACTS WHICH HAD A CONSIDERABLE BEARING UPON THE ULTIMATE DECISION, AND IF THE SECOND TRIBUNAL WAS SATISFIED THAT THE DECISION WAS ARRIVED AT BECAUSE OF THE FAILURE TO TAKE INTO CONSIDERATION THOSE MATERIAL FACTS AND THAT IF THESE MATERIAL FACTS HAD BEEN TAKEN INTO CONSIDERATION THE DECISION WOULD HAVE BEEN DIFFERENT, THEN THE SECOND TRIBUNAL WOULD BE IN THE SAME POSITION TO REVISE THE EARLIER DECISION AS IF FRESH FACTS HAD BEEN PLACED BEFORE IT. ON PRINCIPLE THERE IS NOT MUCH DIFFERENCE BETWEEN FRESH FACTS BEING PLACED BEFORE THE SECOND TRIBUNAL AND THE SECOND TRIBUNAL TAKING INTO CONSIDERATION CERTAIN MATERIAL FACTS WHICH THE FIRST TRIBUNAL FAILED TO TAKE INTO CONSIDERATION. 45.5 THE OTHER EXCEPTION IS FOR NON - BINDING OF THE COORDINATE BENCH DECISION IS WHEN THERE HAD BEEN AMENDMENT IN LAW SUBSEQUENT TO THE DECISION ON THE BASIS OF WHICH THE COORDINATE BENCH RENDERED THE DECISION AND THE CO - ORDINATE BENCH COULD NOT BE ABLE TO CONSIDER THE SAID AMENDMENTS, THE DECISION OF THE CO - ORDINATE BENCH IS NOT BINDING. FROM PARA 14 OF THE ORDER OF THE CO - ORDINATE BENCH IT IS APPARENTLY CLEAR WHILE DECIDING THE APPEAL IN THE CASE OF CHOWGULE & CO. (ITA 162 & 184), IT HAD GOT IMPRESSED TH AT THE EXPRESSION PROCESSING IS OMITTED IN SECTION 10B. THE APPEAL RELATES TO A.Y.2002 - 03 NOT RELATING TO IMPUGNED A.Y. CLAUSE (III) OF EXPLANATION 1 TO SECTION 1OAA, WHICH LAYS DOWN THAT THE EXPRESSION 'MANUFACTURE' SHALL HAVE THE SAME MEANING AS ASSIG NED TO IT IN SECTION 2(R) OF THE SPECIAL ECONOMIC ZONES ACT, 2005, AND SECTION 2(29BA) WERE SUBSEQUENTLY BROUGHT INTO THE STATUTE AFTER THE RENDERING OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SESA GOA 271 ITR ON THE BASIS OF CO - ORDINATE BENC H DECIDED THE CASE OF CHOWGULE & CO. EVEN THESE PROVISIONS WERE NOT IN THE STATUTE DURING THE ASSESSMENT YEAR 2002 - 03 TO WHICH YEAR THE CO - ORDINATE BENCH WAS ENTRUSTED WITH THE ISSUE OF CLAIM OF EXEMPTION U/S 10B. THE CO - ORDINATE BENCH COULD NOT HAVE ANY OCCASION TO CONSIDER THE SAME EVEN THOUGH THE CLAUSE (III) OF EXPLANATION 1 TO SECTION 10AA HAS ALREADY COME INTO FORCE AFTER THE DECISION OF HONBLE APEX COURT IN THE CASE OF SESA GOA LTD 271 ITR 331 WHEN THE DECISIONS WAS RENDERED BUT WAS NOT INSERTED WI TH RETROSPECTIVE EFFECT. EVEN THE PROVISION OF SECTION 2(29BA) WAS ALSO INSERTED AFTER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SESA GOA LTD(SUPRA). BOTH THESE AMENDMENTS ARE IN THE STATUTE AS ON TODAY AND ARE TO BE CONSIDERED FOR THE IMPUGNE D ASSESSMENT YEAR. THE DECISION OF SUPREME COURT IN THE CASE OF CHOWGULE & CO AS CITED BY US EARLIER WAS ALSO NOT CONSIDERED BY THE COORDINATE BENCH AS THE WORD PROCESSING WAS OMITTED IN SECTION 10B DURING THAT YEAR FOR WHICH CASE WAS DECIDED. BOTH THES E AMENDMENTS HAVE DULY BEEN CONSIDERED BY THE SUBSEQUENT DECISION OF SPECIAL BENCH, HIGH COURT AND THE SUPREME COURT CITED BY US IN DISCUSSION HELD HERE IN ABOVE. WE NOTED THAT SUBSEQUENT TO THE DECISION OF THIS TRIBUNAL IN ITA NO. 162/PNJ/2006 DT. 12 TH JU LY, 2007, THE SPECIAL BENCH OF THIS 32 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) TRIBUNAL IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD. [2012 - TIOL - 424 - ITAT - KOL - SB] HAS DEALT WITH THE ISSUE EXHAUSTIBLY WHETHER THE ASSESSEES WHO ARE IN THE BUSINESS OF BLENDING OF TEA I.E PROCESSING OF TEA AND EXPORT THEREOF IN 100% EOU CAN BE SAID TO BE MANUFACTURER / PRODUCER OF TEA FOR THE PURPOSE OF SECTION 10A/10B. WHEN THE SUPREME COURT HAS ALREADY HELD IN THE CASE OF TARA AGENCIES 292 ITR 444 THAT BLENDING OF TEA IS PROCESSING. THUS, THE SPECIAL BENCH HAS DECIDE D THE ISSUE IN RESPECT OF 100% EOU FOR THE PURPOSE OF EXEMPTION UNDER SECTION 10B WHETHER AN ASSESSEE WHO IS ENGAGED IN PROCESSING CAN BE SAID TO BE ENGAGED IN MANUFACTURE / PROCESSING. WE ALSO NOTED THAT KERALA HIGH COURT IN THE CASE OF TATA TEA LTD. VS. ACIT 338 ITR 285 DEALT WITH THE ISSUE IN RESPECT OF 100% EOU FOR THE PURPOSE OF EXEMPTION UNDER SECTION 10B WHETHER THE PROCESSING OF TEA IS TREATED AS MANUFACTURE OR PRODUCTION OF AN ARTICLE QUALIFYING FOR EXEMPTION. NOT ONLY THESE DECISIONS SUBSEQUENT TO THE DECISION OF THE COORDINATE BENCH, SUPREME COURT HAS ALSO DECIDED FOLLOWING CASES IN WHICH ALSO, IN OUR OPINION, SIMILAR ISSUE WHETHER PROCESSING IS MANUFACTURE OR PRODUCTION HAS BEEN DECIDED. THESE DECISIONS ARE GIVEN AS UNDER: - I) INDIA CINE AGENCIES 308 ITR 98 (SC) II) ORACLE SOFTWARE INDIA LTD. 320 ITR 546 (SC) III) ARIHANT TILES AND MARBLES (P) LTD. 320 ITR 79 (SC). 45.6 WE NOTED THAT IN ALL THESE DECISIONS EXCEPT IN THE CASE OF ORACLE SOFTWARE THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. SESA GOA LTD. 271 ITR 331 WAS REFERRED TO BY THE COURT. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR 1 (P&H) HAS OBSERVED AS UNDER ON THE RESPONSIBILITY OF THE TRIBUNAL WHILE DECIDING THE CASE: THE TRIBUNAL BEING THE LAST FACT - FINDING AUTHORITY, A HIGHER RESPONSIBILITY IS CAST BY THE LEGISLATURE ON IT TO DECIDE THE CASES BY RECORDING COMPLETE FACTS AND ASSIGNING COGENT REASONS. IT IS THE DUTY OF THE TRIBUNAL TO DECIDE THE CASES ON THE BASIS OF THE LAW LAID DOWN BY THE SUPREME COURT/HIGH COURT AND NOT WHAT THE TRIBUNAL DECIDES ON THE PARTICULAR ISSUE. EVERY EFFORT MUST BE MADE BY THE TRIBUNAL TO DECIDE THE ISSUE BY TAKING HELP FROM THE DECISIONS OF THE SUPREME COURT AND IF THERE IS NO DIRECT AUT HORITY OF THE SUPREME COURT ON THE POINT THEN OF THE JURISDICTIONAL HIGH COURT AND LASTLY OF ANY OTHER HIGH COURT. 45.7 WE NOTED THAT THE COORDINATE BENCH IN THE CASE OF CHOWGULE & CO. LTD. ITA NO. 162/PNJ/2006 DECIDED THE ISSUE ONLY ON THE BASIS OF TH E DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS. GEM INDIA MANUFACTURING CO. 249 ITR 307, WHILE THE SAID DECISION HAS NOT BEEN FOLLOWED BY THE SUPREME COURT IN THEIR SUBSEQUENT DECISIONS. EVEN THE CASE RELATE TO A.Y.2002 - 03. NO CONTRARY DECISION SUBS EQUENT TO THE DECISION OF THE SPECIAL BENCH, KERALA HIGH COURT AND THAT OF THE SUPREME COURT RENDERED IN THE CASE OF INDIA CINE AGENCY (SUPRA) AS WELL AS ARIHANT TILES & MARBLES (SUPRA) WAS BROUGHT TO OUR KNOWLEDGE WHICH MAY HAVE TAKEN A DIFFERENT VIEW THA T 33 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) 100% EOU APPROVED BY THE COMPETENT AUTHORITY IF ENGAGED IN PROCESSING ACTIVITY FOR UPGRADING A COMMODITY FOR THE PURPOSE OF MARKETABILITY FOR EXPORT WOULD NOT BE ALLOWED EXEMPTION U/S 10B. THE LD. SPECIAL COUNSEL EVEN COULD NOT BRING TO OUR KNOWLEDGE ANY DECISION SUBSEQUENT TO THE DECISION OF THE SPECIAL BENCH AND ARIHANT TILES & MARBLES (SC) AS WELL AS KERALA HIGH COURT IN THE CASE OF TATA TEA (SUPRA) WHICH WOULD HAVE DISALLOWED THE CLAIM OF THE ASSESSEE U/S 10B ON THIS BASIS AFTER CONSIDERING THE EXPLAN ATION (III) OF SECTION 10AA AS WELL AS DEFINITION GIVEN U/S 2(29BA). THUS, DUE TO THE DECISION RENDERED BY THE SPECIAL BENCH, HIGH COURTS AND SUPREME COURT SUBSEQUENT TO THE DATE OF ORDER IN THE CASE OF CHOWGULE & CO. LTD. VS. ACIT IN ITA NO. 162/PNJ/2006 IN OUR OPINION, THE ISSUE RAISED BY THE REVENUE IS NOT FIT TO BE REFERRED TO SPECIAL BENCH AS THE DECISIONS OF SPECIAL BENCH / HIGH COURT / SUPREME COURT ARE BINDING ON US IN PREFERENCE TO THE DECISION OF THE COORDINATE BENCH. THUS, WE HAVE IN OUR OPINION GERMANE REASON NOT TO REFER THIS ISSUE FOR CONSTITUTION OF A SPECIAL BENCH AS IN OUR OPINION EVEN IF THE SPECIAL BENCH IS CONSTITUTED THE EARLIER DECISION OF THE SPECIAL BENCH IN THE CASE OF MADHU JAYANTI WILL BE BINDING UNTIL AND UNLESS THERE ARE SPECIAL AND GERMANE REASONS FOR CONSTITUTING A LARGE SPECIAL BENCH. WE, THEREFORE, DISMISS THE APPLICATION DT. 18/01/2013 MOVED BY THE REVENUE FOR CONSTITUTING THE SPECIAL BENCH. 45.8 NOW COMING BACK TO THE ISSUE WHETHER AN ASSESSEE WHO IS ENGAGED IN PROCESSING FOR UPGRADING AND MAKING THE COMMODITY FIT FOR EXPORT AND WHICH IS A 100% EOU APPROVED BY THE COMPETENT AUTHORITY CAN BE SAID TO HAVE BEEN ENGAGED IN MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. WE HAVE NOTED THAT THIS ISSUE IS DULY COVERED BY THE DE CISION OF THE SPECIAL BENCH IN THE CASE OF MADHU JAYANTI INTERNATIONAL LTD.(SUPRA). THE RELEVANT PARAGRAPH OF THIS JUDGEMENT HAS BEEN REPRODUCED BY US IN THE PRECEDING PARAS. 45.9 IN THIS DECISION, SPECIAL BENCH HAS EXHAUSTIVELY DEALT WITH THE PROVISIONS OF SECTION 10B, SECTION 2(29BA) OF THE INCOME - TAX ACT, 1961 AND SECTION 2(R) OF THE SPECIAL ECONOMIC ZONES ACT, 2005; AND THE VARIOUS DECISIONS OF THE SUPREME COURT AS WELL AS THE HIGH COURT WHICH DEALT WITH THE SIMILAR ISSUE AND EVEN THE DECISION OF CHOWG ULE & CO (SC) AS WAS REFERRED TO BY US IN THE PRECEDING PARAS HEREIN ABOVE. THE SPECIAL BENCH CLEARLY NOTED IN THIS DECISION, THE DECISION OF THE SUPREME COURT IN TARA AGENCIES CASE 292 ITR 444 IN WHICH IT WAS HELD BLENDING AND PACKING OF TEA AMOUNTS TO P ROCESSING AND IS NOT MANUFACTURING OR PRODUCING OF AN ARTICLE OR THING. IN THIS DECISION THE SPECIAL BENCH ALSO NOTED THAT KERALA HIGH COURT IN THE CASE OF TATA TEA LTD. VS. ACIT 338 ITR 285 (KER.) WHICH TOOK THE VIEW THAT 100% EOU ENGAGED IN PROCESSING C ANNOT BE DENIED EXEMPTION ON THE BASIS THAT THE UNITS ARE NOT ENGAGED IN MANUFACTURE OR PRODUCTION. MOREOVER, ON FACTS EXACTLY SIMILAR TO THE FACTS OF THE ASSESSEE, IN THE CASE OF CHOWGULE & CO. PVT. LTD. VS UNION OF INDIA (1981) 1 SCC 653 AIR 1981 SC 014, HONBLE SUPREME COURT WERE CONCERNED WITH 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 OF ORE FOR SALE WITHIN 34 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) THE MEANING OF SECTION 8(3)(B ) AND RULE 13 OF CENTRAL SALES TAX ACT, 1956. THE HONBLE 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 PROC ESS 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 TAX ACT, 1956. THE SPECIAL BENCH ULTIMATELY ALLOWED EXEMPTION TO THE ASSESSEE ON THE SIMILAR ISSUE WHERE THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF BLENDING THE TEA FOR UPGRADING FOR MARKETING. THUS, IN VIEW OF THE DECISION OF THE SPECIAL BENCH AND OTHER DECISIONS DISCUSSED IN THE PRECEDING PARAGRAPHS AND THAT OF HONBLE SUPREME COURT IN THE CASE OF CHOWGULE & CO (SUPRA) AS WELL AS DEFINITION OF MANUFACTURE AS INSERTED W.E.F 1.4.2009 BY WAY OF SECTION 2 (29AB) OF THE INCOME TAX ACT AS REFERRED TO BY BOTH THE PARTIES, WE HOLD THAT ALL THE THREE 100% EOU ENGAGED IN PROCESSING SO AS TO MAKE CRUDE ORE AND WASTE I.E TAILINGS USABLE OR MARKETABLE ARE ENTITLED FOR EXEMPTION U/S 10B SUBJECT TO THE OTHER CONDITIONS FOR EXEMPTION UNDER SECTION 10B ARE BEING FULFILLED. FROM THE AFORESAID DECISION, IT IS APPARENT THAT THIS TRIBUNAL IN THE CASE OF CODLI UNIT OF SESA GOA LTD. WHICH WAS ENGAGED IN PROCESSING THE TAILINGS INTO IRON ORE, IN WHICH THE ASSESSEE IS ALSO ENGAGED, THIS TRIBUNAL TOOK THE VIEW THAT THE ASSESSEE WA S ENGAGED IN MANUFACTURING. THIS TRIBUNAL CLEARLY LAID DOWN THAT DURING CONVERSION OF THE CRUDE ORE INTO LUMPS AND FINES, WASTE IS GENERATED WHICH IS CALLED TAILING AND DISCHARGED INTO THE TAILING PO ND . IN CODLI UNIT, THESE TAILINGS WHICH ARE IN LIQUID FORM ARE CONVERTED INTO ULTRA FINE . THE CRUDE ORE IS ENTIRELY DIFFERENT FROM THE LUMPS AND FINES IN PHYSICAL APPEARANCE, USE AND CHEMICAL COMPOSITION. EVEN TECHNICAL NAMES ARE ALSO DIFFERENT , SIMILARLY WHAT COMES AS OUTPUT FROM THE INPUT IN CODLI UNIT THAT IS ALSO DIFFERENT IN PHYSICAL A PPEARANCE AND CHEMICAL COMPOSITION. THE TRIBUNAL CLEARLY HELD THAT THEY DO NOT AGREE WITH THE LD. DR THAT THERE IS NO CHANGE IN PHYSICAL AND CHEMICAL COMPOSITION OF THE OUTPUT THAN THE INPUT AS IS BEING PROCESSED AND ULTIMATELY IT TOOK THE VIEW THAT CLAUS E (B) OF SEC. 2(29BA) IS CLEARLY APPLICABLE AS A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE COMES INTO EXISTENCE. THE CRUDE ORE ONCE PROCESSED IS MADE MARKETABLE AND HAD A DIFFERENT CHEMICAL AND P HYSICAL COMPOSITION THAN THE CRUDE ORE EVEN THOUGH IN COMMON PARLANCE BOTH MAY BE CALLED IRON ORE. THE TAILING NO MORE REMAINS 35 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) TAILING BUT CONVERTED INTO A POWDER. T HIS TRIBUNAL IN THE CASE OF SESA GOA LTD. AFTER DISCUSSING THE VARIOUS DECISIONS, EVEN TH E DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SESA GOA, 271 ITR 331 ON WHICH THE DEPARTMENT HAS RELIED , TOOK THE VIEW IN RESPECT OF CODLI UNIT OF SESA GOA THAT THE UNIT IS ENGAGED IN MANUFACTURE . EVEN THE TRIBUNAL DISCUSSED THE SUBSEQUENT DECISION S OF THE HON'BLE SUPREME COURT IN THE CASE OF ITO VS. ARIHANT TILES AND MARBLES P. LTD., 320 ITR 79 AND CIT VS. EMPTEE POLY - YARN P. LTD., 320 ITR 665 AND INDIAN CINE AGENCIES VS. CIT, 308 ITR 98 AND CIT VS. ORACLE SOFTWARE INDIA LTD., 320 ITR 546. IT IS NOT DISPUTED THAT THE ASSESSEE IN THE PRESENT CASE BEFORE US IS ALSO ENGAGED IN PROCESSING THE TAILINGS AND CONVERTING THEM INTO IRON ORE SO THAT IT MAY BE EXPORTED. THUS, IN OUR OPINION, THE CASE OF THE ASSESSEE IS DULY COVERED BY OUR DECISION OF THIS BENCH DT. 8.3.2013 IN THE CASE OF ACIT VS. SESA GOA LTD. IN ITA NO. 85/PNJ/2012. RESPECTFULLY FOLLOWING THE SAID DECISION, WE HOLD THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING. SINCE THE EXEMPTION U/S 10B WAS DENIED TO THE ASSESSEE MERELY HOLDING THAT THE ASSESSEE IS NOT ENGAGED IN MANUFACTURING, WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE EXEMPTION TO THE ASSESSEE U/S 10B BY HOLDING THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING. 4 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 5 . ORDER PRONOUNCED IN THE OPEN COURT ON 13 /09/2013. SD/ - (D.T.GARASIA) JUDICIAL MEMBER SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER PLACE : PANAJI / GOA DATED : 13 /09/ 2013 *SSL* 36 ITA NO. 68/PNJ/2013 (ASST. YEAR : 2009 - 10) COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT, PANAJI (4) CIT(A), PANAJI (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER SR. P RIVATE S ECRETARY ITAT, PANAJI, GOA