Venakateshwara Food & Feeds, V. Dy. CIT Cen Cir 1[2] Pune, Pune

ITA 758/PUN/2012

• Counselvise Citation: 75824514 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 16-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M L VERMA
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K.PANDA, ACCOUNTANT MEMBER ITA NO. 758 TO 763/PN/2012 (ASSESSMENT YEAR: 2003-04 TO 2008-09) VENKATESHWARA FOODS AND FEEDS, VENKATESHWARA HOUSE H. NO. 3-5-808 AND 909/1 HYDERGUDA HYDERABAD 500 029 PAN AACFV 4204 H APPELLANT VS. DY. CIT CET. CIR. 1(2) PUNE .. RESPONDENT APPELLANT BY: SHRI NIKHI L PATHAK RESPONDENT BY: SMT. M.L. VERMA DATE OF HEARING : 15.07.2013 DATE OF ORDER : 18.07.2013 ORDER PER BENCH THESE APPEALS BY THE ASSESSEE PERTAINING TO THE SA ME ASSESSEE RAISE SIMILAR ISSUES AND ALSO ARISING OUT OF CONSOL IDATED ORDER OF THE CIT() CENTRAL, PUNE DATED 27-12-2011 FOR A.Y. 2003- 04 TO 2008-09 WERE HEARD TOGETHER AND THE SAME BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. BASICALLY THE ISSUE IS WITH REGARD TO CLAIM OF D EDUCTION U/S 80- IB OF THE ACT. THE ASSESSEE-FIRM IS CARRYING ON TH E BUSINESS OF MANUFACTURING OF MASH FEED AND PELLATE FEED. THE A SSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE RELYING UPON THE ORDERS FOR A.Y. 2001-02 TO 2005-06 AS WELL AS THE APPELLATE ORDER P ASSED BY THE CIT(A)-V HYDERABAD FOR A.Y. 2001-02 TO 2005-06. THE CIT(A) FOLLOWING THE DECISION FOR A.Y. 2001-02 TO 2005-06, UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 80-I B(5) OF THE ACT. THE SAME HAS BEEN OPPOSED BEFORE ON BEHALF OF THE A SSESSEE. 3. IT WAS CONTENDED ON BEHALF OF DEPARTMENT THAT TH IS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF TRIBUN AL HYDERABAD BENCH A IN ASSESSEES OWN CASE WHEREIN THE TRIB UNAL VIDE ITS ORDER DATED 26-4-2012 IN ITA NO. 1013, 1014/HYD/200 6, 869, 870/HYD/2008 AND 493/HYD/2005 FOR A.Y. 2002-03, 200 3-04, 2004-05, 2005-06 AND 2001-02 RESPECTIVELY UPHELD T HE SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER BY OBSER VING AS UNDER: 17. WE HAVE CONSIDERED THE RIVAL S UBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUT HORITIES. WE HAVE ALSO CAREFULLY EXAMINED THE CASE-LAW RELIED UPON BY THE PARTIES BEFORE US. 17.1 WE HAVE PERUSED THE ENTIRE PROCESS BY WH ICH PELLET FEED IS OBTAINED AND SHALL ENUMERATE THE SAME SERIA TUM: 1) VARIOUS FEED INGREDIENTS SUCH AS MAIZE, RICE BRAN, DE- OILED SOYA ETC., ALONG WITH CERTAIN FEED PREMIXES A RE MIXED IN DIFFERENT PROPORTIONS AND THEN GROUND TO F ORM A COURSE POWDERED MATERIAL WHICH IS CALLED MASH FEED. 2) SUCH FEED UNDERGOES A CERTAIN KIND OF PHYSICAL CHANGES BEFORE AGAIN CONVERTED INTO SMALL PELLETS. THE MASH FEED IS CARRIED THROUGH AN ELEVATOR TO A PELLE T MAKING MACHINE WHERE IT GETS MIXED WITH STEAM AND THEN FORCED THROUGH A PRESS CONTAINING SMALL HOLES TO CONVERT THE FEED INTO SMALL PELLETS. 3) AT THE STAGE OF GRINDING, GRINDING IS DONE TO REDUCE PARTICLE SIZE OF INGREDIENTS. 4) AFTER GRINDING THE INGREDIENTS WILL BE SENT TO M IXTURE BY ELEVATORS IN THE PROCESS OF PRE-MIXING. 5) IN THE LAST PROCESS OF MIXING, ALL INGREDIENTS L IKE VITAMINS, MINERAL AND MEDICINES ARE PROPERLY MIXED TO PROVIDE A BALANCE DIET AS PRESCRIBED BY THE NUTRITI ONAL DOCTOR WHO IS STATIONED AT THE PLANT 24 HOURS. 8) AFTER MIXING, CONDITIONING IS DONE WHERE AFTER COLLECTING MIXED FEED FROM THE FEEDER, THE FEED IS CONDITIONED WITH DRY STEAM IN THE CONDITIONER. PERF ECT MIXING OF DRY STEAM WITH FEED RESULTS IN A CONSISTE NT PELLET. 9) GELATINIZED STARCH IS GUMMY, DESIRABLE TO FORM A PELLET AS A BINDING AGENT. THE CONDITIONED FEED FORMED INT O PELLETS BY PRESSING THE THROUGH A DIE (3MM, 4.5 MM & 6 MM). 10)PELLET COOLING IS ALSO A PART OF CONDITIONING, W HERE, COOLING IS ACHIEVED BY PASSING DRAFT OF AIR THROUGH THE PELLETS TO EVAPORATE MOISTURE RESULTING IN TEMPERAT URE REDUCTION. 11) AFTER THE COOLING PROCESS, THE MATERIAL IS BEIN G PASSED TO THE PELLET CRUMBIER THROUGH PELLET ELEVATOR, WHE RE THE CRUMBIER IS USED TO CRUMBLE A WHOLE PELLET INTO SMA LLER SIZE. 12) IN THE SIEVING PROCESS, SIEVE IS USED TO GRADE THE PELLETS BY SIZE AND THE FEED GOES TO BAGGING BIN AN D DEPENDING UPON THE REQUIREMENT, PACKING IS DONE IN THE BAGS OF 50 TO 70 KGS. 17.2 WE HAVE EXAMINED THE STAGES THROUGH WHICH THE MASH FEED IS CONVERTED INTO PELLET FEED. IN DECIDING THE ISSUE WHETHER THERE HAS BEEN ANY MANUFACTURE OF PELLET FEED, WE A RE INCLINED TO HOLD THAT THERE HAS BEEN ONLY PROCESSING' WHILE THE PRODUCTION OF PELLET FEED IS DONE BY FOLLOWING VARI OUS STAGES, NAMELY, I) BATCH WEIGHING, II) GRINDING, III) MIXIN G, IV) CONDITIONING WITH STEAM, V) PELLETING, VI) COOLING, VII) CRUMBLING AND, FINALLY, VIII) PACKING. 17.3 THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUB MITTED A CHART SHOWING THE DIFFERENCE BETWEEN THE PELLET FEE D AND MASH FEED, WHICH IS A NOTE ON THE DIFFERENCE IN THE QUAL ITY OF THE FEED AND DOES NOT THROW ANY LIGHT ON THE MANUFACTURE AND IS OF ANY SIGNIFICANCE WHILE DISCUSSING WHETHER THERE IS MANU FACTURE FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB. 17.4 THE QUESTION BEFORE US IS WHETHER 'MASH FEED' UNDERGOES ANY PROCESS OF MANUFACTURE TO PRODUCE AN ARTICLE OR THING CALLED 'PELLET', WHICH IS DIFFERENT AND DISTI NCT FROM THE INPUT MATERIAL. IN THIS CASE THOUGH THE ORIGINAL CO MMODITY HAS UNDERGONE CERTAIN DEGREE OF CHANGE STILL IT HAS NOT LOST ITS ORIGINAL IDENTITY AND HENCE, IT CANNOT BE SAID THAT IT AMOUNTS TO MANUFACTURE. THE WORD 'MANUFACTURE' AND 'PRODUCE ' APPLIED TO BRINGING INTO EXISTENCE SOMETHING WHICH IS DIFFE RENT FROM ITS COMPONENTS. IN THE CASE OF CASINO P. LTD., 91 ITR 2 89, THE HON'BLE KERALA HIGH COURT HELD THAT DOING SOMETHING TO THE GOODS TO CHANGE OR ALTER THEIR FORM CAN BE TERMED A S PROCESSING AND DOES NOT AMOUNT TO MANUFACTURE. THE HON'BLE SUPREME COURT HAS DRAWN THE DISTINCTION BETWEEN THE PROCESSING AND MANUFACTURE IN THE CASE OF UNION OF INDIA VS. DELHI CLOTH & GENERAL MILLS CO. LTD., AIR 1963 SC 7 91 AND IT WAS HELD IN THAT CASE THE WORD MANUFACTURE USED AS VERB IS GENERALLY UNDERSTOOD TO MEAN BRING TO 'EXISTENCE A NEW SUBSTANCE' AND DOES NOT MEAN MERELY TO 'PRODUCE SOM E CHANGE IN THE SUBSTANCE'. 17.5 IN THE CONVERSION, WHETHER THE IDENTITY OF TH E COMMODITY BEFORE AND AFTER IT UNDERGOES VARIOUS PROCESSES/CHA NGES REMAINS THE SAME. IN MANUFACTURING A NEW AND DIFFER ENT ARTICLE MUST EMERGE FROM THE ORIGINAL SUBSTANCE AND NEW SUBSTANCE DOES NOT MEAN THAT MERELY A CHANGE IN THE SUBSTANCE IS EFFECTED. MANUFACTURE AND PRODUCTION I MPLIES THAT SOMETHING IS BROUGHT INTO EXISTENCE WHICH IS D IFFERENT FROM ITS COMPONENTS. MOREOVER, THE 'TERM' PROCESSIN G IS DISTINGUISHABLE FROM THE TERM 'MANUFACTURE' AND MER E PROCESSING DOES NOT AMOUNT TO CHANGE LOOSING ITS OR IGINAL IDENTITY WHEREAS IN MANUFACTURING, THE ORIGINAL ART ICLES LOOSE THEIR IDENTITY. IN THE CASE UNDER CONSIDERATION, DO ING SOMETHING TO SUBSTANCE TO CHANGE OR ALTER THEIR FOR M CAN BE TERMED AS PROCESSING AND DOES NOT AMOUNT TO MANUFAC TURE AS A PRODUCTION OF A NEW SUBSTANCE DOES NOT MEAN MEREL Y TO PRODUCE SOME CHANGE IN THE SUBSTANCE. THERE IS NO C HANGE IN THE BASIC COMPONENT EXCEPT A PHYSICAL CHANGE IN THE STRUCTURE AND SHAPE IN THE FORM OF PELLET AS NO NEW SUBSTANCE COMES INTO EXISTENCE. 17.6 THE ITAT COORDINATE BENCH HELD IN THE CASE OF M/S DAFTRI AGRO, AS FOLLOWS: 'WE FIND MERIT IN THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE ASSESSEE FIRM PROCESSED ONLY RAW S EED TO FINAL SEEDS AND HENCE THE ASSESSEE FIRM HAS NOT TAK EN ANY MANUFACTURING ACTIVITY AND, THEREFORE, THE ASSE SSEE IS NOT ELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB OF THE ACT. IT IS WELL SETTLED LAW THAT PROCESS OF STANDARDIZATION AND PASTEURIZATION OF MILK DOES NOT AMOUNT TO MANUFACTURE/PRODUCTION FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB OF THE ACT (E.G. CHITALE VS. DCI T [2008] 115 ITD 97 (PUNE)(SB). LIKEWISE THE PROCESSI NG OF MINERAL WATER ALSO NOT AMOUNTS TO MANUFACTURE. THE ACTIVITY OF THE ASSESSEE FIRM IS SIMILAR TO THE ACT IVITY REFERRED TO IN THE CASE OF E.G. CHITALE (SUPRA). HE NCE, THE DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE IS DISTINGUISHABLE ON FACTS. HENCE, THE AP PEAL OF THE REVENUE IS ALLOWED.' 17.7 IN THE CASE OF SHRI RAGHAVENDRA INDUSTRIES VS . ITO, THE COORDINATE BENCH IN ITA NO. 324 TO 326/HYD/04 FOR ASSESSMENT YEAR 1996-97, 1997-98 & 1999-2000, ORDER DATED 30/11/2005, HELD AS UNDER:- '8. EVEN ON MERITS WE ARE UNABLE TO PERSUADE OURSELVES TO TAKE A DIFFERENT VIEW FROM THE VIEW ALREADY TA KEN. IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 1998-99 (ITA NO. 175/HYD/2001 DATED 11 TH SEPT. 2003) THE BENCH HAS CONSIDERED THE ISSUE IN GREAT DETAIL AND APPLIE D THE DECISION OF SUPREME COURT IN THE CASE OF N. C. BUDD IRAJA & COMPANY (SUPRA) WHILE HOLDING THAT NO NEW COMMODI TY HAS COME INTO EXISTENCE WITH A NEW CHEMICAL COMPOSITION. THOUGH THE CONTENTION OF THE ASSESSEE, SUPPORTED BY CASE-LAW, IS ATTRACTIVE, NONE OF THE C ASES WERE DIRECTLY ON THE POINT. IN OTHER WORKS, THE ISS UE AS TO WHETHER PRESSING OF COTTON INTO BALES WOULD AMOUNT TO MANUFACTURE OR NOT WAS NOT THE SUBJECT MATTER OF CONSIDERATION. IT IS NOT OUT OF PLACE TO MENTION TH AT THE DEFINITION GIVEN UNDER THE CENTRAL EXCISE ACT AND U NDER DIFFERENT ENACTMENTS HAVE TAKEN IN ITS FOLD ANY PRO CESS, IN ORDER TO CONSIDER IT AS A MANUFACTURING PROCESS, WHEREAS THE HYDERABAD BENCH HAS TAKEN INTO CONSIDERATION THE DICTIONARY MEANING OF THE TERM 'MANUFACTURE' AND THE DECISION OF THE APEX COURT, WHEREIN THE TERM 'MANUFACTURE' WAS INTERPRETED, TO COME TO THE CONCLUSION THAT THE ACTIVITY OF PRESSING THE COTTON AND CONVERTING INTO BALES WOULD NOT AMOUNT TO MANUFACTURE. CONSISTENT WITH THE VIEW TAKEN BY THE HYDERABAD BENCH IN THE ASSESSEE'S OWN CASE WE UPHOL D THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE APP EALS FILED BY THE ASSESSEE.' 17.8 IN THE CASE OF CHOWGULE & CO. PVT. LTD. VS. U NION OF INDIA [1981] 47 STC 124 (SC) WHEREIN BLENDING OF DI FFERENT QUALITIES OF ORE OF THE CONTRACTUAL SPECIFICATIONS WAS HELD NOT TO INVOLVE THE PROCESS OF MANUFACTURE. 17.9 IN THE CASE OF CST VS. BOMBAY TRADERS, [1976] 38 STC 286 (BOM), THE HON'BLE COURT HELD THAT PLAIN-CASHEW NUTS WERE FRIED AND SALTED, STILL TO BE CASHEW-NUTS. 17.10 IN THE CASE OF SANDOZ (INDIA) LTD. VS. UNION OF INDIA [1980] TAX LR 2332 (BOM.), THE HON'BLE COURT HELD T HAT FORMULATION OF FORON PIGMENTS IN THE FORM OF FORON LIQUID DOES NOT AMOUNT TO MANUFACTURE. 17.11 IN THE CASE OF BHERAGHAT MINERAL INDUSTRIES V S. DIVISION DY. CST [1990] 79 STC 156 (MP), THE COURT HELD THAT PREPARATION OF CHIPS AND POWDER FROM DOLOMITE LUMPS HELD NOT MANUFACTURE. 17.12 IN THE CASE OF SRI VINAYAKA OIL INDUSTRIES VS . STATE OF KARNATAKA [1993] 91 STC 253 (KARN.), THE COURT HELD THAT DEHUSKING OF TAMARIND SEEDS TO GIVE WHITE TAMARIND 'PAPPU' IS MERELY A CHANGE OF FORM AND CONVERSION OF TAMARIND SEED INTO POWDER DOES NOT RESULT IN THE MANUFACTURE OF NEW AR TICLE. 17.13 IN THE CASE OF APPEEJAY PVT. LTD. VS. CIT, [1 994] 206 ITR 367, 381 (CAL.), THE COURT HELD THAT THE BLENDING O F DIFFERENT KINDS OF TEA DOES NOT CONSTITUTE MANUFACTURE OR PRO DUCTION OF ARTICLES. 17.14 IN THE CASE OF CIT VS. TATA LOCOMOTIVE ENGINE ERING CO., 68 ITR 325, THE COURT HELD THAT THE WORD OR EXPRESS ION MANUFACTURE AND PRODUCE APPLY TO BRINGING INTO EXIS TENCE OF SOMETHING WHICH IS DIFFERENT FROM ITS COMPONENTS. 17.15 IN THE CASE OF RAGHBIR CHAND SOMCHAND VS. EXC ISE AND TAXATION OFFICER, 11 STC 149 (P&H), THE COURT HELD THAT WHERE THE COMMODITY RETAINS A SUBSTANTIAL IDENTITY THROUG H THE PROCESSING STAGE IS SAID TO HAVE BEEN PROCESSED. 7.16 IN VIEW OF THE ABOVE DISCUSSION AND THE RATIO S LAID DOWN BY THE RESPECTIVE HON'BLE HIGH COURTS/SUPREME COURT, IT CAN BE CONCLUDED THAT THE ACTIVITY FOLLOWED BY THE ASSESSEE- FIRM IS A PROCESSING ACTIVITY AND IT IS NOT ENTITLED FOR THE DEDUCTION UNDER S. 80-IB OF THE IT ACT, 1961. THUS, WE CONFIRM THE ORDERS OF THE CIT(A) PASSED IN RESPECTIVE APPEA LS AND DISMISS THE ASSESSEES CLAIM U/S.80IB OF THE ACT, I N A.YS.2001- 02, 2002-03, 2003-04, 2004-05 & 2005-06 RESPECTIVEL Y. 4. NOTHING CONTRARY WAS BROUGHT TO OUR KNOWLEDGE ON BEHALF OF THE ASSESSEE. FACTS BEING SIMILAR. SO, FOLLOWING T HE SAME REASONS, WE ARE NOT INCLINED TO INTERFERE WITH THE FINDING O F THE CIT(A) WHO HAS UPHELD THE DISALLOWANCE MADE BY THE ASSESSING O FFICER WITH REGARD TO DEDUCTION U/S 80-IB OF THE ACT BY HOLDING THAT PRODUCTION OF PELLET FEED FROM MASH FEED IS ONLY RESULTING IN PROCESSING AND DID NOT AMOUNT TO ANY MANUFACTURING ACTIVITY. 5. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE D ISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 18 TH JULY 2013. (R.K.PANDA) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 18 TH JULY 2013 ANKAM COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT(A) CENTRAL PUNE 4) THE CIT- CENTRAL PUNE 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE