ITO, Dehradun V. M/s. Rudra Woodpack Pvt. Ltd., Uttrakhand

ITA 71/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5079 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Fair market value
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. K.N.CHARY, JUDICIAL MEMBER AND SH. O.P. MEENA, ACCOUNTANT MEMBER ITA NO.71/DEL./2016 : ASST T. YEAR : 2012-13 INCOME TAX OFFICER, WARD-2(2), DEHRADUN VS M/S. RUDRA WOODPACK PVT. LTD. VIII, LATHERDEVA HOON, P.O.JHABERERA, TEHSIL ROORKEE, DISTT. HARIDWAR PAN : AADCR6972N (APPELLANT) (RESPONDENT) APPELLANT BY : SH. KAPIL GOEL, ADV. RESPONDENT BY : SMT. NAINA SOIN KAPIL, SR. DR DATE OF HEARING : 06.02.2019 DATE OF PRONOUNCEMEN T : 07.02.2019 ORDER PER O.P.MEENA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE REVENUE AND IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) , DEHRADUN DA TED 08.10.2015 WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED U/S 143(3 ) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO THE ACT) BY THE ITO , WARD -2(2), DEHRADUN FOR THE ASSESSMENT YEAR 2012-13. 2. THE SOLE GROUND OF THE REVENUE STATES THAT THE L D. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING DEDUCTION U/S 80IC TO THE ASSESSEE IGNORING THE ITA NO.71/DEL/2016 2 FACT THAT A SPOT ENQUIRY REVEALED THAT NO MANUFACT URING ACTIVITIES WERE SEEN AT THE PREMISES OF THE COMPANY. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT AT THE FACTORY PREMISES OF ASSESSEE BY THE INVESTIGATION WING, DEHRADUN ON 02.12.2013 WHEREIN IT WAS FOUND THAT TH E ACTIVITIES OF COMPANY WERE IN THE NATURE OF ASSEMBLING AND NOT MANUFACTUR ING. IT WAS POINTED OUT THAT THE ASSESSEE COMPANY WAS CLAIMED DEDUCTION U/S 80IC OF THE ACT FROM ASSESSMENT YEAR 2008-09, BUT NO MANUFACTURING ACTI VITIES COVERED UNDER THE PROVISION OF SECTION 80IC OF THE ACT WERE BEING CAR RIED OUT BY THE COMPANY. ON SPOT VERIFICATION, THE AO FOUND THAT ABOUT 13 T O 15 LABORERS WERE THERE WHO WERE MAKING WOODEN CRATE FOR WHICH THEY WERE US ING READYMADE WOODEN PLANKS, THERMOCOL, FEVICOL AND NAILS ETC. THE AO HA S REPRODUCED SOME PICTURES OF SUCH MANUFACTURING ACTIVITIES OF PRODUCT IN THE ASSESSMENT ORDERS AT PAGE 3 TO 5. THE ASSESSEE THROUGH SUBMISSIONS FILED BY HI S C.A. CONTENDED THAT THE ASSESSEES BUSINESS IS INVOLVED OF MANUFACTURING OF WOODEN CRATES SPECIALLY CUSTOMIZED AND DESIGNED FOR ASAHI GLASS. IT WAS A LSO SUBMITTED THAT THE ASSESSEE HAS BEEN GRANTED REGISTRATION BY THE DISTR ICT INDUSTRIES CENTRE AS MANUFACTURER. SIMILARLY THE ASSESSEE IS REGISTERED UNDER THE FACTORIES ACT FOR WHICH FACTORY IS DOING MANUFACTURING ACTIVITY. THE ASSESSEE HAS ALSO GRANTED EXEMPTION FROM THE EXCISE DUTY BY THE CENTRAL EXCIS E AND THE MANUFACTURING UNITS. IT WAS FURTHER SUBMITTED THAT THE ASSESSEDS ACTIVITY OF MANUFACTURING ARE COVERED BY THE DEFINITION PRESCRIBED U/S 2(29BA) I NSERTED BY FINANCE ACT, 2009 W.E.F. 01.04.2009. THE REPLY AND SUBMISSIONS FILED BY THE ASSESSEE HAS BEEN REPRODUCED BY THE AO AT PAGE 6 TO 7 OF THE ASS ESSMENT ORDER WHICH CONTAINS SOME CASE LAWS IN SUPPORT OF HIS CLAIM. HO WEVER, THE AO WAS OF THE VIEW THAT THE CASE LAWS CITED BY THE ASSESSEE ARE N OT APPLICABLE IN THIS CASE. ITA NO.71/DEL/2016 3 THE ACTIVITIES OF THE ASSESSEE ARE PURELY ASSEMBLIN G OF WOODEN PLANKS WITH NAIL INTO WOODEN CRATES, IF NAILS ARE REMOVED, IT WILL GET ITS ORIGINAL SHAPE AS IT WAS BEFORE USED. THEREFORE THESE FACTS PROVED THAT THE ACTIVITIES OF THE ASSESSEE ARE ASSEMBLING AND NOT MANUFACTURING. ACCORDINGLY THE A O HAS DISALLOWED THE DEDUCTION U/S 80IC AMOUNTING TO RS. 1,10,38,278/-. 4. BEING AGGRIEVED THE ASSESSEE HAS FILED AN APPEAL BEFORE THE CIT(A) WHEREIN THE SAME SUBMISSIONS WERE REPEATED AS MADE BEFORE THE AO. IT WAS CONTENDED THAT THE WORD MANUFACTURE HAD NOW BEEN DE FINED IN SECTION 2(29AB) TO MEAN THAT :- MANUFACTURE, WITH ITS GRAMMATICAL VARIATIONS, MEA NS A CHANGE IN A NON-LIVING PHYSICAL OBJECT OR ARTICLE OR THING- A) RESULTING IN TRANSFORMATION OF 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 OBJEC T OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR I NTEGRAL STRUCTURE 5. IT WAS SUBMITTED THAT THE WOODEN CRATES WERE A N EW DISTINCT OBJECT HAVING A DIFFERENT NAME, CHARACTER AND USE FROM THE PRODUC TS THAT WENT INTO THEIR MANUFACTURE. THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS:- 1. ASPINWALL AND CO. LTD. VS. COMMISSIONER OF INC OME TAX 251 ITR 323 [2001] 2. COMMISSIONER OF INCOME TAX VS. N.C.BUDHARAJA AN D CO AND ANR. ETC. 204 ITR 412 [1993] 3. UNION OF INDIA VS. DELHI CLOTH AND GENERAL MILL S 1963 AIR 791, 1963 SCR SUPL. (1) 586 4. DEPUTY COMMISSIONER, SALES TAX (LAW) BOARD OF R EVENUE (TAXES) VS. PIO FOOD PACKERS 1980 AIR 1227, 1980 SC R (3) 1271 ITA NO.71/DEL/2016 4 5. INDIAN CINE AGENCIES VS. COMMISSIONER OF INCOME TAX 308 ITR 98[2009] 6. COMMISSIONER OF INCOME TAX VS. EMPTEE POLY-YARN PRIVATE LIMITED 320 ITR 665[2010] 7. COMMISSIONER OF INCOME TAX VS. JAMAL PHOTO INDU STRIES (I) PRIVATE LIMITED 285 ITR 209 [2006] (MADRAS) 8. COMMISSIONER OF INCOME TAX VS. DARSHAK LIMITED 247 ITR 489 [2001] (KARNATAKA). 6. AFTER CONSIDERING THE FACTS AND SUBMISSIONS OF THE ASSESSEE, LD. CIT(A) HAS GIVEN HIS FINDING IN PARA 14 TO 24 WHICH IS REPRODU CED AS UNDER :- 14. I HAVE DULY CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSIONS OF THE ASSESSEE. IN THE FIRST PLACE IT IS QUITE CLEAR THAT THE SURVEY CONDUCTED BY THE INVESTIGATION WING AND THE INSPECTION CONDUCTED BY THE AO, CONFIRMED THE FINDINGS OF THE INSPECTION OF THE ASSESSEES PREMISES CONDUCTED BY THE INCOME TAX INS PECTOR 0N 18.11.2011 I.E. THAT THERE WAS A LABOR INTENSIVE UN IT MANUFACTURING WOODEN CRATES WITH THE AID OF SMALL TOOLS SUCH AS WOOD CUTTERS, NAILORS, STAPLERS, FOAM, FEVICOL ETC. THE ONLY POIN T OF DIVERGENCE IS WHETHER SUCH ACTIVITIES AMOUNTED TO MANUFACTURING O R NOT THAT WOULD RENDER THE ACTIVITY ELIGIBLE FOR THE DEDUCTIO N U/S 80IC. THUS, THE CRUCIAL ASPECT FOR DETERMINATION IS THE ISSUE O F WHETHER THE PROCESS EMPLOYED BY THE ASESSEE AMOUNT TO MANUFACTU RE OR NOT. 15. THE TERM MANUFACTURE HAS BEEN DEFINED BY SECTIO N 2(29)BA OF THE I.T. ACT TO MEAN ANY ACTIVITY THAT RESULT IN THE CREATION OF AN ARTICLE OR OBJECT THAT IS NEW AND DISTINCT FROM THE RAW MATERIAL THAT GO INTO ITS MANUFACTURE AND HAVING A DIFFERENT NAME, CHARACTER, USE AND/OR INTEGRAL STRUCTURE. IT CANNOT BE DENIED THAT THE WOODEN CRATES ARE COMPLETELY DISTINCT FROM THE PLANKS, NAI LS, FEVICOL, FOAM ETC. THAT ARE USED TO MAKE THEM AND HAVE A USE OF T HEIR OWN .THE FACT THAT THEY ARE A DIFFERENT PRODUCT IS RECOGNIESD BY BOTH THE CENTRAL EXCISE CLASSIFICATION AND THE VAT WHICH ASS IGNS THEM SPECIFIC CODES AND SERIAL NOS. FOR THE PURPOSES OF TAXATION. THUS, ITA NO.71/DEL/2016 5 FROM THIS STAND POINT THEY FULFIL THE CRITERIA OF B EING MANUFACTURED PRODUCTS. THE AO SEEMS TO DISAGREE PRIMARILY ON TWO ISSUES I) THAT THE WORK DOES NOT INVOLVE PLANT AND MACHINERY AND IS LABOR INTENSIVE. II) THAT IF THE CRATES ARE DISMANTLED THE ORIGINAL PRO DUCTS WOULD RETURN BACK. IN THIS CONTEXT, IT MAY BE RELEVANT TO QUOTE FROM T HE VARIOUS JUDGMENTS CITED BY THE ASESSEE TO SHOW THAT THE OPI NIONS ON SUCH MATTERS EXPRESSED BY THE AO DO NOT TAKE THE PRODUCT S, I.E. WOODEN CRATES OUT OF THE AMBIT OF MANUFACTURED PRODUCTS TH AT ARE NOT ENTITLED FOR DEDUCTION U/S 80IC. 16. IN THE CASE OF ASPINWAL & CO LTD. VS. CIT 251 ITR 3 23 (2001), THE HONBLE SUPREME COURT HAS HELD THAT THE WORD 'MANUFACTURE' HAS NOT BEEN DEFINED IN THE ACT. IN THE ABSENCE OF A DEFINITION OF THE WORD MANUFACTU'E I T HAS TO BE GIVEN A MEANING AS IS UNDERSTOOD IN COMMON PARLANCE. IT IS TO BE UR DERSTOOD AS MEANING THE PRODUCTION OF ARTICLES FOR USE FROM RAW OR PREPARED MATERIALS BY GIVING SUCH MATERIALS NEW FOR MS, QUALITIES OR COMBINATIONS WHETHER BY HAND LABOUR OR MACHINES. IF THE CHANGE MADE IN THE ARTICLE RESULTS IN A NEW AND DIFFERENT ARTICLE THEN IT WOULD AMOUNT TO A MANUFACTURING ACTIVITY. 17. IN THE INSTANT CASE FROM THE PROCESS OF MANUFACTURI NG EXPLAINED BY THE ASESSEE, IT IS QUITE CLEAR THAT TH E ORIGINAL PROCUCTS ARE WOODEN PLANKS, EVAFOAM, THERMOCOL, ADHESIVE TAP E/PNEUMATIC STAPPLER PINS AND NAILS. THE FINAL PRODUCT IS WOODE N CRATES WHICH ARE A DISTINCT AND SEPARATE ARTICLE DIFFERENT FROM ALL THE PRODUCTS THAT GO INTO ITS MANUFACTURE AND RECOGNIZED AS A DI STINCT PRODUCT BY THE CENTRAL EXCISE AND VAT CLASSIFICATION WHICH ASS IGNED TIE PRODUCT A SPECIFIC HS CODE AND SERIAL NO. RESPECTIV ELY IN THE CENTRAL EXCISE AND VAT SCHEDULES. THE AO HAS SUBMIT TED THAT ON HIS VISIT TO THE PREMISES HE ON Y FOUND READYMADE WOODE N PLANKS BEING FIXED TOGETHER TO FORM WOODEN CRATES AND THIS WAS A SSEMBLING NOT ITA NO.71/DEL/2016 6 MANUFACTURING. IN THIS CONTEXT, IT IS OBSERVED THAT THE ASESSEE HAS SUBMITTED THAT THE AO VISITED THE PREMISES AFTER TH E LOGS HAD BEEN CUT AND MADE INTO PLANKS. HOWEVER, EVEN IF THAT WAS NOT THE CASE, IT IS STILL CLEAR THAT WOODEN CRATES ARE DIFFERENT FRO M THE PLANKS PER SE AND THE PLANKS ARE ONLY ONE OF THE MANY PRODUCTS TH AT GO INTO MANUFACTURING THE WOODEN CRATES. SINCE, THE WOODEN CRATES STAND APART AS A DISTINCT COMMODITY FROM THE ITEMS THAT G O INTO MAKINC THEM, THE MAKING OF THE WOODEN CRATES AMOUNTS TO MA NUFACTURE WITHIN THE MEANING OF THE SUPREME COURT JUDGMENT IN THE CASE OF ASPINWALL & CO. LTD (SUPRA). MOREOVER, THE JUDGMENT MAKES IT CLEAR THAT SIMPLY BECAUSE THE PROCESS MAY BE MANUAL AND L ABOR INTENSIVE WOULD NOT TAKE IT OUT OF THE AMBIT OF MANUFACTURING . 18. FURTHERMORE, THE HONBLE MADRAS HIGH COURT HAS HELD IN THE CASE OF CIT VS. JAMAL PHOTO INDUSTRIES (I) PVT. LTD . THERE CANNOT BE ANY DISPUTE THAT THE EXPRESSION 'M ANUFACTURE' INVOLVES THE CONCEPT OF CHANGES EFFECTED TO A BASIC RAW MATENAL RESULTING IN THE EMERGENCE OF, OR TRANSFORMATION IN TO, A NEW COMMERCIAL COMMODITY. BUT IT IS NOT NECESSARY THAT THE ORIGINAL ARTICLEOR MATERIAL SHOULD HAVE LOST ITS IDENTITY CO MPLETELY. ALL THAT IS REQUIRED IS TO FIND OUTWHETHER AS A RESULT OF THE O PERATION IN QUESTION, A TOTALLY DIFFERENT COMMODITY HAD BEEN PR ODUCED HAVING ITS OWN NAME, IDENTITY, CHARACTER OR END USE' 19. FROM THE ABOVE, IT IS QUITE CLEAR THAT THE MERE FAC T THAT DISMANTLING A MANUFACTURE ARTICLE MAY BRING BACK TH E ORIGINAL PRODUCTS (ALBEIT IN THE FORM OF WASTE), WOULD NOT D ETRACT FROM THE FACT THAT A NEW AND DISTINCT PRODUCT HAD EMERGED AS A RESULT OF THE PROCESS AND THEREFORE, IT CANNOT BE SAID THAT THE S AME AMOUNTED TO ASSEMBLING AND NOT MANUFACTURING. 20. FINALLY, THE HON'BLE KARNATAKA HIGH COURT HAS HELD IN CIT VS. DARSHAK LTD. 247 ITR 489 (2001) THE SUPREME COURT IN EMPIRE INDUSTRIES LTD. & ANR. VS. UNION OF INDIA & ORS. (1987) 162 ITR 846 (SC) HAS HELD TH AT ITA NO.71/DEL/2016 7 'MANUFACTURE' WOULD INCLUDE PROCESSES LIKE BLEACHIN G MERCERISING, DYEING, PRINTING, WATERPROOFING, RUBBE RISING, SHRINK- PROOFING, GREASE-RESISTING, ETC. IT IS CLEAR FROM T HE JUDGMENT OF THE SUPREME COURT THAT THE WORD 'MANUFACTURE' IS TO BE UNDERSTOOD IN A WIDER SENSE. MANUFACTURE WOULD EMPLOY A CHANGE AND A TRANSFORMATION. 4 NEW AND A DIFFERENT ARTICLE MUST EMERGE HAVING A DISTINCT AND DIFFERENT CHARACTER AND USE. 21. THUS, IT WOULD BE INCORRECT TO HOLD THAT ONLY PROD UCTS THAT INVOLVE INSTALLATION OF PLANT AND MACHINERY AND PRO DUCTION BY AUTOMATED PROCESSES AMOUNT TO MANUFACTURING. RATHER , MANUFACTURING MUST BE UNDERSTOOD IN A WIDER SENSE T O BE ANY PROCESS THAT RESULTS IN THE CREATION OF A NEW AND D ISTINCT ARTICLE HAVING A DISTINCT AND DIFFERENT CHARACTER AND USE F ROM THE INGREDIENTS THAT GO INTO MAKING THE SAID PRODUCT. I N THE INSTANT CASE, THE WOODEN CRATES HAD A DISTINCT CHARACTER AND USE OF THEIR OWN WHICH IS DIFFERENT FROM THE VARIOUS COMPONENTS THAT GO INTO MAKING THEM. THEY ARE THEREFORE, QUITE CLEARLY MANUFACTURE ITEMS AND THAT IS WHY THEY HAVE BEEN RECOGNISED AS SUCH IN CENTRAL EX CISE CLASSIFICATION. 22. FURTHERMORE, IN THE A.Y. 2009-10, THE AO PASSING T HE ORIGINAL ORDER U/S 143(3), IN THE COURSE OF HER OFF ICE NO 1 E HAS CLEARLY RECORDED THE FACT THAT THE PRODUCT MANUFACTURED BY THE ASSESSEE IS NET COVERED BY 13 TH SCHEDULE AND THEREFORE, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION IN RESPECT OF SUCH PRODUCTS. THE AO H AS NOT BROUGHT ANY FACT ON RECORD TO SHOW THAT WOODEN CRATES FALL UNDER THE 13 TH SCHEDULE AND ARE NOT ELIGIBLE FOR THE DEDUCTION J/S 80IC. 23. THUS, THE STAND TAKEN BY THE AO THAT NO MANUFACTUR ING ACTIVITIES COVERED UNDER THE PROVISION OF SECTION 8 0IC ARE BEING CARRIED OUT BY THE COMPANY, IS INCORRECT AS THE ASS ESSEE IS NOT ONLY ENGAGED IN THE PROCESS OF MANUFACTURE BUT IS ALSO P RODUCING A COMMODITY NOT COVERED BY THE 13 TH SCHEDULE. ITA NO.71/DEL/2016 8 24. IN THE CIRCUMSTANCES, THE DISALLOWANCE MADE IS WITH OUT BASIS AND IS ACCORDINGLY DELETED. 7. BEING AGGRIEVED THE REVENUE HAS FILED THIS APPEA L BEFORE THIS TRIBUNAL. THE LD. SR. DR SUBMITTED THAT THE SURVEY PROCEEDINGS CO NDUCTED U/S 133A REVEALED THAT THE ASSESSEE WAS MAKING WOODEN CRATES BY ASSE MBLING WOODEN PLANKS WITH THE HELP OF NAILS BY USING HIS WOODEN CUTTERS. TH ERE WAS NO MACHINERY INSTALL IN THE PREMISES OF THE ASSESSEE. NO OTHER MANUFACTURIN G ACTIVITY HAS BEEN SEEN AT THE PREMISES OF THE COMPANIES EXCEPT PREPARING THE WOOD EN CRATES BY EMPLOYING 13 TO 15 LABORERS, HENCE MAKING OF WOODEN CRATES AMOUNTS TO ASSEMBLING AND NOT MANUFACTURING ACTIVITIES, THEREFORE, THE ASSESSEE I S NOT ENTITLED TO CLAIM DEDUCTION U/S 80IC WHICH IS ALLOWABLE IN RESPECT OF MANUFACTU RING ACTIVITIES. LD. SR. DR REFERRED THE PHOTOGRAPHS APPEARING AT PAGE 3 TO 7 O F THE ASSESSMENT ORDER. THE LD. SR. DR FURTHER DREW OUR ATTENTION TO PAGE 8 OF THE ASSESSMENT ORDER WHICH IS FINDING OF THE ASSESSING OFFICER. THE LD. SR. DR FU RTHER REFERRED A SYNOPSIS WHEREIN DEFINITION OF MANUFACTURING GIVEN UNDER THE EXCISE ACT HAS BEEN DISCUSSED BY THE HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DELHI CLOTH AND GENERAL MILLS COMPANY LTD. AIR 1963 SC 791 WHEREIN THE HON BLE SUPREME COURT HELD THAT THE WORD MANUFACTURE IS GENERALLY UNDERSTOOD TO MEAN AS BRINGING INTO EXISTENCE A NEW SUBSTANCE AND DOES NOT MERELY MEAN TO PRODUCE SOME CHANGE IN SUBSTANCE. THE COURT QUOTED WITH APPROVAL A PASSAG E APPEARING IN VOLUME 26 OF THE PERMANENT EDITION OF THE WORDS AND PHRASES AS BELOW : MANUFACTURE IMPLIES A CHANGE, BUT, EVERY CHANGE I S NOT MANUFACTURE AND YET EVERY CHANGE OF AN ARTICLE IS T HE RESULT OF TREATMENT, LABOUR AND MANIPULATION. BUT SOMETHING M ORE IS NECESSARY AND THERE MUST BE TRANSFORMATION: A NEW A ND DIFFERENT ARTICLE MUST EMERGE HAVING A DISTINCTIVE NAME, CHAR ACTER OR USE. ITA NO.71/DEL/2016 9 8. ACCORDINGLY SR. DR HAS EMPHASIZED THAT EVERY CHA NGE IN MANUFACTURING DOES NOT AMOUNTS TO MANUFACTURING WITHIN THE MEANIN G OF CENTRAL EXCISE ACT. THEREFORE THE LD. SR. DR VEHEMENTLY SUPPORTED THE O RDER OF THE AO AND CONTENDED THAT SAME MAY BE RESTORED. 9. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE FOUR DEPARTMENTS OF THE GOVERNMENT HAVE ACCEPTED THAT TH E ASSESSEE IS A MANUFACTURING UNITS. THE LD. COUNSEL REFERRED PAGE 6 OF ASSESSMEN T ORDER WHEREIN THE SUBMISSIONS FILED BY THE ASSESSEE ARE REPRODUCED AN D CONTENDED THAT THE ASSESSEE HAS BEEN REGISTERED AS MANUFACTURER BY THE DISTRICT INDUSTRIES CENTRE, ROORKI (HARIDWAR) (PB-I). SIMILARLY THE ASSESSEE HAS ALSO REGISTERED HIS FACTORY UNDER THE FACTORIES ACT BY LABOUR DEPARTMENT OF UTTRAKHAND GO VERNMENT (PAPER BOOK PAGE 2). FURTHER THE ASSESSEE HAS BEEN ALSO RECOGNIZED A S MANUFACTURING UNITS BY THE SALE TAX DEPARTMENT OF WHICH ASSESSMENT ORDER IS P LACED ON PAPER BOOK PAGE 21. IT WAS FURTHER SUBMITTED THAT AS PER UTTRAKHAND VAT ACT, 2005 WOODEN CRATES WERE RECOGNIZED AS A DISTINCT PRODUCT AND ITEM 122 IN SC HEDULE II ND B WHICH SHOWS WOODEN CRATES TO BE DISTINCT PRODUCT IN VIEW OF THE FOREGOING SUBMISSION. THE LD. COUNSEL HAS PLACED RELIANCE ON THE DECISION OF ITAT DELHI BENCH IN THE CASE OF MOBILE COMMUNICATION (INDIA) P. LTD. VS. DCIT, [2010], 125 ITD 309 (DELHI TRIB.) AND QUOTED FROM THE SAID DECISION FROM PARA 9 PAGE 10 THAT IT IS A WELL SETTLED LEGAL POSITION AS LAID DOWN BY THE COURT OF APPEAL IN ENGLAND IN MOOUAT VS. BETTS MOTORS LTD. 1958 (3) ALL ER 402, THAT TWO DEP ARTMENTS OF THE GOVERNMENT CANNOT IN LAW ADOPT CONTRARY OR INCONSISTENT STANDS OR RAISE INCONSISTENT CONTENTIONS OR ACT AT A CROSS PURPOSES. TO USE THE FAMOUS WORDS OF LORD DENNING IN THAT CASE, THE RIGHT HAND OF THE GOVERNMENT CANNOT PRETEND TO BE UNAWARE OF THE LEFT HAND IS DOING. THE SAME PRINCIPLE OF LAW HAS ALSO BEEN FOL LOWED BY APEX COURT IN THE CASE ITA NO.71/DEL/2016 10 OF M.G. ABRO, ADDL. COLLECTOR OF CUSTOMS VS. SHANTI LAL & CO. AIR 1966 SC 197, WHEREIN IT WAS LAID DOWN THAT THE CUSTOMS AUTHORITI ES CANNOT IN LAW TAKE A STAND OR ADOPT A VIEW WHICH IS CONTRARY AUTHORITIES. THEREFO RE IT WAS CONTENDED THAT WHEN FOUR DEPARTMENTS OF GOVERNMENT HAS CONSIDERED THE A SSESSEE IS A MANUFACTURING UNIT THAN NO CONTRARY VIEW CAN BE TAKEN BY OTHER DE PARTMENT WHICH IS INCONSISTENT WITH THE STANDS TAKEN BY OTHER FOUR DEPARTMENT. THE LD. COUNSEL FURTHER SUPPORTED HIS ABOVE VIEW BY PLACING RELIANCE ON THE DECISION OF ITAT DELHI BENCH IN ITA NO. 215/DEL/2014 AND OTHERS DATED 30/05/2018 WHEREI N PARA 13 IT WAS OBSERVED THAT WHERE THE ASSESSEE IS MAKING PACKING MATERIAL AS PER THE REQUIREMENT OF THE PRODUCT WITH THE AID AND HELP OF VARIOUS KINDS OF M ACHINES AS INCORPORATED ABOVE AND IT IS ALSO REGISTERED AS MANUFACTURER UNDER THE VARIOUS LAWS, THEN SUCH A GENERAL INFERENCE BASED ON STATEMENT OF EMPLOYEES CANNOT BE GIVEN MUCH CREDENCE. THUS, WE DO NOT FIND ANY SUBSTANTIAL MERITS IN THE GROUND S RAISED BY THE REVENUE THAT ASSESSEE IS NOT ENGAGED IN THE MANUFACTURING OF PAC KAGING MATERIAL (PB PAGE 37- 38). 10. LD. COUNSEL FOR THE ASSESSEE FURTHER PLACED REL IANCE ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF PR. CIT - 31 VS. M/S. UNIQUE GEM & JEWELLERY ITA NO. 1623 OF 2016 DATED 23/01/2019 WHE REIN THE HONBLE HIGH COURT IN PARA 7 PAGE 43 OF PAPER BOOK WHICH IS REPRODUCED AS UNDER :- 7. WE NOTE THAT THE IMPUGNED ORDER OF THE TRIBUNAL HAS CONSIDERED THIS VERY OBJECTION RAISED BY MR. PINTO AND HAS INTER ALIA COME TO THE FINDING THAT THE RESPONDENT WAS GRANTED PERMISSION BY THE GOVERNMENT TO MAKE ONLY HANDMADE JEWELLERY. ACCORDI NGLY, NATURE OF MANUFACTURING ACTIVITY CARRIED OUT BY THE RESPONDEN T DID NOT REQUIRE HUGE PLANT AND MACHINERY AND THE ABSENCE OF PLANT A ND MACHINERY COULD NOT LEAD TO CONCLUSIVE PRESUMPTION THAT THERE WAS NO ITA NO.71/DEL/2016 11 MANUFACTURING ACTIVITY. THE TRIBUNAL FURTHER RECORD ED THE FACT THAT THE MATERIAL PRODUCED BY THE RESPONDENT HAS NOT BEEN CO NTRADICTED OR SHOWN TO BE INCORRECT BY THE REVENUE. FURTHER, THE SMALL AMOUNT OF LABOUR CHARGES AND WAGES BEING THE BASIS OF THE DIS ALLOWANCE WAS ALSO CONSIDERED BY THE TRIBUNAL AND IT WAS FOUND TH AT THE REVENUE HAD NOT CARRIED OUT ANY EXAMINATION / ENQUIRY TO ASCERT AIN WHAT WOULD BE THE FAIR MARKET VALUE OF THE LABOUR CHARGES AND WAG ES IN THIS SORT OF ACTIVITY. THUS, THERE IS NO REASON TO DISBELIEVE TH E RESPONDENT. 11. LD. COUNSEL FURTHER PLACED RELIANCE ON THE DECI SION OF CO-ORDINATE BENCH OF BOMBAY TRIBUNAL IN THE CASE OF ITO VS. SHRI ULHA S GOPAL KARLE ITA NO. 2369/MUM/2013 DATED 16.10.2015 WHEREIN AT PAGE 13 V ARIOUS CASE LAWS HAVING CITED TO ESTABLISH THE ASSESSEE HAS BEEN MANUFACTU RING WOODEN CRATES WHICH IMPLIES CHANGE OF SUBSTANCE IN AN ARTICLE AS A RESU LT OF TREATMENT OF LABOUR PROCESS. THE LD. COUNSEL SUBMITTED THAT THE HONBLE APEX COURT IN THE CASE OF INDIA CINE AGENCIES VS. DCIT, 2010 TAXMANN. 253 SC HELD THAT EVEN CUTTING OF JOMBO VOLUMES ROLLS INTO SMALL MARKETABLE SIZES AMO UNTS TO MANUFACTURING. SIMILARLY THE HONBLE APEX COURT IN CIT VS. MT POLO YAN PVT. LTD. CIVIL APPEAL ARISING OUT OF SLP (C. NO. 26482/2008) CIVIL APPEAL NO. 786792 OF 2010 DATED 21.01.2010 HELD THAT TWISTING OF YARN AM OUNTS TO MANUFACTURING. THE LD. COUNSEL FURTHER HEAVILY RELIED IN THE CASE OF CIT VS. ORACLE SOFTWARE INDIA LTD. 2010 (1) SCALE 425 WHEREIN THE APEX COUR T HAS OBSERVED AS UNDER :- THE TERM MANUFACTURE IMPLIES A CHANGE, BUT, EVER Y CHANGE IS NOT A MANUFACTURE, DESPITE THE FACT THAT EVERY C HANGE IN AN ARTICLE IS THE RESULT OF A TREATMENT OF LABOUR AND MANIPULATIO N. HOWEVER, THIS TEST OF MANUFACTURE NEEDS TO BE SEEN IN THE CONTEXT OF THE ABOVE PROCESS. IF AN OPERATION/PROCESS RENDERS A COMMODIT Y OR ARTICLE FIT FOR USE FOR WHICH IT IS OTHERWISE NOT FIT, THE OPERATIO N/ PROCESS FALLS WITHIN THE MEANING OF THE WORD MANUFACTURE. ITA NO.71/DEL/2016 12 THEREFORE, IT WAS CONTENDED THAT THE LD. CIT(A) HAS RIGHTLY ALLOWED THE APPEAL OF THE ASSESSEE AND CONSEQUENTLY DEDUCTION U /S 80IC OF THE ACT. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD AND CASE LAWS CITED BY THE PARTIES. WE FIND THAT THE ORIGINAL PRODUCTS USED BY THE ASSESSEE ARE WOODEN PLANKS, EVAFOAM, TH ERMOCOL, ADHESIVE TAPE/ PHEUMATIC, STAPLER PINS, AND NAILS. THE FINAL PR ODUCT OBTAINED IN THE PROCESS BY THE ASSESSEE IS WOODEN CRATES WHICH ARE A DISTINCT AND SEPARATE ARTICLE DIFFERENT FROM ALL THE PRODUCTS THAT GO INT O IT MANUFACTURE AND RECOGNIZED AS A DISTINCT PRODUCT BY CENTRAL EXCISE AND VAT CLASSIFICATION WHICH HAS ASSIGNED THE PRODUCT A SPECIFIC HS CODE A ND SERIAL NO. RESPECTIVELY IN THE CENTRAL EXCISE AND VAT SCHEDULE S. IT IS FURTHER SEEN THAT AS PER UTTRAKHAND VAT ACT, 2005, WOODEN CRATES WER E RECOGNIZED AS A DISTINCT PRODUCT AND ITEM. SIMILARLY THE ASSESSEE H AS BEEN REGISTERED AS MANUFACTURE WITH DISTRICT INDUSTRIES CENTRE AND REG ISTERED AS A FACTORY UNDER THE FACTORIES ACT. FURTHER THE ASSESSEE HAS BEEN G RANTED EXEMPTION FROM EXCISE DUTY AND HAS AVAILED EXEMPTION FROM DUTY WHI CH IS ONLY GRANTED TO MANUFACTURING UNITS. THUS AS PER THE TERM DEFINED BY SECTION 2 (29BA) OF THE ACT WOULD BE ANY ACTIVITY THAT RESULTS IN THE C REATION OF AN ARTICLE FOR OBJECT THAT IS NEW AND DISTINCT FROM THE RAW MATERI AL THAT GO INTO ITS MANUFACTURE AND HAVING A DIFFERENT NAME, CHARACTER , USE AND / OR INTEGRAL STRUCTURE. IT CANNOT BE DENIED THAT THE WOODEN CRAT ES ARE COMPLETELY DISTINCT FROM THE PLANKS, NAILS, FEVICOL FOAM ETC. THAT ARE USED TO MAKE THEM AND HAVE A USE OF THEIR OWN. THE LD. CIT(A) HAS SUPPORTED HI S VIEW BY PLACING THE RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ASPINWAL & CO. LTD. VS. CIT, 251 ITR 323 (2001) SC WHEREIN T HE HONBLE SUPREME COURT HAS HELD THAT :- ITA NO.71/DEL/2016 13 THE WORD MANUFACTURE HAS NOT BEEN DEFINED IN TH E ACT. IN THE ABSENCE OF A DEFINITION OF THE WORD MANUFACTURE I T HAS TO BE GIVEN A MEANING AS IS UNDERSTOOD IN COMMON PARLANCE. IT IS TO BE UNDERSTOOD AS MEANING THE PRODUCTION OF ARTICLES FOR USE FROM RAW OR PREPARED MATERIALS BY GIVING SUCH MATERIALS NEW FORMS, QUALITIES OR COMB INATIONS WHETHER BY HAND LABOUR OR MACHINES. IF THE CHANGE MADE IN THE ARTIC LE RESULTS IN A NEW AND DIFFERENT ARTICLE THEN IT WOULD AMOUNT TO A MANUFAC TURING ACTIVITY. 13. THUS, IN THE LIGHT OF RATIO LAID DOWN IN ABOVE DECI SION. THE CHANGE BROUGHT IN WOODEN PLANKS BY HAND BY THE LABOURS USI NG SMALL CUTTERS WOULD AMOUNT AS MANUFACTURE A PRODUCT, WHICH IS OBTAINED AS WOODEN CRATES BY THE ASSESSEE. SIMILARLY THE HONBLE SUPREME COURT IN THE CASE OF ORCLE SOFTWARE INDIA LTD. (2010) 187 TAXMANN. 275 SC HELD THAT IF AN OPERATION / PROCESS RENDERS A COMMODITY FOR ARTICLE FIT FOR USE FOR WHI CH IT IS OTHERWISE NOT FIT FOR OPERATION / PROCESS FALLS WITHIN THE MEANING OF WOR D MANUFACTURE. IN THE CASE OF ASSESSEE WOODEN CRATES ARE DIFFERENT FROM THE PL ANKS PER SE AND THE PLANKS ARE ONLY ONE OF THE MANY PRODUCTS THAT GO INTO THE MANUFACTURING THE WOODEN CRATES. SINCE, THE WOODEN CRATES STAND APART AS A DISTINCT COMMODITY FROM THE ITEMS THAT GO INTO MAKING THEM, THE MAKING OF THE WOODEN CRATES AMOUNTS TO MANUFACTURE WITHIN THE MEANING OF THE SUPREME COUR T DECISION IN THE CASE OF ASPINWAL & CO. LTD. (SUPRA). THE LD. COUNSEL HAS PL ACED RELIANCE ON THE DECISION OF MOBILE COMMUNICATION INDIA PVT. LTD. (S UPRA) WHEREIN IT WAS OBSERVED THAT IT IS THE WELL SETTLED LEGAL POSITION AS LAID DOWN BY THE COURT OF APPEAL IN ENGLAND IN MOOUAT VS. BETTS MOTORS LTD. 1 958 (3) ALL ER 402, THAT TWO DEPARTMENTS OF THE GOVERNMENT CANNOT IN LAW ADO PT CONTRARY OR INCONSISTENT STANDS OR RAISE INCONSISTENT CONTENTIO NS OR ACT AT A CROSS PURPOSES. THEREFORE WHEN THE 4 DEPARTMENTS OF THE GOVERNMENT HAS CONSIDERED THE ASSESSEE AS A MANUFACTURING UNIT THEREFORE, THE OTH ER DEPARTMENT OF THE ITA NO.71/DEL/2016 14 GOVERNMENT CANNOT TAKE A CONTRARY VIEW OR STAND INC ONSISTENT WITH THE VIEW TAKEN BY THE OTHER DEPARTMENTS OF THE GOVERNMENT. 14. COMING TO THE OBSERVATION OF THE LD. AO THAT TH E ACTIVITIES OF THE ASSESSEE ARE PURELY ASSEMBLING OF WOODEN PLANKS WIT H NAIL INTO WOODEN CRATES AND IF NAILS ARE REMOVED IT WILL CUT ITS ORIGINAL S HAPE AS IT WAS BEFORE USED. HOWEVER, WE FIND THAT THE ORIGINAL COMMODITY USED B Y THE ASSESSEE AS RAW MATERIAL ARE A WOODEN SLEEPERS / PLANKS WHICH ARE G O INTO SIZES TO ACCORDING TO THE ORDERS PLACED WITH THE ASSESSEE THEN THE CUT TW O SIZES WOODEN PLANKS ARE SUBJECT TO SMOOTHENING USE OF PLANTING MACHINE THEN THE PLANKS ARE TREATED TO FIX THE EVAFOAM AND THERMOCOL TO MAKE THE MATERIAL CARRIED IN THE CRATES JERK RESISTANT THEN THE PLANKS ARE STAPLER AND NAIL ARE USED INDUSTRIAL NAILS AND STAPLERS, THEREFORE, THE RESULT OF THE PROCESS IS W OODEN CRATES WHICH IS DISTINCT FROM THE WOODEN SLIPPERS PLANKS BEING ORIGINAL COMM ODITY. THEREFORE, THE END PROJECT IS RESULT OF MANUFACTURING ACTIVITY WHICH A MOUNTS CHANGE IN THE ORIGINAL ARTICLES. HENCE, IT CANNOT BE TREATED AS MERE ASSEM BLING OF WOODEN PLANKS EVEN THE HONBLE SUPREME COURT IN THE CASE OF ORACLE SOF TWARE INDIA LTD. (SUPRA) HELD THAT IF AN OPERATION / PROCESS RENDERS A COMMO DITY OR ARTICLE FIT FOR USE FOR WHICH IT IS OTHERWISE NOT FIT, OPERATION / PROCESS FALLS WITHIN THE MEANING OF WORD MANUFACTURE. WE HAVE ALSO GONE THROUGH THE VA RIOUS CASE LAWS RELIED BY THE LD. COUNSEL FOR THE ASSESSEE WHICH ARE DISCUSSE D IN SUBMISSIONS IN THE AFORESAID PARA OF THIS ORDER WHICH ALSO SUPPORTS TH E VIEW TAKEN OF THE LD. CIT(A) AND WE ALSO CONCUR THE VIEW OF LD. CIT(A) IN THE LIGHT OF AFORESAID FACTS AND CIRCUMSTANCES AND LEGAL POSITIONS. WE ARE OF THE CONSIDERED OPINION THAT LD. CIT(A) HAS RIGHTLY HELD THE ASSESSEE IS MA NUFACTURER OF WOODEN CRATES, AND CONSEQUENTLY ALLOWED THE DEDUCTION U/S 80IC OF THE ACT. THEREFORE, WE DO ITA NO.71/DEL/2016 15 NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A). ACCORDINGLY THE APPEAL OF THE REVENUE IS THEREFORE, DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 07/0 2/2019). SD/- SD/- (K.N.CHARY) (O.P.MEENA) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED: 07 / 02/2019 *BINITA* COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSISTANT REGIS TRAR DATE OF DICTATION 06/02/2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 07/02/2019 DATE ON WHICH THE TYPED DRAFT IS PLAC ED BEFORE THE OTHER MEMBER 07/02/2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS 07/02/2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 07/02/2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 07/02/2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER ITA NO.71/DEL/2016 16