TMI Blog2006 (2) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... excessive and unreasonable. (3) That the appellant craves leave to add/amend or delete any ground of appeal before or during hearing of the appeal. 2. The first issue relates to sustaining of disallowance of deduction under section 80-IB. The facts related to this issue in brief are that the assessee was engaged in the manufacture of watches, watch components, coil, ECB, plastic parts in its two manufacturing units. During the year, it had earned Rs. 20,35,519 and Rs. 7,06,254 from job work in units-I II respectively. The Assessing Officer required the assessee to explain as to how deduction under section 80-IB was available on the profit of job work and how the job work represented manufacture. The assessee vide written reply dated 22-10-2002 stated that it had undertaken some job work of welding of case and glass with its ultrasonic welding machine for which the components were supplied by the parties. It was further stated that the process resulted in manufacturing of new product i.e., case set and was available for deduction under section 80-IA. The Assessing Officer did not accept contention of the assessee for two reasons. Firstly, mere welding of a case and glass into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not be produced by one assessee, as production of every part needs different machinery and technical know-how. The work was, thus, divided among various operators, who in themselves were also manufacturing an altogether independently marketable product and all of them had a significant contribution for the making of a complete watch. It was further seated that the assessee had machinery of Rs. 10,00,000 (approximately) and Rs. 3,00,000 (approximately) for manufacture of 'stator' and 'case-set' respectively. It was explained that both the machineries were hi-tech machineries and that was the reason, work was being entrusted to different manufacturers for different parts and for the above said two parts, the job was entrusted to the assessee. It was further stated that both those items were independently saleable items altogether different from the raw material supplied to the assessee. Thus, simply supply of raw material would not make the manufacturing process of the assessee a non-manufacturing, i.e., to say, job work by its nomenclature so is to disentitle the assessee from legally allowable deduction. It was further stated that in case, had the assessee purchased the raw mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 3 SCC 469 (SC). (2) Empire Industrial Ltd. v. Union of India AIR 1986 SC 662. (3) Aspinwall Co. Ltd. v. CIT [2001] 251 ITR 323 (SC). (4) CCE v. M.M. Khambhatwala [1996] 4, Scale 466 (SC), [1996] 5 SCC 100 (SC). (5) Empire Industrial Ltd v. Union of India [1985] 20 ELT 179 (SC), Philips India Ltd. v. Union of India [1980] 6 ELT 263 (All). 4. The learned CIT (Appeals), after considering the submissions of the assessee observed that manufacturing process shall remain a manufacturing process irrespective of the fact whether raw material was supplied by some customer or purchased by the assessee himself i.e., there is no difference between income from job work and the income from manufacturing activities carried out by the assessee provided the assessee carries on the same process for job work which have otherwise been carried out in the manufacturing activities. According to him, the assessee was engaged in manufacture of coils, ECB and plastic watches in Unit-I and watches and other parts in Unit-II and that the job A work carried out by the assessee during the year was only in respect of two processes, first related to production of 'stator' which involve heat treatment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted that it was a manufacturing so different stand should not be taken for the activity conducted by the assessee on job work basis. 5. In his rival submissions, the learned DR strongly supported the orders of the authorities below and submitted that mere fixing of two things was not a manufacturing activity. The reliance was placed on the judgment of the Hon'ble Calcutta High Court in the case of Hindustan Metal Refining Works (P.) Ltd., wherein it has been held that the galvanization as an act or process of galvanizing or coating to protect it from rust does not bring into existence a different article and hence, does not result into manufacture or production of new goods as such. 6. We have considered the rival submissions and carefully gone through the material available on the record. Before us, the issue to be decided is whether the assessee is eligible for deduction under section 80-IB claimed on the manufacture of 'case-sets'. The deduction under section 80-IB is available to an Industrial Undertaking if it manufactures or produces any article or thing not being any article or thing specified in the list in the Eleventh Schedule. The word 'Industrial Undertaking' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ram Atam Parkash v. State of Haryana [1974] 34 STC 344 (Punj. Har.) as under: "Applying the above definition to the instant case, the question is when the logs are converted into planks and rafters, does it mean that a manufacturing process has been gone into? In other words, has a new substance has occurred? As we look at the matter, when a log, either by manual labour or mechanical process, is converted into a plank or a rafter, a new substance does not come into being and this process is not covered by the definition of the word 'manufacture' as given by the Supreme Court." 6.1 I.T.A.T. Calcutta Special Bench in the case of Shah Scott Distilleries (P.) Ltd. v. Asstt. CIT [2002] 255 ITR 14 (AT) also interpreted the meaning of the word 'manufacturing' in the following words: "Manufacturing normally involves consumption of a particular commodity in the process of manufacturing of another commodity. The goods purchased should be consumed, the consumption should be in the process of manufacture and the result must be the manufacture of other goods. There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduction, every production need not amount to manufacture. The meaning of the expression 'manufacture' was considered by this court in Deputy CST v. Pio Food Packers [1980] 46 STC 63 among other decisions. In the said decision, the test evolved for determining whether manufacture can be said to have taken place is, whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognized in the trade as a new and distinct commodity. Pathak J., as he then was, stated the test in the following words: 'Commonly, manufacture is the end result of one or more process through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity g experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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