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2014 (5) TMI 777 - HC - Income TaxScope of section 10B of the Act – Process of segregation of metal scrap from cable scrap - Whether the Tribunal erred in treating the processes employed by the assessee in segregating the metal scrap from cable scrap as 'Manufacture or produce' within the meaning of section 10B of the Act and whether the assessee carried out manufacturing process or not – Held that:- The term "manufacture", which definitions are worded slightly differently, the Courts have accepted the principle of fairly universal application that where the change or series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the process, it would amount to manufacture of an article or thing – Relying upon M/s. Ujagar Prints and others (II) vs. Union of India [1988 (11) TMI 106 - SUPREME COURT OF INDIA] - the word "manufacture" implies a change but every change in the raw material is not manufacture - There must be such a transformation that a new and different article must emerge having a distinct name, character or use. In case of mix cable scrap the material would be sorted and segregated in the factory in different diameters of various lengths - jackets and upper layers would be removed mechanically in order to make them suitable for feeding in different cable cutting machines and stripping machines - various strips in the cables are removed and sorted cable scrap would be put in cable cutting machines for cutting and stripping - several types of copper wires would be generated - Impurities such as plastic, dust and other metals would be separated through this detailed process and clean copper material would be sold after baling them on the baling machines and packing for export sale. Mix metal scrap would consist of several substances such as stones, rubber, steel, ferrous as well as nonferrous metals - This would be derived mostly from dismantling of buildings and other structures and plants - Scrap as such would have no other use or marketability before subjecting to manufacturing process - Assessees would segregate and remove attachments, sorting out various metals in categories from the mix metals - This process would derive ferrous metal, other non-metallic parts etc. - the Tribunal correctly came to the conclusion that the process amounted to manufacturing - the assessee, as an EOU is required to carry out manufacturing activity and on its DTA sales is also required to pay excise duty which the assessee paid and excise department collected. The assessees were to pay excise duty on the ground that the same amounted to manufacturing activity but would be declined deduction under the Income Tax Act on the ground that the same did not - the Tribunal has merely remanded the entire issue before the AO for fresh consideration of the entire issue without any observations and/or directions, we do not see any reason to interfere - the AO shall examine whether on DTA sales by the assessee, claim of deduction under section 10B of the Act would be allowable - whether the remittances on such sales have been received in foreign exchange or not would be just one of the additional aspects of the matter – Decided against Revenue.
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