TMI Blog1993 (6) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... ished its earlier decision rendered for the assessment years 1977-78 and 1978-79 in the case cited supra on the ground that the notification dated 8-7-1983 (189 of 1983) which considered latex concentrate, preserved latex, etc. as manufactured goods was not brought to the notice of the Tribunal when it decided the appeal for the assessment years 1977-78 and 1978-79. According to the Tribunal, the notification made all the difference and after discussing certain decisions, it took the view that by means of centrifuging process normal latex is converted into preserved latex which is entirely a different commercial product. It thus upheld the claim of the assessee. The revenue obtained reference on the following two questions to the Hon'ble High Court of Kerala : (1) Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction under section 80J of the IT Act ? (2) Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction under section 80HH of the IT Act ? The Hon'ble High Court in its judgment dated 22-2-1993 in ITR No. 167 of 1988 in RA No. 193 (Coch.)/1987 (arising out of ITA No. 465 (Coch.)/1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate Tribunal is not in accordance with law ". In the circumstances, the Hon'ble High Court declined to answer the questions and directed the Tribunal to restore the appeal to its file and decide the matter afresh in accordance with law. This is how we came in seisin of the matter. 3. Sri K. I. John, the learned Chartered Accountant for the assessee and Sri P. Balakrishnan, the learned departmental representative advanced rival contentions. The burden of Sri Balakrishnan's contentions was based on the findings of the Tribunal in the assessee's own case in the order of the Tribunal dated 23-12-1983 in ITA Nos. 187 and 188 (Coch.)/1982 for the assessment years 1977-78 and 1978-79. Sri John submitted before the Tribunal samples of the following and contended that the centrifuged latex is a marketable commodity unlike the normal latex and it has a market of its own as it constituted the raw-material for manufacture of foam rubber, gloves etc. Samples are as follows :--- (1) Cup latex taken from the tree which as per the note has coagulated ; (2) The normal latex after application of ammonia ; (3) Centrifuged latex after centrifuging in the machine ; (4) Rubber sheet which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocessing into preserved field latex : That is natural latex with ammonia application. Although preserved field latex is not used as such in any manufacturing industry, there is good demand for this form of latex. It is a raw-material for latex concentration units. Many such units buy preserved field latex from small-holders. Also a large number of small-scale units producing latex products, for economic reasons, buy preserved field latex and concentrate it by creaming. For the preparation of preserved field latex, latex from the field is sieved and bulked and ammonia bubbled through it so as to get a concentration of 0.7--1.0 per cent on volume of latex. After ammnoniation, latex is left undisturbed for about 15-20 minutes to allow separation of sedimentable impurities and reaction product. It is then transferred to drums, sealed and marketed. (page 403) Preserved latex concentrate : The process of latex concentration involves the removal of a substantial quantity of serum field latex, thus making latex richer in rubber content. The concentration of latex is necessary because of the following four reasons : (i) Economy in transportation ; (ii) Preference for high DRC by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s through a series of holes into the interior of the bowl. The cream centrifuges inwards towards the axis of rotation and then empties from the bowl through holes into a stationary gully. The shim flows outwards away from the aids of rotation and leaves the bowl through orifices which are formed by regulating screws. It passes out of the centrifuge through a second stationary gully. The parts of the machine which comes into contact with latex should be constructed preferably out of stainless steel for avoiding contamination and preventing corrosion. The cream is separately collected in a bulking bank, it is ammonia content estimated and made upto 0.7 per cent or latex and packed in drums. Efficiency of the process : The efficiency of the centrifuging process is defined as that fraction of the total rubber entering the machine, which effluxes in the form of concentrate. The important factors are the feed rate, angular velocity of the machine and length of the regulating screws. (pages 412 and 413) Skim latex and production of skim rubber : When field latex is centrifuged, in addition to the concentrate containing most of the rubber, an equal fraction in volume, containing a ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he drums are filled by opening these stop-cocks. There should be facilities for weighing and marking of the filled drums. Skim latex is coagulated in batches in shallow coagulation tanks, using dilute sulphuric acid which is stored in another tank. Creping machines are placed adjacent to the coagulation tanks. Suitable drying shed and packing shed/store are also necessary. The serum from the skkin coagulation tank and the wash water from the creping unit flow into the effluent treatment plant, along with wash water from the main factory floor. The effluent treatment plant also should be situated a little away from the factory to minimise foul odour in the factory. The factory building should have good ventilation. A reliable water supply also should be provided. The factory should be located at a central place in the estate and there should be roads leading to it from various parts of the estate. While designing the factory, the full crop of the estate should be estimated and a complete plan prepared. The latex and skim storage tanks are made of either mind steel or concrete. In either case, the inside of the tanks should be provided with a protective coating of an alkali-resistant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centrated latex is different from normal field latex in following respects : (1) Rubber content in the centrifuged latex is in the range of 60 to 61 per cent whereas in normal field latex, rubber content is in the range of 30 to 40 per cent. (2) Non-rubber content in centrifuged latex is in the range of 1.5 to 2 per cent whereas in normal field latex non-rubber content is in the range of 2 to 3.5 per cent. (3) In centrifuged latex the particle size of the dispersed rubber phase is much larger than the particle size of the dispersed rubber phase in normal field latex. Normal field latex as such cannot be used in the production of high quality rubber products like condoms, surgical gloves, examination gloves, catheters and rubber thread whereas for these products ideal raw material for manufacturing is centrifugally concentrated latex. Although chemically both the latices contain the same rubber hydrocarbon there is a lot of difference in their physical nature. There is a set of specification also prescribed by Bureau of Indian Standards for centrifugally concentrated latex and these are given under IS 5430. For normal field latex there is no such specifications. " 7. From th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, instead, recognised as a distinct and new article that has emerged as a result of the processes. The principles are clear. But difficulties arise in their application in individual cases. There might be borderline cases where either conclusion with equal justification may be reached. Insistence on any sharp or intrinsic distinction between ' processing ' and ' manufacture ', we are afraid, results in an over simplification of both and tends to blur their interdependence in cases such as the present one... " In the case of the assessee, having regard to the differentiation between the normal field latex and the centrifuged latex, In rubber content, non-rubber content, particle size and the ineligibility of the normal field latex for use in the production of high quality products such as surgical gloves, condoms etc., and their difference in physical nature, we hold that by the process of centrifuging a different commodity that is capable of being to a totally different use as that from the natural latex had emerged and in the light of the decision of the Apex Court cited supra, the process can be said to have resulted in manufacture or production. The other cases relied on by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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