Poabs Rocks Products P.Ltd, Pathanamthitta V. ACIT, Thiruvalla

ITA 87/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68938 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: CHERRY P KURIAN
• Keywords: Depreciation; Additional depreciation; Difference of opinion
• Section: 80IB; 263

Judgement Text

ITA NOS. 86 TO 88/ COCH/ 2013 1 IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 86 & 88 /COCH/ 2013 (ASST YEAR 2008 - 09 & 2009 - 10 ) POABS ROCK PRODUCTS P LTD KUTTOOR POST THIRUVALLA PATHANAMTHITTA DIST PIN - 689 106 PAN AACCP8494J VS THE ASST COMMR OF INCOME TAX CIRCLE 1, THIRUVALLA ( APPELLANT) (RESPONDENT) ITA NO. 87 /COCH/ 2013 (ASST YEAR 2009 - 10 ) POABS GRANITE PRODUCTS P LTD WEST OTHERA POST THIRUVALLA PATHANAMTHITTA DIST PIN - 689 106 PAN AACCP 9929 J VS THE ASST COMMR OF INCOME TAX CIRCLE 1, THIRUVALLA ( APPELLANT) (RESPONDENT) ASSESSEE BY SHRI CHERRY P KURIAN REVENUE BY SMT S VIJAYAPRABHA, JR DR/SHRI M ANILKUMAR DATE OF HEARING 3 RD JULY 2013 DATE OF PRONOUNCEMENT 5 TH , SEPT 2013 OR D ER PER B.R. BASKARAN, AM: THE ASSESSEES CITED ABOVE HAVE FILED THESE APPEALS CHALLENGING THE ORDERS PASSED BY LD CIT(A), TRIVANDRUM AND THEY RELATE TO THE ASSESSMENT YEARS MENTIONED AGAINST THEIR NAME IN THE CAUSE TITLE. SINCE MAJOR ISSUE URGED IN THESE APPEAR S ARE IDENTICAL IN NATURE, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. ITA NOS. 86 TO 88/ COCH/ 2013 2 2. THE COMMON ISSUE THAT ARISES FOR CONSIDERATION IN BOTH THE CASES IS WHETHER THE ACTIVITY OF EXTRACTION OF GRANITE BOULDERS FROM HILLS AND PRODUCING GRANITE AGGREGATES OF DIFFERENT SIZES BY CRUSHING AND SEGREGATING THOUGH MECHANICAL PROCESS WOULD AMOUNT TO MANUFACTURE OR PRODUCTION OR NOT. BESIDES THE ABOVE, ANOTHER QUESTION URGED IS WHETHER THE ASSESSEE, M/S POABS ROCK PRODU CTS (P) LTD CAN BE CONSIDERED AS A SMALL SCALE INDUSTRIAL UNIT U/S 80IB OR NOT. 3. THE FACTS RELATING TO THE CASES ARE STATED IN BRIEF. BOTH THE ASSESSEES ARE ENGAGED IN THE BUSINESS OF EXTRACTION OF GRANITE BOULDERS FROM HILLS AND PRODUCING GRANIT E AGGREGATES OF DIFFERENT SIZES BY CRUSHING THEM THROUGH MECHANICAL PROCESS. M/S POABS ROCK PRODUCTS (P) LTD CLAIMED DEDUCTION U/S 80IB OF THE ACT IN BOTH THE YEARS UNDER CONSIDERATION. DEDUCTION U/S 80IB(3)(II) IS ALLOWED TO A SMALL SCALE INDUSTRIAL UND ERTAKING FOR CERTAIN NUMBER OF YEARS, IF IT BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR TO OPERATE ITS COLD STORAGE PLANT (NOT SPECIFIED IN SUB - SECTION (4) OR SUB - SECTION (5)) AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1 ST DAY OF APRIL, 1995 AND ENDING ON THE 31 ST DAY OF MARCH, 2002. THE SAID CLAIM WAS REJECTED BY THE AO IN ASSESSMENT YEAR 2008 - 09 ON THE GROUNDS THAT ; (A) THE ACTIVITY CARRIED ON BY THE ASSESSEE WOULD NOT FALL UNDER THE DEFINITION OF MANUFACTURE AS GIVEN U/S 2(29BA), WHICH WAS INSERTED BY THE FINANCE ACT 2009 W.E.F. 1.4.2009. AND (B) THE ASSESSEE HAS FAILED TO PRODUCE SSI CERTIFICATE VALID FOR THE FY 2007 - 08 RELEVANT TO THE ASSESSMENT YEAR 2008 - 09. FOR THIS PURPOSE, THE AO DREW SUPPORT FROM THE FOLLOWING CASE LAW: - (A ) CIT VS. GOMATESH GRANITES (246 ITR 167) (B) CIT VS. GEM INDIA MFG. CO. (249 ITR 307) IN ASSESSMENT YEAR 2009 - 10, THE AO REJECTED THE CLAIM OF DEDUCTION U/S 80IB ONLY ON THE GROUND THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE WOULD NOT FALL UNDER THE DEFINITION OF ITA NOS. 86 TO 88/ COCH/ 2013 3 MANUFACTURE GIVEN U/S 2(29)(BA) OF THE ACT. IN THIS YEAR, THE AO DREW SUPPORT FROM THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF LUCKY MINMAT (P) LTD VS. CIT (245 ITR 803). HOWEVER, IN THIS YEAR, THE AO DID NOT MAKE ANY OB SERVATION ABOUT THE SSI CERTIFICATE. 4. IN THE CASE OF M/S POABS GRANITE PRODUCTS (P) LTD, THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT IN ASSESSMENT YEAR 2009 - 10. THE ADDITIONAL DEPRECIATION IS ALLOWABLE IN RESPECT OF ANY NEW M ACHINERY OR PLANT (OTHER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER THE 31 ST DAY OF MARCH, 2005 BY AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING . THE AO REJECTED THE CLAIM OF ADDITIONAL DEPRECIATION ON THE GROUND THAT THE ACTIVITY CARRIED ON BY THE ASSESSEE WOULD NOT FALL UNDER THE DEFINITION OF MANUFACTURE GIVEN U/S 2(29BA) OF THE ACT. 5. BOTH THE ASSESSEES FILED APPEALS CHALLENGING THE ASSESSMENT ORDERS PASSED IN THEIR RESPECT IVE HANDS. BEFORE LD CIT(A), THE ASSESSEES PLACED RELIANCE ON THE FOLLOWING CASE LAW: - (A) C.I.T VS. M.R.GOPAL (58 ITR 658) (B) C.I.T. VS. R.C.CONSTRUCTION (222 ITR 658) (C) PIO FOOD PACKERS (46 STR 63) (D) C.I.T. VS. EMPTEE POLY YARN (P) LTD (188 TAXMANN 188) (E) MIDAS POLYMER COMPOUNDS (P) LTD VS. ACIT (197 TAXMANN 481) IT WAS SUBMITTED THAT THE TRIBUNAL HAS ALREADY DECIDED THAT THE ACTIVITIES CARRIED ON BY THESE ASSESSEES ARE MANUFACTURE IN NATURE. BY PLACING RELIANCE ON THE DECISION OF HO NBLE SUPREME COURT IN THE CASE OF UOI VS. KAMALAKSHI FINANCE CORPORATION (AIR 1992 SC 711), THE ASSESSEES CONTENDED BEFORE LD CIT(A) THAT THE PRINCIPLES OF JUDICIAL DISCIPLINE REQUIRE THAT THE ORDERS OF ITA NOS. 86 TO 88/ COCH/ 2013 4 THE HIGHER AUTHORITIES SHOULD BE FOLLOWED UNRESERVED LY BY THE SUBORDINATE AUTHORITIES UNLESS ITS OPERATION HAS BEEN SUSPENDED BY A COMPETENT COURT. THE LD CIT(A) NOTICED THAT THE TRIBUNAL, VIDE ITS COMMON ORDER DATED 8.4.2012, HAD ACCEPTED THE CONTENTION OF THE ASSESSEE IN THE CASE OF M/S POABS ROCK PRODU CTS (P) LTD IN ASSESSMENT YEARS 2006 - 07 & 2007 - 08 IN ITA NOS. 574 & 575/COCH/2010 THAT THE ACTIVITIES CARRIED ON BY THE SAID ASSESSEE IS MANUFACTURING ACTIVITY ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE TRIBUNAL HAD ALSO EXPRESSED THE VIEW THAT THE DEFINITION OF MANUFACTURE INSERTED IN SEC. 2(29BA) BY FINANCE ACT, 2009 W.E.F. 1.4.2009 SHALL NOT APPLY TO ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. ACCORDINGLY, THE LD CIT(A), BY FOLLOWING THE TRIBUNALS DECISION (REFERRED SUPRA) HELD THAT THE ACTIVITY CA RRIED ON BY M/S POABS ROCK PRODUCTS (P) LTD AMOUNT TO MANUFACTURE FOR ASSESSMENT YEAR 2008 - 09. HOWEVER, HE UPHELD THE REJECTION OF DEDUCTION U/S 80IB ON THE GROUND THAT THE ASSESSEE COULD NOT FILE VALID SSI CERTIFICATE AND HENCE IT CANNOT BE REGARDED AS A SMALL SCALE UNDERTAKING FOR THE PURPOSES OF SECTION 80IB OF THE ACT, WHICH WAS ONE OF THE CONDITIONS FOR ALLOWING DEDUCTION U/S 80IB OF THE ACT. 6. BOTH THE ASSESSEES HAD FILED APPEALS BEFORE LD CIT(A) FOR THE ASSESSMENT YEAR 2009 - 10. SINCE THE DEFINITION OF THE WORD MANUFACTURE WAS INTRODUCED IN SEC. 2(29BA) W.E.F. 1.4.2009, THE LD CIT(A) EXAMINED THE ACTIVITIES CARRIED ON BOTH THE ASSESSEES IN TERMS OF THE DEFINITION OF MANUFACTURE GIVEN IN THE ABOVE SAID SECTION. THE LD CIT(A) HELD THAT T HE ACTIVITIES CARRIED ON BY BOTH THE ASSESSEES ARE NOT COVERED WITHIN THE DEFINITION OF WORD MANUFACTURE AS GIVEN IN SEC. 2(29BA) OF THE ACT. THE SAID SECTION DEFINED THE WORD MANUFACTURE AS UNDER: - 2(29BA) MANUFACTURE, WITH ITS GRAMMATICAL VARIATI ONS, MEANS A CHANGE IN A NON - LIVING PHYSICAL OBJECT OR ARTICLE OR THING, -- ITA NOS. 86 TO 88/ COCH/ 2013 5 (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 OR A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE FOR THE SAKE OF CONVENIENCE, THE RELEVANT OBSERVATIONS OF LD CIT(A) ARE EXTRACTED BELOW: - AS PER PART (A) OF SECTION 2(29BA), THER E SHALL BE TRANSFORMATION OF THE ORIGINAL OBJECT OR ARTICLE OR THING INTO A NEW AND DISTINCT OBJECT OR ARTICLE OR THING HAVING A DIFFERENT NAME, CHARACTER AND USE. AS PER PART (B) OF THE DEFINITION A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFF ERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE SHOULD EMERGE. THE CHEMICAL COMPOSITION AND THE INTEGRAL STRUCTURE OF THE END PRODUCT REMAINS UNALTERED IN THE CASE OF THE APPELLANT THOUGH THERE IS CHANGE IN THE NAME AND USE OF ORIGINAL PRODUCT. BUT THE CHARACTER OF END PRODUCT REMAINS THE SAME. IT IS TO BE NOTED THAT AS PER PART (A) OF SEC.2(29BA), THERE SHALL BE CHANGE OF ALL THREE ASPECTS I.E. NAME, CHARACTER AND USE. FURTHER BLASTING OF GRANITE BLOCKS WHICH ARE FOUND IN A NATURAL FORMATION CANNOT BE REGARDED AS MANUFACTURE AS THE GRANITE BLOCKS SO PRODUCED FROM BLASTING HAVE THE NAME, CHARACTER AND USE AS THE GRANITE IN NATURAL FORMATION. FURTHER THERE IS NO CHANGE IN CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE. THE CRUSHING OF GRANITE DOES NOT CA USE ANY CHANGE IN CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE EVEN THOUGH THE END PRODUCT MAY HAVE A DIFFERENT NAME AND USE BUT ITS CHARACTER, I.E., GRANITE REMAINS THE SAME. IN THE CASE OF M/S POAB ROCK PRODUCTS (P) LTD, THE LD CIT(A) ALSO HELD THAT IT CANNOT BE REGARDED AS A SMALL SCALE UNDERTAKING FOR THE PURPOSES OF SECTION 80IB OF THE ACT IN THE ABSENCE OF A VALID SSI CERTIFICATE FOR ASSESSMENT YEAR 2009 - 10, EVEN THOUGH THE AO HAD NOT CITED THAT REASON. ACCORDINGLY, THE LD CIT(A) UPHELD THE REJECTI ON OF CLAIM OF DEDUCTION U/S 80IB IN THE HANDS OF M/S POAB ROCK PRODUCTS (P) LTD IN BOTH THE YEARS UNDER CONSIDERATION AND ALSO THE CLAIM OF ADDITIONAL DEPRECIATION IN THE HANDS OF M/S POAB GRANITE PRODUCTS (P) LTD IN ASSESSMENT YEAR 2009 - 10. AGGRIEVED, BOTH THE ASSESSEES HAVE FILED THESE THREE APPEALS CHALLENGING THE ORDERS PASSED BY LD CIT(A). ITA NOS. 86 TO 88/ COCH/ 2013 6 7. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE HAS BEEN HELD TO BE MANUFACTURE BY THE HONBLE TRIBUNAL IN THE EARLIER YEARS. HENCE, THE TAX AUTHORITIES ARE NOT JUSTIFIED IN HOLDING THAT THE VERY SAME ACTIVITY CANNOT BE CONSIDERED AS MANUFACTURING ACTIVITY, IN TERMS OF DEFINITION OF THE WORD MANUFACTURE INSERTED IN SEC. 2(29BA) OF THE ACT. REFERRING TO THE D EFINITION GIVEN IN THAT SECTION, THE LD COUNSEL SUBMITTED THAT THE MEANING OF THE WORD MANUFACTURE, ALREADY EXPLAINED BY THE COURTS HAVE ONLY BEEN CODIFIED IN THE DEFINITION. LD COUNSEL SUBMITTED THAT THE ASSESSEE IS MANUFACTURING GRANITE AGGREGATES OF DIFFERENT SIZES, VIZ., 1 - , 1, , AND ALSO SAND AND DUST. THESE AGGREGATES HAVE DIFFERENT NAME IN COMMON PARLANCE VIZ., METALS. THE SAND MANUFACTURED BY THE ASSESSEE IS EQUIVALENT TO THE QUALITY OF RIVER SAND AND USED FOR VERY SAME PURPOSES AS THAT OF RIVER SAND. FURTHER, EACH SIZED METAL IS USED FOR DIFFERENT PURPOSES AND HAS GOT DISTINCT AND DIFFERENT USE. HE SUBMITTED THAT THE TAX AUTHORITIES HAVE ACCEPTED THAT THE NAME AND USE OF THE PRODUCTS MANUFACTURED BY THE ASSESSEE ARE DIFFERENT FROM THE GRANITE BOULDERS. HOWEVER, THEY HAVE HELD THAT THE CHARACTER OF GRANITE BOULDERS AND METALS REMAIN SAME, WHICH IS NOT CORRECT. HE SUBMITTED THAT THE CHARACTERISTICS OR DISTINGUISHING FEATURES OF GRANITE BOULDERS CANNOT BE COMPARED WITH THE FEATUR ES OF METALS, EVEN THOUGH THE METALS ARE DERIVED FROM THE GRANITE BOULDERS. HE FURTHER SUBMITTED THAT THE ASSESSEE COMPANIES ARE REGISTERED AS MANUFACTURING UNITS UNDER THE FACTORIES ACT. THE LD COUNSEL, BESIDES PLACING RELIANCE ON THE CASE LAW PUT BEFORE THE TAX AUTHORITIES, ALSO PLACED RELIANCE ON THE DECISION RENDERED BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF ARIHANT TILES & MARBLES (P) LTD VS. ITO REPORTED IN 295 ITR 148 (RAJ). HE FURTHER SUBMITTED THAT THE ASSESSEE OBTAINED PROVISIONAL SSI CERTIFICATE IN THE YEAR 1993 AND LATER APPLIED FOR PERMANENT REGISTRATION CERTIFICATE. HOWEVER, THE ASSESSEE DID NOT RECEIVE ANY PERMANENT CERTIFICATE SO FAR AND HENCE THE PROVISIONAL CERTIFICATE ISSUED TO THE ASSESSEE CONTINUES TO BE VALID TILL DATE. HE SUBMITTED THAT THE PROVISIONAL CERTIFICATE WAS ITA NOS. 86 TO 88/ COCH/ 2013 7 OBTAINED AS SOON AS THE COMPANY STARTED SETTING UP OF THE FACTORY. ACCORDINGLY HE SUBMITTED THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE HAS FAILED TO FURNISH SSI CERTIFICATES FOR BOTH THE YEARS UNDER CONSIDERATION. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS STARTED COMMERCIAL PRODUCTION IN THE FINANCIAL YEAR 2000 - 2001, I.E., WITHIN THE PERIOD SPECIFIED IN SEC. 80IB(3)(II) OF THE ACT. HE SUBMITTED THAT THESE FACTS ARE EVIDENT FROM THE FINANCIAL STATEMENTS PREPARED BY THE ASSESSEE COMPANY AT THE END OF EVERY YEAR. THE LD A.R ALSO FURNISHED COPIES OF FINANCIAL STATEMENTS FILED WITH THE REGISTRAR OF COMPANIES TO SUBSTANTIATE HIS CONTENTION THAT THE ASSESSEE COMPANY STARTED COMMER CIAL PRODUCTION ONLY IN THE FINANCIAL YEAR 2000 - 2001. THE A.R SUBMITTED THAT THE ASSESSEE HAD FILED THE AUDIT REPORT IN FORM NO.10CCB FOR BOTH THE YEARS AS PRESCRIBED IN 80IB OF THE ACT. THE AO REFUSED TO RECOGNIZE THE PROVISIONAL SSI CERTIFICATE AND ALS O DID NOT CONSIDER THE AUDIT REPORT. HE SUBMITTED THAT THE TAX AUTHORITIES ARE NOT CORRECT IN DISREGARDING THE ABOVE SAID DOCUMENTS AND ALSO IN INSISTING UPON A SSI CERTIFICATE FOR THE YEARS UNDER CONSIDERATION, WHICH IS NOT REQUIRED UNDER THE ACT. 8. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE WORD MANUFACTURE WAS NOT DEFINED IN THE ACT IN EARLIER YEARS, WHEN THE TRIBUNAL RENDERED ITS DECISION IN THE ASSESSEES OWN CASE FOR EARLIER YEARS. NOW THE WORD MANUFACTURE HAS BEEN DEFINED IN SEC. 2(29 BA) OF THE ACT. THE SAID SECTION WAS INSERTED BY FINANCE ACT, 2009 W.E.F. 1.4.2009. THE LD CIT(A) HAS POINTED OUT THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE DO NOT FALL UNDER THE SAID DEFINITION AND HENCE HE HAS DENIED DEDUCTION U/S 80IB OF THE ACT A ND ALSO THE ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT. THE LD CIT(A) HAS ALSO POINTED OUT THAT ALL THE CASE LAW RELIED UPON BY THE ASSESSEE HAVE BEEN RENDERED PRIOR TO THE INSERTION OF THE DEFINITION OF THE WORD MANUFACTURE IN THE ACT. IN ADDI TION TO THE ABOVE, THE ASSESSEE M/S POABS ROCK PRODUCTS (P) LTD HAS FAILED TO FURNISH THE SSI CERTIFICATE RELEVANT FOR THE TWO YEARS UNDER CONSIDERATION AND FOR THAT REASON ALSO, THE LD ITA NOS. 86 TO 88/ COCH/ 2013 8 CIT(A) WAS JUSTIFIED IN REJECTING THE CLAIM OF DEDUCTION U/S 80IB OF T HE ACT IN BOTH ASST. YEARS FOR THAT ASSESSEE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. ON GOING THROUGH THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT WE NEED TO ADDRESS FOLLOWING TWO ISSUES, VIZ., (A) WHETHER THE ACTI VITIES CARRIED ON BY THE ASSESSEE CAN BE REGARDED AS MANUFACTURE OR PRODUCTION IN TERMS OF SEC. 80IB AND SEC. 32(1)(II) OF THE ACT. (B) WHETHER THE NON - FURNISHING OF SSI CERTIFICATE FOR THE YEARS UNDER CONSIDERATION WOULD DISENTITLE THE ASSESSEE TO CLAI M DEDUCTION U/S 80IB OF THE ACT. 10. IN THE APPEAL RELATING TO THE ASSESSMENT YEAR 2008 - 09 IN THE CASE OF M/S POAB ROCK PRODUCTS (P) LTD, WE NOTICE THAT THE LD CIT(A) HAS HELD, BY FOLLOWING THE DECISION RENDERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE IN EARLIER YEARS, THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE CAN BE REGARDED AS MANUFACTURE. WE ALSO NOTICE THAT THE SAID DECISION OF THE LD CIT(A) HAS NOT BEEN CHALLENGED BY THE REVENUE BEFORE US. 11. WE NOTICE THAT THE LD CIT(A) HAS HELD THAT THE ACTIVITIES OF THE ASSESSEE DO NOT FALL WITHIN THE MEANING OF DEFINITION OF THE WORD MANUFACTURE GIVEN IN SEC. 2(29BA) OF THE ACT. AT THE COST OF REPETITION, WE EXTRACT BELOW THE SAID DEFINITION: - 2(29BA) MANUFACTURE, WITH ITS GRAMMATIC AL 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 ITA NOS. 86 TO 88/ COCH/ 2013 9 (B) BRINGING INTO EXISTENCE OR A NEW AND DISTINCT OBJECT OR ARTICLE OR THING WITH A DIFFERENT CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE A CAREFUL READING OF THE ABOVE SAID DEFINITION WOULD SHOW THAT IT IS ENOUGH IF THE ACTIVITIES CARRIED ON BY A PERSON IS COVERED EITHER UNDER CLAUSE (A) OF SECTION 2(29BA) OR CLAUSE (B) OF SEC. 2(29BA) IN ORDER TO BE CATEGORISED AS MANUFACTURING ACTIVITY, SINCE THE WORD OR IS USED BETWEEN CLAUSE (A) AND CLAUSE (B). HENCE, IT IS NOT NECESSARY THAT THE ACTIVITY OF A PERS ON SHOULD FALL UNDER BOTH CLAUSE (A) AND CLAUSE (B). 12. BEFORE PROCEEDING TO EXAMINE THE APPLICABILITY OF SEC. 2(29BA) TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE, WE FEEL IS APPOSITE TO DISCUSS CERTAIN CASE LAW, WHICH WE CONSIDER AS RELEVANT IN T HIS CASE. BEFORE US, THE LD A.R PLACED RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF ARIHANT TILES & MARBLES (P) LTD (SUPRA). THE ASSESSEE THEREIN WAS ENGAGED IN ACTIVITY OF SAWING OF MARBLE BLOCK INTO SLABS AND TILES AND MARKET ING THEM IN INDIGENOUS AS WELL AS FOREIGN MARKETS. IT CLAIMED DEDUCTION U/S 80IA AS AN INDUSTRIAL UNDERTAKING WHICH MANUFACTURES OR PRODUCES ARTICLES OR THINGS. THE HIGH COURT WAS ASKED TO CONSIDER FOLLOWING QUESTIONS: - (1) WHETHER THE EXPRESSION PROD UCTION USED UNDER SECTION80IA/80IB OF THE INCOME TAX ACT, 1961 IN WHICH BOTH EXPRESSIONS MANUFACTURE AND PRODUCTION HAVE BEEN USED WHETHER THEY HAVE BEEN USED AS SYNONYMS WITH EACH OTHER OR THE WORD PRODUCTION HAS A WIDER MEANING THAN MANUFACTURE SO AS TO INCLUDE WITHIN ITS PURVIEW, AN ACTIVITY, WHICH MAY NOT AMOUNT TO MANUFACTURE BUT MAY STILL AMOUNT TO PRODUCTION? (2) WHETHER IF THE QUESTION NO.1 IS TO BE DECIDED IN POSITIVE WHETHER THE CUTTING AND POLISHING OF MARBLE STONE INTO MARBLE SLABS AND TILES WHICH HAS BEEN HELD BY THE SUPREME COURT NOT AMOUNTING TO MANUFACTURE CAN STILL BE CONSIDERED PRODUCTION FOR THE PURPOSE OF SECTION 80IA/80IB? ITA NOS. 86 TO 88/ COCH/ 2013 10 12.1 WITH REGARD TO THE FIRST QUESTION, THE HONBLE RAJASTHAN HIGH COURT HELD THAT THE EXPRESSION PR ODUCTION HAS A WIDER CONNOTATION THAN THE EXPRESSION MANUFACTURE. IT WAS FURTHER HELD THAT ALL ACTIVITIES FALLING WITHIN THE AMBIT OF MANUFACTURE RESULT IN PRODUCTION BUT CONVERSE IS NOT TRUE. THE RELEVANT DISCUSSIONS ARE EXTRACTED BELOW: - 10. THER E IS SUBSTANCE IN THE CONTENTION OF LEARNED COUNSEL FOR THE RESPONDENTS THAT EXPRESSION 'PRODUCTION' HAS A WIDER CONNOTATION THAN THE EXPRESSION 'MANUFACTURE' AND, THEREFORE, THE QUESTION WHETHER ANY ACTIVITY FALLS WITHIN THE AMBIT OF S. 80 - IA/80 - IB, THE E XAMINATION FROM THE POINT OF VIEW OF ONLY MANUFACTURER IS NOT THE FINAL TEST. THE ESSENTIAL DISTINCTION BETWEEN EXPRESSIONS 'MANUFACTURE' AND 'PRODUCTION' HAD RECEIVED ATTENTION OF THE JUDICIAL PRONOUNCEMENT FROM TIME TO TIME. 11. THE DISTINCTION BETWEEN M ANUFACTURE AND PRODUCTION WAS NOTICED AND EXPLAINED BY THE SUPREME COURT IN CIT VS. N.C. BUDHARAJA & CO. & ANR. ETC. (1993) 114 CTR (SC) 420 : (1993) 204 ITR 412 (SC). THE APEX COURT CLEARLY OPINED THAT ALL ACTIVITIES FALLING WITHIN THE AMBIT OF MANUFACTU RE RESULT IN PRODUCTION BUT CONVERSE IS NOT TRUE. 12. THE PRINCIPLE WAS REITERATED IN CHOWGULE & CO. (P) LTD. UNION OF INDIA & ORS. (1981) 47 STC 124 (SC). 13. IN AMAN MARBLE INDUSTRIES (P) LTD VS. CCE (SUPRA)(20030(157) ELT 393), THE COURT CONSIDERING THE ENTRIES UNDER THE CENTRAL EXCISE AND TARIFF ACT HELD THAT ACTIVITY OF CUTTING OF MARBLE BLOCKS INTO MARBLE SLABS DOES NOT AMOUNT TO MANUFACTURE SO AS TO BRING IT WITHIN THE NET OF LEVY OF EXCISE DUTY. IN COMING TO THIS CONCLUSION, THE COURT RELIED ON RSEB VS. ASSOCIATED STONE INDUSTRIES & ORS. JT 2000 (6) SC 522 IN WHICH THE APEX COURT OBSERVED THAT EXCAVATION OF STONES FROM A MINE AND THEREAFTER CUTTING THEM AND POLISHING THEM INTO SLABS DID NOT AMOUNT TO MANUFACTURE OF GOODS. WHETHER EXCAVATION OF STONE FROM MINES AMOUNTS TO PRODUCTION WAS NOT THE ISSUE BEFORE RAJASTHAN HIGH COURT OR SUPREME COURT. 12.2 WITH REGARD TO THE SECOND QUESTION, THE HONBLE RAJASTHAN HIGH COURT CONSIDERED THE DECISIONS RENDERED BY THE HONBLE SUPREME COURT AND OTHER HIGH CO URTS ITA NOS. 86 TO 88/ COCH/ 2013 11 AND HELD THAT THE ACTIVITY OF CUTTING OF GRANITE/MARBLE BLOCK INTO USABLE SLABS OR TILES IS A MANUFACTURING ACTIVITY. THE RELEVANT DISCUSSIONS ARE EXTRACTED BELOW: - . 14. KARNATAKA HIGH COURT IN CIT VS. MYSORE MINERALS LTD. (2001) 166 CTR (KAR) 142 : (2001) 250 ITR 725 (KAR) WAS CONSIDERING WHETHER THE ACTIVITY OF CUTTING GRANITE BLOCKS INTO SLABS AND SIZES AND POLISHING THEM FALLS WITHIN THE PURVIEW OF S. 32A OF IT ACT, 1961 SO AS TO ALLOW THE MACHINERY USED FOR SUCH ACTIVITY ELIGIBLE FOR INVESTMENT ALLOWANCE AND WHETHER IT ALSO BECOMES ELIGIBLE TO DEDUCTION UNDER S. 80 - I WHICH IS AVAILABLE TO INDUSTRIAL UNDERTAKING ENGAGED IN MANUFACTURING OR PRODUCTION OF GOODS. THE KARNATAKA HIGH COURT OPINED AS UNDER: 'SEC. 32A REFERS TO INVESTMENT ALLOWANCE ON PLANT AND MACHINERY. PLANT AND MACHINERY SHOULD BE USED IN MANUFACTURE OR PROCESS OF ANY ARTICLE OR THING AND IT SHOULD BE OF AN INDUSTRIAL UNDERTAKING. THERE ARE A NUMBER OF CONDITIONS MENTIONED IN THE SECTION. IN ORDER TO FIND OUT WHETHER A PARTICULAR A CTIVITY IS A MANUFACTURING ACTIVITY OR NOT IT HAS TO BE OBSERVED THAT THERE SHOULD BE AN ACTION OR PROCESS OF MAKING AN ARTICLE BY APPLICATION OF PHYSICAL OR MECHANICAL LABOUR AND THE PRODUCT MUST BE COMMERCIALLY A NEW OR DIFFERENT ARTICLE. MANUFACTURING R ESULTS IN ALTERATION OR CHANGE IN THE NATURE OF THE GOODS WHICH ARE SUBJECTED TO PROCESS. GRANITE BLOCKS ARE CONVERTED INTO SLABS AND CUT INTO SIZES AND THEREAFTER POLISHED. IT IS NOT THE SAME COMMODITY, I.E., THE BLOCK. THIS MATTER WAS EXAMINED IN THE CAS E OF THE ASSESSEE IN CIT VS. MYSORE MINERALS LTD. (1994) 205 ITR 461 (KAR), AND IT WAS HELD THAT THE ASSESSEE IS AN INDUSTRIAL UNDERTAKING ENTITLED TO INVESTMENT ALLOWANCE UNDER S. 32A. IT IS POINTED OUT THAT THE SPECIAL LEAVE HAS BEEN GRANTED AGAINST THE SAID JUDGMENT [SEE (1993) 201 ITR (ST) 59]. SEC. 80 - I ALSO REFERS TO PROFITS AND GAINS IN RESPECT OF AN INDUSTRIAL UNDERTAKING. IN VIEW OF THE DECISION GIVEN IN THE CASE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE TRIBUNAL IS RIGHT IN LAW IN COMING TO THE CONCLUSION THAT THE ORIGINAL ASSESSMENT WHICH GRANTED THE RELIEF UNDER SS. 32A AND 80 - I TO THE ASSESSEE WAS NOT ERRONEOUS AND THE INFERENCE OF THE CIT UNDER S. 263 WAS NOT PROPER. THE TRIBUNAL IS ALSO RIGHT IN LAW IN HOLDING THAT EXTRACTING GRANITE FROM Q UARRY AND CUTTING IT TO VARIOUS SIZES AND POLISHING SHOULD BE CONSIDERED AS MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING AND THE ASSESSEES BUSINESS ACTIVITY MUST BE CONSIDERED AS AN INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF GRANTING RELIEFS UNDER SS. 32A AND 80 - I OF THE IT ACT, 1961.' 15. THIS JUDGMENT WAS UNDER APPEAL BEFORE THE SUPREME COURT IN CIT VS. SESA GOA LTD. (2004) 192 CTR (SC) 577 : (2004) 271 ITR 331 (SC). REFERRING TO ITA NOS. 86 TO 88/ COCH/ 2013 12 APPEAL ARISING FROM THE ABOVE JUDGMENT OF KARNATAKA HIGH COURT AND BY R EFERRING THE PRINCIPLE ENUNCIATED IN CIT VS. SESA GOA LTD. CASE (SUPRA), THE APPEALS WERE DISMISSED. THE COURT SAID THAT EXTRACTION AND PROCESSING OF IRON ORE AMOUNT TO 'PRODUCTION' WITHIN THE MEANING OF THE WORD IN S. 32A(2)(B)(III) OF THE IT ACT, 1961. O N THAT PREMISE THE INVESTMENT ALLOWANCE WAS HELD DEDUCTIBLE IN TERMS OF PLANT AND MACHINERY INSTALLED BY THE ASSESSEE FOR EXCAVATION AND PROCESSING MINERAL ORE UNDER S. 32A. IT ALSO HELD THAT IT IS NOT NECESSARY THAT THE MINED ORE MUST BE A COMMERCIALLY NE W PRODUCT FOR THE PURPOSE OF S. 32A. OTHER PROVISIONS OF THE ACT SUCH AS S. 33(1)(B)(B) SHOWS THAT MINING OF ORE IS STATED TO BE PRODUCTION. THUS THE DECISION OF KARNATAKA HIGH COURT AFFIRMED BY THE SUPREME COURT DEALS WITH THE SAME COMMODITY AND SAME EXPR ESSION IN THE SAME ENACTMENT WITH WHICH WE ARE CONCERNED AND CLINCHES THE ISSUE IN FAVOUR OF THE APPELLANT. 16. WE ALSO FIND THAT EVEN UNDER THE IT RULES, 1962 ASSESSEE UNDER S. 44AB R/W R. 6G IS REQUIRED TO FURNISH REPORT OF AUDIT OF HIS ACCOUNTS AND ALSO REQUIRED TO FURNISH STATEMENT OF PARTICULARS IN FORM NO. 3CD PROVIDED UNDER THE RULES WHICH INCLUDE FURNISHING INFORMATION ABOUT THE NATURE OF BUSINESS CARRIED ON BY THE ASSESSEE IN PART B OF THE ANNEXURE TO BE APPENDED TO THE STATEMENT OF PARTICULARS IN WHICH THE MARBLE AND GRANITE HAS BEEN CLASSIFIED UNDER THE MANUFACTURING INDUSTRY SECTOR. THUS, FOR THE PURPOSE OF INCOME - TAX, UNDER THE RULES, MARBLE AND GRANITE INDUSTRY HAS BEEN CONSIDERED TO BE MANUFACTURING INDUSTRY. UNDER THE RULES GOVERNING THE CO MPULSORY AUDIT IN RESPECT OF VARIOUS BUSINESSES ALSO, MARBLE AND GRANITE INDUSTRY HAS BEEN INCLUDED IN THE SECTOR OF MANUFACTURING INDUSTRY. THIS GOES TO SHOW THAT SO FAR AS THE AUTHORITIES UNDER THE INCOME - TAX ENTRUSTED WITH THE TASK OF ITS IMPLEMENTATION ARE CONCERNED AND THE FRAMERS OF THE RULES HAVE CONSIDERED THE CUTTING OF MARBLE AND GRANITE BLOCKS INTO SLABS AND POLISHING THEM FOR BRINGING THEM TO THE STAGE OF USABILITY AS AN ACTIVITY OF INDUSTRIAL UNDERTAKING ENGAGED IN MANUFACTURE AND PRODUCTION OF ARTICLES OR THINGS. RULES FRAMED UNDER THE ACT ARE STATUTORY AND BECAME PART OF STATUTE. THUS UNDER THE SCHEME OF IT ACT AND RULES FRAMED THEREUNDER FOR THE PURPOSE OF SAID ACT, CUTTING AND POLISHING OF MARBLE AND GRANITE BLOCKS HAVE BEEN HELD TO BE AN IN DUSTRIAL ACTIVITY OF MANUFACTURE. AS A BLOCK, IT IS NOT OF ANY USE AND HAS BEEN HELD TO BE A MANUFACTURING INDUSTRY FOR THE PURPOSE OF IT ACT. 17. IT MAY BE PERTINENT TO NOTICE THAT EVEN AS PER ITS CIRCULAR, THE CBDT (VIDE CIRCULAR NO. 729, DT. 1ST NOV., 1 995) [(1995) 129 CTR (ST) 1] HAS CONSIDERED GRANITE AS A MINERAL, AND ANY PROCESS APPLIED MAKES IT VALUABLE MARKETABLE COMMODITY. BOARD HAS CLARIFIED THAT: ITA NOS. 86 TO 88/ COCH/ 2013 13 'THE BOARD IS, THEREFORE, OF THE VIEW THAT WHILE GRANITE CAN ALONE BE CONSIDERED AS MINERAL, ANY PRO CESS APPLIED TO GRANITE WOULD DEPRIVE THE QUALITY OF ROUGH MINERAL FROM THE DIMENSIONAL BLOCKS OF GRANITE, WHICH IS A VALUE ADDED MARKETABLE COMMODITY.' 18. THE DECISION OF KARNATAKA HIGH COURT AS AFFIRMED BY THE SUPREME COURT IS IN CONSONANCE WITH THE AFO RESAID VIEW EMERGING FROM RULES AND EXPRESSED BY THE CBDT. THE AUTHORITY ENTRUSTED FOR SMOOTH IMPLEMENTATION OF THE ENACTMENT HAD ISSUED DIRECTIONS TO THE AUTHORITIES DISCHARGING FUNCTIONS UNDER THE ACT. THE SAME BINDS THE AUTHORITIES UNDER THE ACT. 19. TH E TRIBUNAL HAS RELIED ON THE DECISION OF SUPREME COURT IN LUCKY MINMAT (P) LTD. VS. CIT (SUPRA) AND WHICH HAS ALSO BEEN PRESSED INTO SERVICE BY LEARNED COUNSEL FOR THE REVENUE. THIS JUDGMENT AFFIRMED THE DECISION OF RAJASTHAN HIGH COURT, WHEREIN THE HIGH C OURT HAS HELD THAT MINING OF LIMESTONE AND MARBLE BLOCK AND THEREAFTER CUTTING AND SIZING THE SAME BEFORE IT IS SOLD IN THE MARKET WAS NOT A MANUFACTURING ACTIVITY BY DISTINGUISHING THE EARLIER JUDGMENT IN CIT VS. BEST CHEM & LIMESTONE INDUSTRIES (P) LTD. (SUPRA) IN WHICH THE BUSINESS OF EXTRACTING LIMESTONE AND ITS SALE EITHER AS CONVERTED INTO LIME RODI OR LIME DUST WERE HELD TO BE MANUFACTURING ACTIVITY. THE ONLY ARGUMENT BEFORE THE SUPREME COURT WAS THAT THE HIGH COURT JUDGMENT IN THE CASE OF BEST CHE M (SUPRA) HAD WRONGLY BEEN DISTINGUISHED. THAT CONTENTION HAS BEEN REJECTED BY THE SUPREME COURT. 20. IT IS APPARENT THAT THE AFORESAID JUDGMENT IS FOUNDED ON THE GROUND THAT THE COMMODITY IN BEST CHEMS CASE (SUPRA) BEING DIFFERENT THAN WHAT WAS IN THE CA SE IN HAND, THE JUDGMENT WAS RIGHTLY DISTINGUISHED. THE SUPREME COURT WAS NOT EXAMINING THE ISSUE ABOUT THE FACT WHETHER THE BUSINESS OF MINING OF LIMESTONE AND MARBLE BLOCKS, THEREAFTER CUTTING AND SIZING THE SAME BEFORE IT IS SOLD IN MARKET IS MANUFACTUR ING OR PRODUCTION, AS THE CASE MAY BE. APPARENTLY, THE EARLIER DECISION OF THE SUPREME COURT IN CHOWGULE & CO. (P) LTD. VS. UNION OF INDIA & ORS. (SUPRA) IN WHICH THE ACTIVITY OF MINING WAS HELD TO RESULT IN PRODUCTION OF GOODS, AND THE LATER JUDGMENT OF S UPREME COURT IN CIT VS. SESA GOA LTD. (SUPRA) WITH THE EQUAL STRENGTH OF JUDGES CONSTITUTING THE BENCH HAD TAKEN DIFFERENT VIEWS BY EXAMINING THE ISSUE DIRECTLY AND IN THE PROCESS OF AFFIRMING THE AFOREMENTIONED JUDGMENT OF KARNATAKA HIGH COURT IN MYSORE M INERALS CASE (SUPRA), WHEREIN, THE ACTIVITY OF CONVERTING MARBLE BLOCK, WHICH IS NOT USABLE AS SUCH, INTO SLABS AND POLISHING THEM AND MAKING IT MARKETABLE COMMODITY WAS HELD TO BE MANUFACTURING ACTIVITY THUS, LEGISLATIVE INTENT EMANATING FROM IT AC T AND RULES FRAMED THERE UNDER AND THE JUDGMENT OF THE KARNATAKA HIGH COURT AS AFFIRMED BY SUPREME COURT MAKES IT CLEAR THAT FOR THE PURPOSE OF SS. 80 - IA AND 80 - IB, PROCESS OF CUTTING AND SAWING OR SIZING OR POLISHING OF MARBLE BLOCKS INTO SLABS AND TILES WHICH RESULTS IN ITA NOS. 86 TO 88/ COCH/ 2013 14 MAKING RAW MARBLE USABLE AMOUNTS TO MANUFACTURE. APART FROM THAT WINNING OF MARBLE BLOCK FROM MINES ITSELF AMOUNTS TO PRODUCTION. 23. IT WILL NOT BE OUT OF PLACE TO REFER TO A DECISION OF SUPREME COURT IN KORES INDIA LTD. VS. CCE 2004 (174 ) ELT 7 (SC), WHEREIN, THE ACTIVITY OF CUTTING OF JUMBO ROLLS INTO TYPEWRITER/TELEX ROLLS WAS HELD TO BE MANUFACTURING BECAUSE THE JUMBO ROLLS AS SUCH COULD NOT HAVE BEEN USED AS RIBBONS IN TYPEWRITER AND VICE VERSA AND THEY ARE NOT INTERCHANGEABLE. THE CO URT OBSERVED THAT: 'THE RIBBON IN JUMBO ROLLS CANNOT BE USED IN A TYPEWRITER AND SIMILARLY A PERSON WHO REQUIRES 30 PIECES OF SPOOL RIBBON WOULD NOT BE SATISFIED IF HE IS OFFERED JUMBO ROLLS OF EQUAL LENGTH'. APPARENTLY, THE PRINCIPLE APPLIED BY THE SUPREM E COURT WAS THAT IF WITHOUT APPLYING THE PROCESS A THING IN ITS RAW FORM CANNOT BE USABLE AND IT IS MADE USABLE FOR PARTICULAR PURPOSE, IT AMOUNTS TO MANUFACTURE. THE COURT APPROVED THE PRINCIPLE ENUNCIATED IN SARASWATI SUGAR MILLS VS. HARYANA STATE BOARD (1992) 1 SCC 418 THAT ESSENCE OF MANUFACTURE IS A CHANGE OF ONE OBJECT TO ANOTHER FOR THE PURPOSE OF MAKING IT MARKETABLE. ON THIS PRINCIPLE, THE COURT ACCEPTED THE CONTENTION THAT BY CUTTING JUMBO ROLLS INTO SMALLER SIZES, A DIFFERENT COMMODITY HAS COME I NTO EXISTENCE AND THE COMMODITY WHICH WAS ALREADY IN EXISTENCE SERVES NO PURPOSE AND NO COMMERCIAL USE. AFTER THE PROCESS, A NEW NAME AND CHARACTER HAS COME INTO EXISTENCE. THE ORIGINAL COMMODITY AFTER PROCESSING DOES NOT POSSESS ORIGINAL IDENTITY. OBVIOUS LY, SO FAR AS PHYSICAL CHARACTERISTIC OF JUMBO ROLLS AND ITS SHORTER VERSION IN THE FORM OF TYPEWRITER AND TELEX ROLL MAY HAVE THE SAME PHYSICAL PROPERTIES, NONETHELESS ON THE BASIS OF THEIR DIFFERENT USE AS A MARKETABLE COMMODITY AND AFTER BEING CUT, THE SAME CANNOT BE USED FOR THE PURPOSE FOR WHICH IT COULD BE USED IN ORIGINAL SHAPE, THE ACTIVITY WAS HELD TO BE MANUFACTURE. 24. THE PRINCIPLE APTLY APPLIES TO PRESENT CASE. HERE ALSO, THE ORIGINAL COMMODITY NAMELY MARBLE BLOCK COULD NOT BE USED FOR BUILD ING PURPOSES AS SUCH UNTIL IT IS CUT INTO DIFFERENT SIZES TO BE USED AS BUILDING MATERIAL. IT IS ONLY BY THE PROCESS OF CUTTING THE MARBLE BLOCK INTO SLABS AND TILES THAT IT IS MADE MARKETABLE. THE MARBLE BLOCK CANNOT BE USED FOR THE SAME PURPOSE AS THE MARBLE SLAB OR TILE CAN BE USED AND AFTER THE MARBLE BLOCK HAS BEEN CUT INTO DIFFERENT SIZES, THE END PRODUCT BY PUTTING IT SIMULTANEOUSLY CANNOT BE USED AS A BLOCK. THE PRINCIPLE IN KORES INDIA LTDS CASE (SUPRA) SUPPORTS THE CONTENTION OF APPELLANT.. 2 7. AS A RESULT, WE HOLD THAT THE DECISION OF SUPREME COURT AFFIRMING THE DECISION OF KARNATAKA HIGH COURT IN MYSORE MINERALS LTDS CASE (SUPRA), UPHOLDING CUTTING OF GRANITE/MARBLE BLOCK INTO USABLE SLABS OR TILES IS A ITA NOS. 86 TO 88/ COCH/ 2013 15 MANUFACTURING ACTIVITY, GOVERNS THE FACTS OF PRESENT CASE, AS DIRECTLY AROSE AND CONSIDERED UNDER THE PROVISIONS OF INCOME TAX ACT, WITH WHICH WE ARE CONCERNED, HENCE, APPEALS DESERVE TO BE ALLOWED. 13. THE REVENUE CHALLENGED THE DECISION RENDERED BY HONBLE RAJASTHAN HIGH COURT IN THE ABOVE CITED CASE BY FILING APPEAL BEFORE HONBLE SUPREME COURT. THE HONBLE APEX COURT CONSIDERED THE ISSUE OF MANUFACTURE VIS - - VIS THE ACTIVITY OF CONVERTING MARBLE BLOCK, WHICH IS NOT USABLE AS SUCH, INTO SLABS AND POLISHING THEM AND MAKING IT MARKET ABLE COMMODITY . THE HONBLE APEX COURT HELD THAT THOSE ACTIVITIES CONSTITUTE MANUFACTUR E OR PRODUCTION ACTIVITY. IT IS PERTINENT TO NOTE THAT THE HONBLE SUPREME COURT ALSO CONSIDERED THE DEFINITION OF THE WORD MANUFACTURE INSERTED IN SEC. 2(29BA) OF TH E ACT ALSO IN THIS CASE. THE RELEVANT OBSERVATIONS MADE BY HONBLE SUPREME COURT IN THE SAID CASE REPORTED AS ITO VS. ARIHANT TILES & MARBLES (P) LTD (320 ITR 79) ARE EXTRACTED BELOW: - 5. THE QUESTION BEFORE US IS: WHETHER ON FACTS AND CIRCUMSTANCES OF TH E CASE(S) THE ACTIVITIES UNDERTAKEN BY THE RESPONDENT(S) HEREIN WOULD FALL WITHIN THE MEANING OF THE WORDS 'MANUFACTURE OR PRODUCTION' IN S. 80 - IA OF THE 1961 ACT ? 6. TO ANSWER THE ABOVE ISSUE, IT IS NECESSARY TO REPRODUCE THE DETAILS OF STEPWISE ACTIVIT IES UNDERTAKEN BY THE ASSESSEE(S) WHICH READ AS FOLLOWS: '(I) MARBLE BLOCKS EXCAVATED/EXTRACTED BY THE MINE OWNERS BEING IN RAW UNEVEN SHAPES HAVE TO BE PROPERLY SORTED OUT AND MARKED; (II) SUCH BLOCKS ARE THEN PROCESSED ON SINGLE BLADE/WIRE SAW MACHINES USING ADVANCED TECHNOLOGY TO SQUARE THEM BY SEPARATING WASTER MATERIAL; (III) SQUARED UP BLOCKS ARE SAWED FOR MAKING SLABS BY USING THE GANG SAW MACHINE OR SINGLE/MULTI BLOCK CUTTER MACHINE; (IV) THE SAWN SLABS ARE FURTHER REINFORCED BY WAY OF FILLING C RACKS BY EPOXY RESINS AND FIBRE NETTING; ITA NOS. 86 TO 88/ COCH/ 2013 16 (V) THE SLABS ARE POLISHED ON POLISHING MACHINE; THE SLABS ARE FURTHER EDGE CUT INTO REQUIRED DIMENSIONS/TILES AS PER MARKET REQUIREMENT IN PREFECT ANGLES BY EDGE CUTTING MACHINE AND MULTI - DISC CUTTER MACHINES; ( VI) POLISHED SLABS AND TILES ARE BUFFED BY SHINER.' IN ADDITION TO THE ABOVE ACTIVITIES, IT MAY ALSO BE NOTED THAT THE ASSESSEE(S) HAS BEEN CONSISTENTLY REGARDED AS A MANUFACTURER/PRODUCER BY VARIOUS GOVERNMENT DEPARTMENTS AND AGENCIES. THE ABOVE PROCESSE S UNDERTAKEN BY THE RESPONDENT(S) HAVE BEEN TREATED AS MANUFACTURE UNDER THE EXCISE ACT AND ALLIED TAX LAWS. 7. AT THE OUTSET, WE MAY POINT OUT THAT IN NUMEROUS JUDGMENTS OF THIS COURT, IT HAS BEEN CONSISTENTLY HELD THAT THE WORD 'PRODUCTION' IS WIDER IN ITS SCOPE AS COMPARED TO THE WORD 'MANUFACTURE'. FURTHER, PARLIAMENT ITSELF HAS TAKEN NOTE OF THE GROUND REALITY AND HAS AMENDED THE PROVISIONS OF THE IT ACT, 1961 BY INSERTING S. 2(29BA) VIDE FINANCE ACT, 2009, W.E.F. 1ST APRIL, 2009. 8. WE QUOTE HEREIN BELOW THE RELEVANT PROVISIONS OF S. 2(29BA) AS ALSO THE RELEVANT PROVISIONS OF S. 80 - IA(2)(III) OF THE IT ACT, 1961 : '2(29BA) 'MANUFACTURE' WITH ITS GRAMMATICAL VARIATIONS, MEANS A CHANGE IN A NON - LIVING PHYSICAL OBJECT OR ARTICLE OR THING, (A) RESULTIN G 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;' '80 - IA(2) (III) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHEDULE, OR OPERATES ONE OR MORE COLD STORAGE PLANT OR PLANTS, IN ANY PART OF INDIA .' 9. THE AUTHORITIES BELOW REJECTED THE CONTENTION OF THE ASSESSEE(S) THAT ITS ACTIVITIES OF POLISHING SLABS AND MAKING OF TILES FROM MARBLE BLOCKS CONSTITUTED 'MANUFACTURE' OR 'PRODUCTION' UNDER S. 80 - IA OF THE IT ACT. THERE WAS DIFFERENCE OF OPINION IN THIS CONNECTION BETWEEN THE MEMBERS OF THE TRIBUNAL. HOWEVER, BY THE IMPUGNED JUDGMENT, THE HIGH COURT HAS ACCEPTED THE CONTENTION OF THE ASSESSEE(S) HOLDING THAT IN THE PRESENT CASE, POLISHED SLABS AND TILES STOOD MANUFACTURED/PRODUCED FROM THE MARBLE BLO CKS AND, CONSEQUENTLY, EACH OF THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF DEDUCTION UNDER S. 80 - IA. HENCE, THESE CIVIL APPEALS HAVE BEEN FILED BY THE DEPARTMENT. ITA NOS. 86 TO 88/ COCH/ 2013 17 10. INCIDENTALLY, IT MAY BE NOTED THAT SOME OF THE ASSESSEES BEFORE US ARE ALSO JOB WORKERS DULY REGISTERED UNDER THE PROVISIONS OF THE EXCISE ACT/RULES FRAMED THERE UNDER. IT MAY ALSO BE CLARIFIED THAT IN THESE CASES, WE ARE CONCERNED WITH ASSESSEES WHO ARE BASICALLY FACTORY OWNERS AND NOT MINE OWNERS. THIS DISTINCTION IS OF SOME RELEVANCE WHEN WE ANALYSE THE VARIOUS JUDGMENTS CITED BEFORE US FAIRLY BY THE LEARNED COUNSEL ON BEHALF OF THE DEPARTMENT. 11. THE MAIN JUDGMENT ON WHICH THE DEPARTMENT HAS PLACED RELIANCE IS THE JUDGMENT OF THIS COURT IN LUCKY MINMAT (P) LTD. VS. CIT (2000) 162 CTR (SC ) 404 : (2001) 9 SCC 669. IN THAT CASE, THE FOLLOWING QUESTION CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL: 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT BUSINESS ACTIVITY OF THE ASSESSEE WAS IN T HE NATURE OF MANUFACTURING OR PRODUCTION SO AS TO BE ENTITLED FOR RELIEF UNDER S. 80HH OF THE IT ACT, 1961.' THE ASSESSEE IN THAT CASE HAD THE BUSINESS OF MINING OF LIME STONES AND MARBLE BLOCKS WHICH THEREAFTER WERE CUT AND SIZED BEFORE BEING SOLD IN THE MARKET. IT WAS HELD BY THIS COURT THAT THE ASSESSEE WAS ESSENTIALLY IN THE BUSINESS OF MINING OF LIMESTONE. IT WAS HELD THAT THE ACTIVITY OF EXCAVATION WILL NOT CONSTITUTE MANUFACTURE OR PRODUCTION. IT WAS FURTHER HELD THAT EVEN THE ACTIVITY OF CUTTING AND SIZING OF MARBLE BLOCKS AFTER EXCAVATION WOULD NOT COME WITHIN THE AMBIT OF EXPRESSION 'MANUFACTURE' OR 'PRODUCTION'. IN THE CIRCUMSTANCES, THIS COURT HELD THAT THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF S. 80HH OF THE IT ACT. HOWEVER, THIS COURT DIS TINGUISHED THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. BEST CHEM & LIMESTONE INDUSTRIES (P) LTD. (1993) 113 CTR (RAJ) 298 : (1994) 210 ITR 883 (RAJ). IN THAT CASE M/S BEST CHEMICAL WAS ENGAGED IN THE BUSINESS OF EXTRACTING LIMESTONE AND ITS SALE THEREAFTER AFTER CONVERTING IT INTO LIME AND LIME DUST OR CONCRETE WHICH WAS HELD TO BE AN ACTIVITY OF MANUFACTURE OR PRODUCTION. THE ACTIVITY OF CONVERSION INTO LIME AND LIME DUST, ACCORDING TO THIS COURT, IN THE CASE OF LUCKY MINMAT (P) LTD. (S UPRA) CERTAINLY CONSTITUTED A MANUFACTURING PROCESS. IT WAS CLARIFIED IN THE SAID CASE THAT MERE MINING OF LIMESTONE AND MARBLE AND CUTTING THE SAME BEFORE IT WAS SOLD WILL NOT CONSTITUTE 'MANUFACTURE' OR 'PRODUCTION' BUT CONVERSION INTO LIME AND LIME DUST COULD CONSTITUTE THE ACTIVITY OF MANUFACTURING OR PRODUCTION. THIS DISTINCTION HAS NOT BEEN TAKEN INTO ACCOUNT BY THE DEPARTMENT WHILE REJECTING THE CLAIM OF THE ASSESSEE(S) FOR DEDUCTION UNDER S. 80 - IA OF THE IT ACT, 1961. 12. THERE IS ONE MORE JUDGMENT OF WHICH SHRI BHATTACHARYA, LEARNED ADDL. SOLICITOR GENERAL, APPEARING ON BEHALF OF THE DEPARTMENT, HAS PLACED RELIANCE. THAT IS THE JUDGMENT OF THIS COURT IN RAJASTHAN STATE ELECTRICITY BOARD VS. ASSOCIATED INDUSTRIES & ANR. AIR 2000 SC 2382. IN THAT CAS E, THE ONLY QUESTION THAT AROSE FOR CONSIDERATION WAS WHETHER PUMPING OUT WATER FROM THE MINES ITA NOS. 86 TO 88/ COCH/ 2013 18 CAME WITHIN THE MEANING OF THE WORD MANUFACTURE, PRODUCTION, PROCESSING OR REPAIR OF GOODS SO AS TO CLAIM EXEMPTION FROM DUTY UNDER NOTIFICATIONS ISSUED UNDER S. 3(3) OF THE RAJASTHAN ELECTRICITY DUTY ACT, 1962. IN THAT CASE, THE FIRST RESPONDENT WAS A REGISTERED PUBLIC LIMITED COMPANY, ENGAGED IN EXCAVATING STONES FROM COLLIERIES AND THEREAFTER CUTTING AND POLISHING THEM INTO SLABS. THE RAJASTHAN STATE GOVERNMENT LEVIED EXCISE DUTY UNDER THE PROVISIONS OF THE ACT. A NOTIFICATION DT. 23RD MARCH, 1962 WAS ISSUED BY THE STATE UNDER S. 3(3) OF THE ACT GRANTING EXEMPTION FROM TAX ON THE ENERGY CONSUMED BY A CONSUMER IN ANY INDUSTRY IN THE MANUFACTURE, PRODUCTION, PROCE SSING OR REPAIR OF GOODS AND BY OR IN RESPECT OF ANY MINE AS DEFINED IN THE INDIAN MINES ACT, 1923. THIS NOTIFICATION WAS LATER ON SUPERSEDED ON 2ND MARCH, 1963 BY WHICH ELECTRICITY DUTY CAME TO BE REMITTED IN CERTAIN CASES. ONE MORE NOTIFICATION WAS ISSUE D ON 1ST NOV., 1965 ONCE AGAIN SUPERSEDING EARLIER NOTIFICATIONS. BY CL. (C) OF THE SAID NOTIFICATION, THE STATE OF RAJASTHAN REDUCED THE DUTY ON THE ENERGY CONSUMED IN INDUSTRIES, OTHER THAN THOSE MENTIONED IN CL. (A) OF THE NOTIFICATION WHICH ARE IN THE MANUFACTURE, PRODUCTION, PROCESSING OR REPAIR OF GOODS. 13. THE BASIC CONTROVERSY WHICH AROSE FOR DETERMINATION IN THE SAID CASE WAS WHETHER THE ACTIVITY OF PUMPING OUT WATER FROM THE MINES CAME WITHIN THE MEANING OF THE WORDS 'MANUFACTURE', 'PRODUCTION', 'PROCESSING OR REPAIR OF GOODS'. WHILE DISPOSING OF THE MATTER, THIS COURT, VIDE PARAS 1 AND 10, STATED THAT THE SPECIFIC CASE OF THE COMPANY WAS THAT THE ELECTRICAL ENERGY WAS CONSUMED FOR PUMPING OUT WATER FROM MINES TO MAKE MINES READY FOR MINING ACTIV ITY. THIS ASPECT IS VERY IMPORTANT. IT NEEDS TO BE HIGHLIGHTED THAT THE CASE OF THE COMPANY WAS THAT PUMPING OUT WATER FROM MINES TO MAKE THE MINES READY FOR MINING ACTIVITY CAME WITHIN THE AMBIT OF THE TERM 'MANUFACTURE'. THIS ARGUMENT WAS REJECTED BY THI S COURT, AFTER EXAMINING VARIOUS JUDGMENTS OF THIS COURT ON THE CONNOTATION OF THE WORD 'MANUFACTURE'. IN OUR VIEW, THE JUDGMENT OF THIS COURT IN RAJASTHAN STATE ELECTRICITY BOARD (SUPRA) HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. EVEN IF ONE REA DS PARA 17 OF THE SAID JUDGMENT IN THE LIGHT OF PARAS 1 AND 10, IT IS VERY CLEAR THAT THE ONLY ACTIVITY WHICH CAME UP FOR CONSIDERATION BEFORE THIS COURT IN THE CASE OF RAJASTHAN ELECTRICITY BOARD (SUPRA) WAS THE ACTIVITY OF PUMPING OUT WATER FROM A MINE I N ORDER TO MAKE THE MINE FUNCTIONAL. IN THE PRESENT CASE, WE ARE NOT CONSIDERED (SIC - CONCERNED) WITH SUCH ACTIVITY. THEREFORE, IN OUR VIEW THE JUDGMENT OF THIS COURT IN RAJASTHAN ELECTRICITY BOARD (SUPRA) HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE . 14. IN THE CASE OF AMAN MARBLE INDUSTRIES (P) LTD. VS. CCE 2003 (157) ELT 393 (SC), THE QUESTION THAT AROSE FOR CONSIDERATION WAS WHETHER CUTTING OF MARBLE BLOCKS INTO MARBLE SLABS AMOUNTED TO MANUFACTURE FOR THE PURPOSES OF CENTRAL EXCISE ACT. AT THE O UTSET, WE MAY POINT OUT THAT IN THE PRESENT CASE, WE ARE NOT ONLY CONCERNED WITH THE WORD 'MANUFACTURE', BUT WE ARE ALSO CONCERNED WITH THE CONNOTATION OF THE WORD 'PRODUCTION' IN S. 80 - IA OF THE IT ACT, 1961, WHICH, AS STATED HEREINABOVE, HAS A WIDER MEAN ING AS ITA NOS. 86 TO 88/ COCH/ 2013 19 COMPARED TO THE WORD 'MANUFACTURE'. FURTHER, WHEN ONE REFERS TO THE WORD 'PRODUCTION', IT MEANS MANUFACTURE PLUS SOMETHING IN ADDITION THERETO. THE WORD 'PRODUCTION' WAS NOT UNDER CONSIDERATION BEFORE THIS COURT IN THE CASE OF AMAN MARBLE INDUSTRIES (P) LTD. (SUPRA). BE THAT AS IT MAY, IN THAT CASE, IT WAS HELD THAT 'CUTTING' OF MARBLE BLOCKS INTO SLABS PER SE DID NOT AMOUNT TO 'MANUFACTURE'. THIS CONCLUSION WAS BASED ON THE OBSERVATIONS MADE BY THIS COURT IN THE CASE OF RAJASTHAN STATE ELECTRICITY B OARD (SUPRA). IN OUR VIEW, THE JUDGMENT OF THIS COURT IN AMAN MARBLE INDUSTRIES (P) LTD. (SUPRA) ALSO HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE. ONE OF THE MOST IMPORTANT REASONS FOR SAYING SO IS THAT IN ALL SUCH CASES, PARTICULARLY UNDER THE EXC ISE LAW, THE COURT HAS TO GO BY THE FACTS OF EACH CASE. IN EACH CASE ONE HAS TO EXAMINE THE NATURE OF THE ACTIVITY UNDERTAKEN BY AN ASSESSEE. MERE EXTRACTION OF STONES MAY NOT CONSTITUTE MANUFACTURE. SIMILARLY, AFTER EXTRACTION, IF MARBLE BLOCKS ARE CUT IN TO SLABS PER SE WILL NOT AMOUNT TO THE ACTIVITY OF MANUFACTURE. 15. IN THE PRESENT CASE, WE HAVE EXTRACTED IN DETAIL THE PROCESS UNDERTAKEN BY EACH OF THE RESPONDENTS BEFORE US. IN THE PRESENT CASE, WE ARE NOT CONCERNED ONLY WITH CUTTING OF MARBLE BLOCKS INTO SLABS. IN THE PRESENT CASE WE ARE ALSO CONCERNED WITH THE ACTIVITY OF POLISHING AND ULTIMATE CONVERSION OF BLOCKS INTO POLISHED SLABS AND TILES. WHAT WE FIND FROM THE PROCESS INDICATED HEREIN - ABOVE IS THAT THERE ARE VARIOUS STAGES THROUGH WHICH THE BL OCKS HAVE TO GO THROUGH BEFORE THEY BECOME POLISHED SLABS AND TILES. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT ON THE FACTS OF THE CASES IN HAND, THERE IS CERTAINLY AN ACTIVITY WHICH WILL COME IN THE CATEGORY OF 'MANUFACTURE' OR 'PRODUCTION' UNDER S. 8 0 - IA OF THE IT ACT. AS STATED HEREIN - ABOVE, THE JUDGMENT OF THIS COURT IN AMAN MARBLE INDUSTRIES (P) LTD. (SUPRA) WAS NOT REQUIRED TO CONSTRUE THE WORD 'PRODUCTION' IN ADDITION TO THE WORD 'MANUFACTURE'. ONE HAS TO EXAMINE THE SCHEME OF THE ACT ALSO WHILE DECIDING THE QUESTION AS TO WHETHER THE ACTIVITY CONSTITUTES MANUFACTURE OR PRODUCTION. THEREFORE, LOOKING TO THE NATURE OF THE ACTIVITY STEPWISE, WE ARE OF THE VIEW THAT THE SUBJECT ACTIVITY CERTAINLY CONSTITUTES 'MANUFACTURE OR PRODUCTION' IN TERMS OF S. 80 - IA. IN THIS CONNECTION, OUR VIEW IS ALSO FORTIFIED BY THE FOLLOWING JUDGMENTS OF THIS COURT WHICH HAVE BEEN FAIRLY POINTED OUT TO US BY LEARNED COUNSEL APPEARING FOR THE DEPARTMENT. 16. IN THE CASE OF CIT VS. SESA GOA LTD. (2004) 192 CTR (SC) 577: (20 04) 271 ITR 331 (SC), THE MEANING OF THE WORD 'PRODUCTION' CAME UP FOR CONSIDERATION. THE QUESTION WHICH CAME BEFORE THIS COURT WAS WHETHER THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER S. 32A OF THE IT ACT, 1961, IN RESPECT OF MACHINERY USED IN MINING ACTIVITY IGNORING THE FACT THAT THE ASSESSEE WAS ENGAGED IN EXTRACTION AND PROCESSING OF IRON ORE, NOT AMOUNTING TO MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING. THE HIGH COURT IN THAT CASE, WHILE DISMISSING THE APPEAL PREFERRED BY THE REVENUE, HELD THAT ITA NOS. 86 TO 88/ COCH/ 2013 20 EXTRACTION AND PROCESSING OF IRON ORE DID NOT AMOUNT TO 'MANUFACTURE'. HOWEVER, IT CAME TO THE CONCLUSION THAT EXTRACTION OF IRON ORE AND THE VARIOUS PROCESSES WOULD INVOLVE 'PRODUCTION' WITHIN THE MEANING OF S. 3 2A(2)(B)(III) OF THE IT ACT, 1961 AND CONSEQUENTLY, THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF INVESTMENT ALLOWANCE UNDER S. 32A OF THE IT ACT. IN THAT MATTER, IT WAS ARGUED ON BEHALF OF THE REVENUE THAT EXTRACTION AND PROCESSING OF IRON ORE DID NOT PRODU CE ANY NEW PRODUCT WHEREAS IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT IT DID PRODUCE A DISTINCT NEW PRODUCT. THE VIEW EXPRESSED BY THE HIGH COURT THAT THE ACTIVITY IN QUESTION CONSTITUTED 'PRODUCTION' HAS BEEN AFFIRMED BY THIS COURT IN SESA GOA'S CASE (S UPRA) SAYING THAT THE HIGH COURT'S OPINION WAS UNIMPEACHABLE. IT WAS HELD BY THIS COURT THAT THE WORD 'PRODUCTION' IS WIDER IN AMBIT AND IT HAS A WIDER CONNOTATION THAN THE WORD 'MANUFACTURE'. IT WAS HELD THAT WHILE EVERY MANUFACTURE CAN CONSTITUTE PRODUCT ION, EVERY PRODUCTION DID NOT AMOUNT TO MANUFACTURE. 17. IN OUR VIEW, APPLYING THE TESTS LAID DOWN BY THIS COURT IN SESA GOA'S CASE (SUPRA) AND APPLYING IT TO THE ACTIVITIES UNDERTAKEN BY THE RESPONDENTS HEREIN (REPRODUCED HEREIN - ABOVE), IT IS CLEAR THAT THE SAID ACTIVITIES WOULD COME WITHIN THE MEANING OF THE WORD 'PRODUCTION'. 18. ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. BY THE SAID JUDGMENT, THIS COURT AFFIRMED THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MYSORE MINERALS LTD. (2001) 1 66 CTR (KAR) 142 : (2001) 250 ITR 725 (KAR). 19. IN THE CASE OF CIT VS. N.C. BUDHARAJA & CO. & ANR. (1993) 114 CTR (SC) 420 : (1993) 204 ITR 412 (SC), THE QUESTION WHICH AROSE FOR DETERMINATION BEFORE THIS COURT WAS WHETHER CONSTRUCTION OF A DAM TO STORE WATER (RESERVOIR) CAN BE CHARACTERISED AS AMOUNTING TO MANUFACTURING OR PRODUCING AN ARTICLE. IT WAS HELD THAT THE WORD 'MANUFACTURE' AND THE WORD 'PRODUCTION' HAVE RECEIVED EXTENSIVE JUDICIAL ATTENTION BOTH UNDER THE INCOME - TAX AS WELL AS UNDER THE CENTRA L EXCISE AND THE SALES - TAX LAWS. THE TEST FOR DETERMINING WHETHER 'MANUFACTURE' CAN BE SAID TO HAVE TAKEN PLACE IS WHETHER THE COMMODITY, WHICH IS SUBJECTED TO A PROCESS CAN NO LONGER BE REGARDED AS THE ORIGINAL COMMODITY BUT IS RECOGNISED IN TRADE AS A NE W AND DISTINCT COMMODITY. THE WORD 'PRODUCTION', WHEN USED IN JUXTAPOSITION WITH THE WORD 'MANUFACTURE', TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFACTURE. THE WORD 'PRODUCTION' TAKES IN ALL THE BY - PRODUCTS, INTERMEDIATE PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS. 20. APPLYING THE ABOVE TESTS LAID DOWN BY THIS COURT IN BUDHARAJA'S CASE (SUPRA) TO THE FACTS OF THE PRESENT CASES, WE ARE OF THE VIEW THAT BLOCKS CONVERTED I NTO POLISHED SLABS AND TILES AFTER UNDERGOING THE PROCESS INDICATED ABOVE CERTAINLY RESULTS IN EMERGENCE OF A NEW AND DISTINCT COMMODITY. THE ORIGINAL BLOCK DOES NOT REMAIN THE MARBLE BLOCK, IT BECOMES A SLAB OR TILE. IN THE CIRCUMSTANCES, NOT ITA NOS. 86 TO 88/ COCH/ 2013 21 ONLY THERE I S 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 ACTIVI TY UNDERTAKEN BY THE RESPONDENTS - ASSESSEES DID CONSTITUTE MANUFACTURE OR PRODUCTION IN TERMS OF S. 80 - IA OF THE IT ACT, 1961 . 13.1 IT IS PERTINENT TO NOTE THAT THE ACT HAS INSERTED THE DEFINITION OF THE WORD MANUFACTURE IN SEC. 2(29BA) OF THE ACT WIT H EFFECT FROM 1.4.2009. BUT THE ACT DOES NOT GIVE ANY DEFINITION TO THE WORD PRODUCTION. IT WAS HELD BY THE HONBLE SUPREME COURT THAT THE WORD 'PRODUCTION' IS WIDER IN AMBIT AND IT HAS A WIDER CONNOTATION THAN THE WORD 'MANUFACTURE'. IT WAS HELD BY HON BLE SUPREME COURT IN THE CASE OF SESA GOA LTD (SUPRA) THAT WHILE EVERY MANUFACTURE CAN CONSTITUTE PRODUCTION, EVERY PRODUCTION DID NOT AMOUNT TO MANUFACTURE. IN THE SAID CASE, IT WAS HELD THAT EXTRACTION OF IRON ORE AND THE VARIOUS PROCESSES WOULD NOT CO NSTITUTE MANUFACTURE, BUT CONSTITUTE 'PRODUCTION' . IT IS SEEN THAT IT HAS BEEN CONSISTENTLY HELD THAT THE WORD 'PRODUCTION' IS WIDER IN ITS SCOPE AS COMPARED TO THE WORD 'MANUFACTURE'. IT WAS HELD BY HONBLE SUPREME COURT IN THE CASE OF ARIHANT TILES & MARBLES (P) LTD THAT T HE WORD 'PRODUCTION', WHEN USED IN JUXTAPOSITION WITH THE WORD 'MANUFACTURE', TAKES IN BRINGING INTO EXISTENCE NEW GOODS BY A PROCESS WHICH MAY OR MAY NOT AMOUNT TO MANUFACTURE. THE WORD 'PRODUCTION' TAKES IN ALL THE BY - PRODUCTS, IN TERMEDIATE PRODUCTS AND RESIDUAL PRODUCTS WHICH EMERGE IN THE COURSE OF MANUFACTURE OF GOODS. 14. THE QUESTION WHETHER THE ACTIVITY OF CRUSHING THE BOULDERS INTO STONE CONCRETE WOULD AMOUNT TO MANUFACTURE OR NOT CAME TO THE CONSIDERATION OF HONBLE HIM ACHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. D.J. STONE CRUSHER (229 CTR 195)(HP). THE ITA NOS. 86 TO 88/ COCH/ 2013 22 RELEVANT DISCUSSIONS MADE BY HONBLE HIMACHAL PRADESH HIGH COURT AND THE DECISION TAKEN BY IT ARE EXTRACTED BELOW: - 4. ACCORDING TO SHRI VISHAL MOHAN, THE BOULDERS ARE COLLECTED FROM A MINING SITE. THEREAFTER, THEY ARE SEGREGATED TO OBTAIN STONES OF REQUISITES SIZES. THESE BOULDERS ARE THEN TRANSPORTED BY TRACTORS/TROLLIES AND FED INTO THE DUG OF THE CRUSHER AND THEREAFTER THEY ARE CRUSHED IN THE CRUSHING MACHINE WHI CH IS ELECTRICALLY OPERATED. THE CRUSHED MATERIAL IS THEN PLACED ON A VIBRATING SCREEN WHICH DIVIDES THE CRUSHED MATERIAL INTO DIFFERENT SIZES AND THIS MATERIAL IS THEN CARRIED TO THE STORAGE AREA WITH THE HELP OF FOUR CONVEYOR BELTS WHICH ARE ALSO ELECTRI CALLY OPERATED. 5. THE BASIC QUESTION WHICH ARISES IS WHETHER THE PROCESS OF CONVERTING BOULDERS INTO STONE CONCRETE (GRIT) IS A MANUFACTURING ACTIVITY WITHIN THE MEANING OF SS. 80 - IA AND 80 - IB OF THE IT ACT, 1961. 6. IN BLACKS LAW DICTIONARY (5TH EDN.), THE WORD 'MANUFACTURE' HAS BEEN DEFINED AS, 'THE PROCESS OR OPERATION OF MAKING GOODS OR ANY MATERIAL PRODUCED BY HAND, BY MACHINERY OR BY OTHER AGENCY; BY THE HAND, BY MACHINERY, OR BY ART. THE PRODUCTION OF ARTICLES FOR USE FROM RAW OR PREPARED MATERIALS BY GIVING SUCH MATERIALS NEW FORMS, QUALITIES, PROPERTIES OR COMBINATIONS, WHETHER BY HAND LABOUR OR MACHINE'. 7. IN STERLING FOODS VS. STATE OF KARNATAKA & ANR. 1986 (3) SCC 469, THE QUESTION FOR DETERMINATION BEFORE THE APEX COURT WAS WHETHER SHRIMPS, PRAWNS AND LOBSTERS SUBJECTED TO PROCESSING LIKE CUTTING OF HEADS AND TAILS, PEELING, DEVEINING, CLEANING AND FREEZING CEASE TO BE THE SAME COMMODITY OR BECOME A DIFFERENT COMMODITY. THE APEX COURT HELD AS FOLLOWS : '6. IT IS CLEAR ON AN APPLICATION OF THI S TEST THAT PROCESSED OR FROZEN SHRIMPS, PRAWNS AND LOBSTERS ARE COMMERCIALLY REGARDED THE SAME COMMODITY AS RAW SHRIMPS, PRAWNS AND LOBSTERS. WHEN RAW SHRIMPS, PRAWNS AND LOBSTERS ARE SUBJECTED TO THE PROCESS OF CUTTING OF HEADS AND TAILS, PEELING, DEVEIN ING, CLEANING AND FREEZING, THEY DO NOT CEASE TO BE SHRIMPS, PRAWNS AND LOBSTERS AND BECOME ANOTHER DISTINCT COMMODITY. THEY ARE IN COMMON PARLANCE KNOWN AS SHRIMPS, PRAWNS AND LOBSTERS. THERE IS NO ESSENTIAL DIFFERENCE BETWEEN RAW SHRIMPS, PRAWNS AND LOBS TERS AND PROCESSED OR FROZEN SHRIMPS, PRAWNS AND LOBSTERS. THE DEALER AND THE CONSUMER REGARD BOTH AS SHRIMPS, PRAWNS AND LOBSTERS. THE ONLY DIFFERENCE IS THAT PROCESSED SHRIMPS, PRAWNS AND LOBSTERS ARE READY FOR THE TABLE WHILE RAW SHRIMPS, PRAWNS AND LOB STERS ARE NOT, BUT STILL BOTH ARE, IN COMMERCIAL PARLANCE, SHRIMPS, PRAWNS AND LOBSTERS. IT IS ITA NOS. 86 TO 88/ COCH/ 2013 23 UNDOUBTEDLY TRUE THAT PROCESSED SHRIMPS, PRAWNS AND LOBSTERS ARE THE RESULT OF SUBJECTING RAW SHRIMPS, PRAWNS AND LOBSTERS TO A CERTAIN DEGREE OF PROCESSING BUT EVEN SO THEY CONTINUE TO POSSESS THEIR ORIGINAL CHARACTER AND IDENTITY AS SHRIMPS, PRAWNS AND LOBSTERS, NOTWITHSTANDING THE REMOVAL OF HEADS AND TAILS, PEELING, DEVEINING AND CLEANING WHICH ARE NECESSARY FOR MAKING THEM FIT FOR THE TABLE. EQUALLY IT MAKES NO DIFFERENCE IN CHARACTER OR IDENTITY WHEN SHRIMPS, PRAWNS AND LOBSTERS ARE FROZEN FOR THE PURPOSE OF PRESERVATION AND TRANSFER TO OTHER PLACES INCLUDING FAR - OFF COUNTRIES IN THE WORLD. THERE CAN THEREFORE BE NO DOUBT THAT PROCESSED OR FROZEN SHRIMPS, PRA WNS AND LOBSTERS ARE NOT A NEW AND DISTINCT COMMODITY BUT THEY RETAIN THE SAME CHARACTER AND IDENTITY AS THE ORIGINAL SHRIMPS, PRAWNS AND LOBSTERS.' 8. THIS JUDGMENT WAS FOLLOWED BY THE APEX COURT IN CIT VS. RELISH FOODS (1999) 152 CTR (SC) 500: (1999) 237 ITR 59 (SC) WHEREIN THE SAME DEFINITION WAS APPLIED TO THE PROVISIONS OF THE IT ACT. 9. THE QUESTION WHETHER STONE CRUSHING ACTIVITY IS A MANUFACTURING PROCESS WAS CONSIDERED BY A DIVISION BENCH OF THIS COURT IN CIVIL WRIT PETN. NO. 605 OF 1998 DECIDED ON 26TH MARCH, 1999 TITLED PANTH STONE CRUSHER VS. STATE OF HIMACHAL PRADESH & ORS. WHEREIN THIS COURT HELD AS FOLLOWS : 'WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED COUNSEL APPEARING ON EITHER SIDE. SO FAR AS THE CASE ON HAND IS CONCERNED, S TONE BOULDERS OR BLOCKS INITIALLY EXTRACTED FROM MINES BY EXCAVATION ARE SUBJECT TO THE PROCESS OF CRUSHING MECHANICALLY OR BY MANUAL LABOUR AND BY SUCH PROCESS THE RESULTANT COMMODITY OR GOODS, COMMONLY KNOWN AS BAJRI OR GITTI ARE OBTAINED AND SOLD IN MARKET. THERE COULD BE NO SERIOUS DISPUTE OR CONTROVERSY OVER THE FACTUAL POSITION THAT THE STONE BLOCKS OR BOULDERS EXCAVATED FROM MINES FROM THE EARTH HAVE DIFFERENT USER AND PURPOSE AND EITHER CANNOT BE AN EFFECTIVE SUBSTITUTE IN THE MATTER OF THEIR OW N AREA OR PURPOSE OF USE THAN BAJRI OR GITTI. NOT ONLY THE MANUFACTURED PRODUCT BAJRI OR GITTI IS A WELL KNOWN COMMERCIAL PRODUCT BY ITSELF AND HAS A DISTINCT AND DIFFERENT PURPOSE AND USE SUBSTANTIALLY AND RADICALLY DIFFERENT FROM THE BLOCKS OF ST ONE/BIG BOULDERS BUT IN COMMERCIAL PARLANCE, BOTH ENGAGED IN THE TRADE AS WELL AS CONSUMERS WHO PURCHASE ARE WELL AWARE OF SUCH DIFFERENT AND DISTINCT USES OF THOSE COMMODITIES BY THEIR WELL RECOGNIZED AND COMMERCIAL NAMES ALSO. MERELY FROM THE FACT THAT BAJRI OR GITTI IS PRODUCED OUT OF THE STONE BLOCKS/BIG BOULDERS AND SUCH PRODUCE RETAIN THE BASIC METALLIC ATTRIBUTES OR PROPERTIES OF STONE, IT CANNOT BE STATED THAT THE RESULTANT PRODUCT OF BAJRI OR GITTI WOULD BE ONE AND THE SAME AS THE BLOCK OF STONES/BIG BOULDERS UNEARTHENED OR EXCAVATED FROM EARTH/MINES. WHEN BIGGER STONES AND BOULDERS ARE CUT AND SHAPED INTO SPECIFIED SHAPES AND SIZES IN CRUSHERS OR MANUFACTURED INTO BALLAST, METAL ITA NOS. 86 TO 88/ COCH/ 2013 24 OR GITTI OR BAJRI, IN OUR VIEW, THERE CERTAINLY TAKES PLAC E THE REQUIRED TRANSFORMATION IN STONE BOULDERS AND IN SUBSTANCE A DIFFERENT COMMERCIAL ARTICLE FIT FOR CONSTRUCTION OF ROADS, HOUSES, BRIDGES AND DAMS ARE PRODUCED.' 10. A DIVISION BENCH OF THE MADRAS HIGH COURT IN CIT VS. SACS EAGLES CHICORY (2000) 164 C TR (MAD) 455 : (2000) 241 ITR 319 (MAD) DEALT WITH THE ISSUE AS TO WHAT IS MANUFACTURE. IN THE CASE BEFORE THE MADRAS HIGH COURT, CHICORY ROOTS WERE BEING ROASTED AND THEN CHANGED IT INTO POWDER FORM. THE QUESTION WAS WHETHER THIS AMOUNTED TO MANUFACTURE WITHIN THE MEANING OF IT ACT. THE MADRAS HIGH COURT HELD AS FOLLOWS : 'THE FACT THAT THE CHICORY POWDER IS USED FOR CONSUMPTION IN COMBINATION WITH COFFEE POWDER DOES NOT MAKE THE CHICORY POWDER ANY DIFFERENT INSOFAR AS ITS IDENTITY IS CONCERNED, AS CHICO RY. CHICORY POWDER IS CHICORY IN POWDER FORM AND NOTHING ELSE. MERE CHANGE IN THE FORM OF THE SAME COMMODITY DOES NOT NECESSARILY INVOLVE CHANGE OF IDENTITY. THE PINEAPPLE FRUIT WHEN PLUCKED FROM THE TREE AND EVEN AFTER IT IS CUT INTO PINEAPPLE SLICES RETA INS THE SAME IDENTITY AS PINEAPPLE. CHICORY POWDER AND CHICORY ROOT HAVE THE COMMON IDENTITY OF BEING CHICORY. THE CHANGE IN THE FORM TO POWDER IN THE CASE OF CHICORY AND TO SLICES IN THE CASE OF PINEAPPLE DOES NOT RESULT IN A CHANGE OF IDENTITY.' 11. IT W OULD BE PERTINENT TO MENTION HERE THAT THIS DECISION OF THE MADRAS HIGH COURT WAS UPHELD BY THE APEX COURT IN SACS EAGLES CHICORY VS. CIT (2002) 175 CTR (SC) 201 : (2002) 255 ITR 178 (SC). 12. IN INDIAN HOTELS CO. LTD. & ORS. VS. ITO & ORS. (2000) 162 CTR (SC) 310 : (2000) 245 ITR 538 (SC), THE APEX COURT AGAIN DEALT WITH THE QUESTION AS TO WHAT IS THE MEANING TO BE GIVEN TO THE WORD MANUFACTURE. THE APEX COURT HELD THAT THE PROCESSING OF RAW FOOD ITEMS SUCH AS PULSES, CEREALS, VEGETABLES, MEAT, ETC. INTO EDIBLE ITEMS IN THE KITCHEN CANNOT BE SAID TO BE PROCESS OF MANUFACTURE. 13. IN CIT VS. GEM INDIA MFG. CO. (2002) 172 CTR (SC) 615 : (2001) 249 ITR 307 (SC), THE QUESTION BEFORE THE APEX COURT WAS WHETHER THE PROCESS OF CUTTING, POLISHING RAW DIAMOND AMOU NTS TO MANUFACTURE AND PRODUCES NEW ARTICLES OR THINGS. THE APEX COURT HELD AS FOLLOWS : 'THE QUESTION THAT THE HIGH COURT AND WE ARE HERE CONCERNED WITH IS WHETHER, IN CUTTING AND POLISHING DIAMONDS, THE ASSESSEE MANUFACTURES OR PRODUCES ARTICLES OR THING S. THERE CAN BE LITTLE DIFFICULTY IN HOLDING THAT THE RAW AND UNCUT DIAMOND IS SUBJECTED TO A PROCESS OF CUTTING AND POLISHING WHICH YIELDS THE POLISHED ITA NOS. 86 TO 88/ COCH/ 2013 25 DIAMOND, BUT THAT IS NOT TO SAY THAT THE POLISHED DIAMOND IS A NEW ARTICLE OR THING WHICH IS THE RESULT OF MANUFACTURE OR PRODUCTION. THERE IS NO MATERIAL ON THE RECORD UPON WHICH SUCH A CONCLUSION CAN BE REACHED.' 14. A THREE JUDGE BENCH OF THE APEX COURT IN ASPINWALL & CO. LTD. VS. CIT (2001) 170 CTR (SC) 68 : (2001) 251 ITR 323 (SC), CONSIDERED THE QUEST ION WHETHER THE PROCESS OF MANUFACTURING COFFEE BEANS FROM RAW BERRIES AMOUNTS TO MANUFACTURE. THE APEX COURT AFTER MAKING REFERENCE TO THE ENCYCLOPEDIA BRITANNICA HELD THAT COFFEE IS A BEVERAGE MADE FROM ROASTED SEEDS (BEANS) OF THE COFFEE PLANT AND FOUND THAT THE PROCESS OF COFFEE INTO ROASTED COFFEE WENT THROUGH NINE PROCESSES. FIRSTLY THE COFFEE WAS DRIED IN THE SUNLIGHT. THEN THE OUTER HUSK OF THE COFFEE BEEN WAS REMOVED, IF NECESSARY, BY MECHANICAL OPERATION. THE COFFEE SEEDS WERE THEN EXTRACTED AND P OLISHING WAS DONE. THEREAFTER, GRADATION WAS DONE WHERE THE GOOD COFFEE WAS SEPARATED BY MECHANICAL AS WELL AS MANUAL GRADING. THE COURT HELD THAT NET PRODUCT IS ABSOLUTELY DIFFERENT AND SEPARATE FROM THE INPUT. THE APEX COURT HELD AS FOLLOWS : 'ADVERTING TO FACTS OF THE PRESENT CASE, THE ASSESSEE AFTER PLUCKING OR RECEIVING THE RAW COFFEE BERRIES MAKES IT UNDERGO NINE PROCESSES TO GIVE IT THE SHAPE OF COFFEE BEANS. THE NET PRODUCT IS ABSOLUTELY DIFFERENT AND SEPARATE FROM THE INPUT. THE CHANGE MADE IN THE ARTICLE RESULTS IN A NEW AND DIFFERENT ARTICLE WHICH IS RECOGNIZED IN THE TRADE AS A NEW AND DISTINCT COMMODITY. THE COFFEE BEANS HAVE AN INDEPENDENT IDENTITY DISTINCT FROM RAW MATERIAL FROM WHICH IT WAS MANUFACTURED. A DISTINCT CHANGE COMES ABOUT IN THE F INISHED PRODUCT. THE SUBMISSION OF THE LEARNED COUNSEL FOR THE REVENUE THAT THE ASSESSEE WAS DOING ONLY THE PROCESSING WORK AND WAS NOT INVOLVED IN THE MANUFACTURE AND PRODUCING OF A NEW ARTICLE CANNOT BE ACCEPTED. THE PROCESS IS A MANUFACTURING PROCESS WH EN IT BRINGS OUT A COMPLETE TRANSFORMATION IN THE ORIGINAL ARTICLE SO AS TO PRODUCE A COMMERCIALLY DIFFERENT ARTICLE OR COMMODITY. THAT PROCESS ITSELF MAY CONSIST OF SEVERAL PROCESSES. THE DIFFERENT PROCESSES ARE INTEGRALLY CONNECTED WHICH RESULT IN THE PR ODUCTION OF A COMMERCIALLY DIFFERENT ARTICLE. IF A COMMERCIALLY DIFFERENT ARTICLE OR COMMODITY RESULTS AFTER PROCESSING THEN IT WOULD BE A MANUFACTURING ACTIVITY. THE ASSESSEE AFTER PROCESSING THE RAW BERRIES CONVERTS THEM INTO COFFEE BEANS WHICH IS COMMER CIALLY DIFFERENT COMMODITY. CONVERSION OF THE RAW BERRY INTO COFFEE BEANS WOULD BE A MANUFACTURING ACTIVITY.' 15. SHRI VISHAL MOHAN, LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGMENT OF THE APEX COURT IN LUCKY MINMAT (P) LTD. VS. CIT (20 00) 162 CTR (SC) 404 : (2000) 245 ITR 830 (SC) WHEREIN THE APEX COURT HAS HELD AS FOLLOWS : ITA NOS. 86 TO 88/ COCH/ 2013 26 'THE CONVERSION INTO LIME AND LIME DUST OR CONCRETE BY STONE CRUSHERS COULD LEGITIMATELY BE CONSIDERED TO BE A MANUFACTURING PROCESS WHILE THE MERE MINING OF LIMEST ONE AND MARBLE AND CUTTING THE SAME BEFORE IT WAS SOLD IN THE MARKET COULD NOT BE SO CONSIDERED.' 16. ACCORDING TO SHRI VINAY KUTHIALA, LEARNED COUNSEL FOR THE REVENUE, THIS OBSERVATION IS ONLY OBITER DICTA AND IS NOT THE RATIO OF THE DECISION AND THE QUES TION WHETHER AN ACTIVITY AMOUNTS TO MANUFACTURE OR NOT IS TO BE DECIDED IN THE FACTS OF EACH CASE. 17. AS FAR AS CONVERSION OF BOULDERS INTO GRIT IS CONCERNED, A DIVISION BENCH OF THIS COURT IN THE CASE PANTH STONE CRUSHER (SUPRA) HAS ALREADY HELD THAT THI S PROCESS AMOUNTS TO MANUFACTURE THOUGH IN THE CONTEXT OF THE SALES - TAX ACT. HOWEVER, THERE IS NO DEFINITION OF MANUFACTURE IN THE SALES - TAX ACT AND THE DIVISION BENCH DECIDED THIS MATTER UNDER GENERAL LAW WHICH WOULD BE APPLICABLE TO THE PRESENT CASE AL SO. 18. IT WOULD ALSO BE PERTINENT TO MENTION HERE THAT IN LUCKY MINMAT CASE (SUPRA), THE APEX COURT HAS CLEARLY HELD THAT CONVERSION OF CONCRETE BY STONE CRUSHERS COULD LEGITIMATELY BE CONSIDERED TO BE A MANUFACTURING PROCESS. THE OBSERVATION OF THE SUPRE ME COURT CANNOT BE TERMED TO BE OBITER DICTA SINCE THE SUPREME COURT HAS HELD THAT THE PROCESS OF CONCRETE BY STONE CRUSHERS IS A MANUFACTURING PROCESS. THEREFORE, THERE IS NO MERIT IN THE CONTENTION OF THE REVENUE. ACCORDINGLY, ALL THE QUESTIONS ARE ANS WERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THUS IT IS SEEN THAT THE HONBLE HIMACHAL PRADESH HIGH COURT HAS HELD THAT THE STONE CRUSHING ACTIVITY RESULTING IN CONVERSION OF STONE BOULDERS INTO GRIT (STONE CONCRETES) AMOUNT TO MANUFACTURE. 1 5. THE ACTIVITIES CARRIED ON BY BOTH THE ASSESSEES HEREIN HAVE BEEN NARRATED AS UNDER BY THE ASSESSEE BEFORE THE TAX AUTHORITIES IN THE CASE OF M/S POABS ROCK PRODUCTS (P) LTD. ITA NOS. 86 TO 88/ COCH/ 2013 27 (A) HOLES ARE DUG IN ROCK DEPOSITS USING MECHANICAL DEVICES AND THE SAID HOL ES ARE FILLED WITH EXPLOSIVES FOR CARRYING BLASTING. (B) ROCK BOULDERS SO OBTAINED ARE SIZED USING ROCK BREAKERS FOR MAKING THE BOULDERS INTO UNIFORM SIZES. (C) THE BOULDERS ARE FED INTO THE PRIMARY ROCK CRUSHERS AND THEREAFTER TO THE SECONDARY ROCK CRUS HERS. (D) THE CRUSHED AGGREGATES ARE SIEVED USING A MECHANICAL SCREEN TO SEGREGATE THE AGGREGATES INTO VARIOUS SIZES. (E) THE AGGREGATES SO SEGREGATED ARE TRANSFERRED TO OVERHEAD HOPPERS FOR DELIVERY. IN THE CASE OF M/S POABS GRANITE PRODUCT (P) LTD, TH E ACTIVITIES ARE EXPLAINED IN A DETAILED MANNER AS UNDER: - 1. DIGGING HOLES USING JACK HAMMERS AND AIR COMPRESSORS AND BLASTING FOR PRODUCING BOULDERS. 2. BREAKING OF BOULDERS USING MECHANICAL ROCK BREAKERS TO PRODUCE RUBBLES. 3. LOADING THE RUBBLES TO THE TIPPER L ORRIES USING EXCAVATOR LOADER. 4. FEEDING THE RUBBLES FROM THE TIPPER LORRIES TO THE PRIMARY CRUSHERS FOR PRODUCING SOILING. 5. THE SOILING PRODUCED AT THE PRIMARY CRUSHERS ARE FED TO THE DIFFERENT SECONDARY CRUSHERS THROUGH CONVEYOR BELTS TO PRODUCE GRANITE AGG REGATE OF DIFFERENT SIZES VIZ., 1, 1, , , SAND AND DUST. 6. THE ABOVE PRODUCTS ARE FED INTO THE VIBRATING SCREENS THROUGH CONVEYOR BELTS FOR SEGREGATION AND THE SEGREGATED DIFFERENT GRANITE AGGREGATES ARE COLLECTED IN DIFFERENT BUNKERS. 7. THE PRODUCTS S TORED AT THE BUNKERS ARE LOADED TO THE TRUCKS FOR SENDING TO CUSTOMERS. IT IS ALSO STATED THAT THE ASSESSEE IS PRODUCING SAND ALSO OUT OF GRANITE BOULDERS AND THE QUALITY OF SAND PRODUCED BY THEM THROUGH MECHANICAL PROCESS IS EQUAL TO THE QUALITY OF NATURA L SAND. IT WAS FURTHER SUBMITTED THAT ALL THE ACTIVITIES HAVE BEEN CARRIED BY USING VARIOUS TYPES OF MACHINES IN VARIOUS STAGES. ITA NOS. 86 TO 88/ COCH/ 2013 28 16. THUS, IT IS SEEN THAT THE ROCK BOULDERS OBTAINED BY BLASTING ACTIVITY ARE NOT SOLD AS SUCH, BUT THEY ARE SUBJECTED TO VARIOUS MECHANICAL PROCESS IN ORDER TO CONVERT INTO DIFFERENT SIZES OF METALS AND ALSO SAND. BESIDES THE ROCK DUST IS ALSO SEPARATELY COLLECTED AND SOLD. THE HONBLE KARNATAKA HIGH COURT , IN THE CASE OF SESA GOA LTD (SUPRA) , WHILE DISMISSING THE APPEAL PREFERRED BY THE REVENUE, HAS HELD THAT EXTRACTION AND PROCESSING OF IRON ORE DID NOT AMOUNT TO 'MANUFACTURE'. HOWEVER, IT CAME TO THE CONCLUSION THAT EXTRACTION OF IRON ORE AND THE VARIOUS PROCESSES WOULD INVOLVE 'PRODUCTION' WITHIN THE MEANING OF S. 32A( 2)(B)(III) OF THE IT ACT, 1961 AND CONSEQUENTLY, THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF INVESTMENT ALLOWANCE UNDER S. 32A OF THE IT ACT. THE SAID VIEW WAS ALSO APPROVED BY THE HONBLE SUPREME COURT. IN THE CASE OF M/S ARIHANT TILES & MARBLES (P) LTD ., THE HONBLE APEX COURT HAS HELD THAT THE ACTIVITY OF CUTTING MARBLE BLOCKS INTO SLABS AND CONVERTING THEM INTO POLISHED SLABS AND TILES WOULD COME IN THE CATEGORY OF MANUFACTURE OR PRODUCTION UNDER SEC. 80IA OF THE ACT. THUS, IT IS SEEN THAT THE HO NBLE SUPREME COURT HAS HELD THAT THE ACTIVITIES CARRIED ON BY M/S ARIHANT TILES & MARBLES (P) LTD WOULD FALL UNDER BOTH THE CATEGORY, VIZ.,MANUFACTURE OR PRODUCTION. IN THE INSTANT CASE ALSO, THE ASSESSEES ARE ENGAGED NOT ONLY IN EXTRACTING BOULDERS, BUT ALSO CONVERTING THEM INTO GRANITE AGGREGATES, COMMONLY CALLED METALS, SAND, DUST. 17. AT THIS STAGE, WE WOULD LIKE TO REFER TO THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF KORES INDIA LTD (SUPRA), WHICH WAS REFERRED TO BY HON BLE DELHI HIGH COURT IN THE CASE OF M/S ARIHANT TILES & MARBLES (P) LTD. THE HONBLE SUPREME COURT IN THE CASE OF KORES INDIA LTD HAS HELD THAT THE ACTIVITY OF CUTTING OF JUMBO ROLLS ITA NOS. 86 TO 88/ COCH/ 2013 29 INTO TYPE WRITER/TELEX ROLLS WAS MANUFACTURING ACTIVITY ON THE REASONING THAT THE JUMBO ROLLS AS SUCH COULD NOT HAVE BEEN USED AS RIBBONS IN TYPEWRITER AND VICE VERSA AND THEY ARE NOT INTERCHANGEABLE . IT IS TO BE NOTED THAT THE TYPEWRITER RIBBON HAD DIFFERENT NAME, CHARACTER AND USE IN THE COMMON PARLANCE. IN THE INSTANT C ASE ALSO THE METALS AND SAND ARE OBTAINED FROM ROCK BOULDERS, BUT THEY HAVE DIFFERENT NAME, CHARACTER AND USE IN THE COMMON PARLANCE. 18. WE HAVE ALREADY NOTICED THAT THE TAX AUTHORITIES HAVE EXAMINED THE MEANING OF THE WORD MANUFACTURE IN TERMS OF NEWLY INSERTED DEFINITION OF THE SAID WORD IN SEC. 2(29BA) OF THE ACT. THE TAX AUTHORITIES HAVE ACCEPTED THE FACT THAT THE GRANITE AGGREGATES PRODUCED BY THE ASSESSEES HEREIN HAVE GOT DIFFERENT NAME AND THEY ARE USED FOR DIFFERENT PURPOSES VIS - - VIS THE ROCK BOULDERS. BUT THEY HAVE HELD THAT THE CHARACTER OF ROCK BOULDERS AND METALS REMAIN THE SAME. IT APPEARS THAT THE TAX AUTHORITIES HAVE UNDERSTOOD THE MEANING OF CHARACTER AS CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE, SINCE THE CHEMICAL COMPOSITI ON OR INTEGRAL STRUCTURE OF ROCK BOULDERS AND METALS WOULD REMAIN THE SAME. HOWEVER, THE TEST OF CHEMICAL COMPOSITION OR INTEGRAL STRUCTURE HAS TO BE APPLIED UNDER CLAUSE (B) OF THE DEFINITION GIVEN IN SEC. 2(29BA) OF THE ACT. WE ARE EXAMINING THE AC TIVITIES OF THE ASSESSEES HEREIN UNDER CLAUSE (A) OF SEC. 2(29BA). THE LD CIT(A) HAS OBSERVED THAT, UNDER CLAUSE (A), THERE SHALL BE CHANGE OF ALL THE THREE ASPECTS VIZ., NAME, CHARACTER AND USE. WE AGREE WITH THE SAID OBSERVATIONS OF LD CIT(A). HOWEVER , WE ARE UNABLE TO AGREE WITH HIS VIEW THAT THERE IS NO CHANGE IN THE CHARACTER. IN OUR VIEW, THE EXPRESSION CHARACTER SHOULD BE READ ALONG WITH USE. WE SHALL ELABORATE THIS POINT FURTHER. ITA NOS. 86 TO 88/ COCH/ 2013 30 19. IN THE CASE OF KORES INDIA LTD, THE RIBBON IN THE JUM BO ROLLS AND THE TYPEWRITER RIBBONS HAD SAME CHEMICAL COMPOSITION AND INTEGRAL STRUCTURE, BUT BOTH OF THEM HAD DIFFERENT NAME, CHARACTER AND USE. IT WAS HELD BY HONBLE APEX COURT THAT, SINCE THE RIBBON IN JUMBO ROLLS CANNOT BE USED AS TYPEWRITER RIBBONS, IT CANNOT BE SAID THAT THE CHARACTER OF RIBBONS REMAIN THE SAME IN BOTH TYPES. ACCORDINGLY, THE HONBLE SUPREME COURT HELD THAT BY CUTTING JUMBO ROLLS INTO SMALLER SIZES, A DIFFERENT COMMODITY HAS COME INTO EXISTENCE AND THE COMMODITY WHICH WAS ALREADY IN EXISTENCE SERVES NO PURPOSE AND NO COMMERCIAL USE. THE APEX COURT FURTHER HELD THAT, AFTER THE PROCESS, A NEW NAME AND CHARACTER HAS COME INTO EXISTENCE. SIMILARLY, IN THE INSTANT CASE ALSO, THE BOULDERS CANNOT BE USED FOR THE PURPOSES FOR WHICH THE M ETALS COULD BE USED. WE WERE TOLD THAT EACH SIZED METAL HAS GOT DISTINCT USE AND THEY CANNOT BE SUBSTITUTED FOR ONE ANOTHER. 20. WE MAY QUOTE SOME MORE EXAMPLES. THE READYMADE GARMENTS ARE MANUFACTURED BY USING CLOTH MATERIALS. EVEN AFTER CONVERSI ON, THE CLOTH REMAINS AS CLOTH IN THE GARMENTS. IN THAT SITUATION, IT CANNOT BE SAID THAT THERE IS NO CHANGE IN CHARACTER, THOUGH THERE IS CHANGE IN THE NAME AND USE. SIMILAR IS THE POSITION, WHEN STAINLESS STEEL SHEETS ARE CONVERTED INTO UTENSILS. AC CORDINGLY, IN OUR VIEW, THE EXPRESSION CHARACTER HAS TO BE UNDERSTOOD AS COMMERCIALLY DIFFERENT PRODUCT HAVING DISTINCTIVE FEATURES. 21. IN THE INSTANT CASES ALSO, GRANITE BOULDERS ARE EXTRACTED FROM HILLS AND THEN THEY ARE CONVERTED GRANITE METAL S, SAND AND DUST, AFTER UNDERGOING THE PROCESS INDICATED ITA NOS. 86 TO 88/ COCH/ 2013 31 ABOVE . THESE ACTIVITIES CERTAINLY RESULTS IN EMERGENCE OF A NEW AND DISTINCT COMMODITY , HAVING DIFFERENT NAME, CHARACTER AND USE . THE ORIGINAL BLOCK DOES NOT REMAIN THE GRANITE BLOCK, IT BECOMES MET ALS OF DIFFERENT SIZES OR SAND OR DUST. IN THE CIRCUMSTANCES, IN OUR VIEW, THERE ARE MANUFAC TURING AS WELL AS PRODUCTION ACTIVITIES IN THE INSTANT CASES IN TERMS OF S. 80 - IB OF THE IT ACT, 1961. ACCORDINGLY, WE SET ASIDE THE ORDERS OF TAX AUTHORITIES ON THIS ISSUE. 22. THE NEXT ISSUE IS WHETHER FURNISHING OF SSI CERTIFICATE IS MANDATORY FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB OF THE ACT. THE EXPRESSION SMALL SCALE INDUSTRIAL UNDERTAKING IS DEFINED UNDER SEC. 80IB(14)(G) OF THE ACT AS UNDER : - SMALL SCALE INDUSTRIAL UNDERTAKING MEANS AN INDUSTRIAL UNDERTAKING WHICH IS, AS ON THE LAST DAY OF THE PREVIOUS YEAR, REGARDED AS A SMALL SCALE UNDERTAKING UNDER SECTION 11B OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 (65 OF 1951) WE NO TICE THAT AN IDENTICAL ISSUE WAS CONSIDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF PRAVEEN SONI VS. CIT (2011)(333 ITR 324), WHEREIN IT WAS HELD BY THE HIGH COURT, AFTER CONSIDERING SEC. 11B OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951, TH AT THE REGISTRATION UNDER INDUSTRIAL DEVELOPMENT REGULATION ACT IS NOT A CONDITION FOR TREATING AN ASSESSEE AS SMALL SCALE UNDERTAKING. FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE HEAD NOTES OF THE SAID CASE AS REPORTED IN ITR. ITA NOS. 86 TO 88/ COCH/ 2013 32 DEDUCTION UNDER S. 8 0 - IB SMALL - SCALE INDUSTRIAL UNDERTAKING ABSENCE OF REGISTRATION UNDER THE PROVISIONS OF IDR ACT, 1951 AS PER CL. (G) OF SUB - S. (14) OF S. 80 - IB, SMALL - SCALE INDUSTRIAL UNDERTAKING MEANS AN INDUSTRIAL UNDERTAKING WHICH IS REGARDED AS 'SMALL - SCALE INDUSTRIAL UNDERTAKING UNDER S. 11B OF THE IDR ACT, 1951' AS PER S. 11B, IT IS FOR THE CENTRAL GOVERNMENT TO LAY DOWN THE CONDITIONS WHICH ARE REQUIRED TO BE FULFILLED AS REGARDS SMALL - SCALE INDUSTRIES IN THE NOTIFICATION DT. 10TH DEC., 1997, ISSUED BY THE CENTRAL G OVERNMENT IN EXERCISE OF SUCH POWERS, THE CONDITIONS MENTIONED FOR BEING REGARDED AS SMALL - SCALE INDUSTRIES ARE THE OWNERSHIP OF PLANT AND MACHINERY AND VALUE THEREOF REGISTRATION OF SUCH AN UNDERTAKING UNDER THE SAID ACT IS NOT A CONDITION PRECEDENT FOR T REATING THE SAME AS SMALL - SCALE INDUSTRIAL UNDERTAKING THAT REGISTRATION IS PRESCRIBED FOR ALTOGETHER DIFFERENT PURPOSE VIZ., TO AVAIL OF THE BENEFIT UNDER THAT ACT AS FAR AS DEDUCTION UNDER S. 80 - IB IS CONCERNED, THE ONLY ASPECT WHICH IS RELEVANT AND IS T O BE CONSIDERED IS AS TO WHETHER THE CONDITIONS STIPULATED IN THE SAID NOTIFICATION FOR REGARDING AN INDUSTRIAL UNDERTAKING AS A SMALL - SCALE INDUSTRIAL UNDERTAKING ARE FULFILLED OR NOT IN THE INSTANT CASE, ADMITTEDLY ASSESSEE FULFILS THE ELIGIBILITY CONDIT IONS PRESCRIBED UNDER THE NOTIFICATION AND IS TO BE REGARDED AS SMALL - SCALE INDUSTRIAL UNDERTAKING THEREFORE, ASSESSEE WAS ENTITLED TO DEDUCTION UNDER S. 80 - IB AS A SMALL - SCALE INDUSTRIAL UNDERTAKING EVEN THOUGH IT IS NOT SO REGISTERED UNDER THE PROVISIONS OF THE IDR ACT. IN THE INSTANT CASE, WE NOTICE THAT THE TAX AUTHORITIES HAVE HELD THAT THE PRODUCTION OF SSI CERTIFICATE IS MANDATORY FOR GRANTING DEDUCTION U/S 80IB OF THE ACT, WHICH IS AGAINST THE VIEW EXPRESSED BY THE HONBLE DELHI HIGH COURT IN THE ABOVE CITED CASE. IT IS NOT THE CASE OF THE AO THAT THESE ASSESSEES ARE HIT BY THE VARIOUS CRITERIA FIXED BY THE CENTRAL GOVERNMENT FOR DETERMINING AN UNDERTAKING AS SMALL SCALE INDUSTRIAL UNDERTAKING UNDER INDUSTRIAL DEVELOPMENT REGULATION ACT. HENCE, B Y RESPECTFULLY FOLLOWING THE ABOVE SAID DECISION OF HONBLE DELHI HIGH COURT, WE HOLD THAT IT IS NOT NECESSARY TO PRODUCE SSI CERTIFICATE FOR TREATING THESE ASSESSEES AS SMALL SCALE INDUSTRIAL UNDERTAKING IN TERMS OF SEC.80IB OF THE ACT. ACCORDINGLY, WE S ET ASIDE THE ORDERS OF TAX AUTHORITIES ON THIS ISSUE. ITA NOS. 86 TO 88/ COCH/ 2013 33 23. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH , DAY OF SEPT 2013. SD/ - SD/ - (N.R.S. GANESAN) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 5 TH , SEPT 2013 RAJ* COPY TO: 1. APPELLANT - POABS ROCK PRODUCTS P LTD KUTTOOR POST THIRUVALLA PATHANAMTHITTA DIST PIN - 689 106 2 APPELLANT - POABS GRANITE PROD UCTS P LTD WEST OTHERA POST THIRUVALLA PATHANAMTHITTA DIST PIN - 689 106 3 RESPONDENT THE ASST COMMR OF INCOME TAX CIRCLE 1, THIRUVALLA 4 CIT(A) 5 CIT , TRIVANDRUM 6 DR 7 GUARD FILE BY ORDER A SSISTANT REGISTRAR ITAT, COCHIN