TMI Blog1984 (4) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... rial company means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. Explanation ................. " The ITO for the reasons given in the assessment order did not accept the said contention of the assessee. In the appeal taken by the assessee to the AAC, it was contended on behalf of the assessee that the cold storage plant of the assessee is used for the preservation of commodities of the customers stored therein and the act of preservation of the goods stored and the method employed therefor amounts to " processing " of those goods and that included treatment of the goods to help their preservation. This contention of the assessee was accepted by the AAC. The Revenue took the matter in appeal to the Tribunal. The question revolved round the words " processing of goods " appearing in the relevant provision. The Single Bench of the Tribunal after examining the case law cited on behalf of the two sides came to the conclusion that the company which is engaged in the running of a cold storage cannot be said to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and blending it. The entire activity of the assessee was broadly divisible into seven different operations, one following upon the other, namely, (i) extraction of ore from the mine; (ii) conveying the ore to the dressing plant; (iii) washing, screening and dressing the ore (iv) conveying of the ore from the mine site to the riverside ; (v) transport of the ore from the riverside to the harbour by means of barges (vi) stacking of the ore at the harbour in different stockpiles according to its physical and chemical composition; and (vii) blending of the ore from different stockpiles with a view to producing ore of the required specifications and loading it into the ship by means of the mechanised ore handling plant. The questions that arose for consideration were : (1) Whether the blending of ore whilst loading it in the ship by means of the mechanical ore handling plant constituted manufacture or processing of ore for sale within the meaning of s. 8(3)(b) of the Central Sales Tax Act, 1956, and r. 13 of the Rules framed thereunder; and (2) Whether the process of mining, conveying the mined ore from the mining site to the riverside, carrying it by barges to the harbour and then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the word 'process' : I to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture, development or preparation for the market, etc., to convert into marketable form as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurising, fruits and vegetables by sorting and repacking. Where, therefore, any commodity is subjected to a process or treatment with a view to its ' development or preparation for the market ', as, for example, by sorting and repacking fruits and vegetables, it would amount to processing of the commodity within the meaning of section 8(3)(b) and rule 13. The nature and extent of processing may vary from case to case; in one case the processing may be slight and in another it may be extensive; but with each process suffered, the commodity would experience a change. Wherever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. The nature and extent of the change is not material. What is necessary in order to characterise an operation as 'processing ' is that the commodity must, as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration before the Gujarat High Court in the case of CIT v. Lakhtar Cotton Press Co. (Pvt.) Ltd. [1983] 142 ITR 503. In that case, the assessee company received cotton in bulk having lighter density which was sprinkled with water and through a mechanical device pressed into small units of convenient size and then packed into bales, because cotton packed in bales was commercially acceptable as merchants found it convenient to store cotton in that form. It was observed that the activity contemplated by the word 'process' is general, requiring only continuous and regular action or succession of actions leading to the accomplishment of some result, but it is not one of the requisites that the activity should involve some operation on some material for its conversion into some other stuff. Therefore, what is necessary in order to characterise an operation as processing is that the commodity must, as result of the operation, experience some change. It was further held that as loose cotton in bulk quantity with lighter density was, as a result of pressing, converted into cotton bales and to that extent it underwent change and, therefore, the assessee company fell within the definition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to processing, it was necessary to bring some change in the nature, quality or form of the goods. All these cases proceeded on the footing that processing was something different and lesser than manufacturing of goods, with which view there can be no quarrel. In the case of CIT v. Yamuna Cold Storage [1981] 129 ITR 728 (P H), the question for consideration before the Punjab and Haryana High Court was as to whether the process undertaken in a cold storage falls within the definition " manufacturing process " in clause (k)(i) of s. 2 of the Factories Act, 1948. The term " manufacturing process " was defined under s. 2(k) of the Factories Act, 1948, as below? " 2(k) `Manufacturing process' means any process for (i) making, altering, repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up, demolishing, or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal, or ........ It was held that the process undertaken in a cold storage would be fully covered by clause (k)(i), because it would certainly be a process of treating the articles or goods with a view to preserve them for their ..... X X X X Extracts X X X X X X X X Extracts X X X X
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