9911796707
TMI Blog1983 (8) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The ITO did not accept the aforesaid claims of the assessee and thereby held that ginning of cotton (cotton ginning) did not amount to manufacture but was only the stage of processing and production of any article was also ruled out in the case of the assessee ; that since neither manufacture nor production of any article was found in the process of ginning, the application of section 80J is absolutely ruled out and was not applicable for the claim in this case. Accordingly, the claim of the assessee was rejected by him on these facts and circumstances relying on the decision in the case of CST v. Mari Bilas Rai & Sons 21 STC 1720 (SC) and Patel Cotton Co. (P.) Ltd. v. City of Punjab 15 STC 865 (Punj.). 4. In appeal, the assessee failed as the AAC upheld the order of the ITO on the grounds that the activity of industrial undertaking should be one of processing or manufacturing and it should result in a product which was distinct from the earlier one and it should be trade-worthy and marketable product ; that the case of the assessee did not fall squarely under the above requirements and reliance was placed in the decision of the Supreme Court in the case of Chowgule & Co. (P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... int cotton. In the Act, the words 'manufacture' and processing of goods or articles are used to indicate different types of activities which is evident from the provisions under section 109 of the Act. Reliance is also placed on the various Finance Acts including the Finance (No. 2) Act, 1980. The learned departmental representative distinguished the case in State of Punjab v. Chandu Lal Kishori Lal AIR 1969 SC 1073, stating that vide this decision their Lordships held that ginning of cotton is merely a manufacturing process and, therefore, no article is said to be manufactured or produced. And relief under section 80J can be allowed if there is manufacture or production of articles by the industrial undertaking and the assessee deals in such articles. He further contends that in deciding the issues involved in this, appeal, the decisions relied upon by the assessee are of no help as these are not the cases failing under the Act and, therefore, the cases decided by the Hon'ble Supreme Court or High Court under the Act on the issue are to be followed in deciding the issue whether the assessee is an industrial undertaking entitled to relief under section 80J and under section 32A. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted position, as stated above, in view of the fact that the assessee is an industrial undertaking and fulfils all the conditions of this section except that of clause (iv) of it. Thus, we have to see that whether the assessee manufactures or produces articles as there is no dispute that the assessee has employed ten workers as required under this section in the previous year relevant for the assessment year under consideration. 10. In the previous year relevant for the assessment year under consideration, the assessee has shown in the balance sheet an amount of Rs. 55,457 as ginning charges received from its customers, who came to the assessee with the cotton for ginning. When this is so, then, there is no question of manufacturing or producing the articles as required by section 80J(4)(iv). Because, for the purpose of this section, the assessee should be the owner of the machinery, plant and of raw material used in the manufacturing or producing the articles and should also deal in such articles. If either of these is missing, then there is no manufacture or production of articles as required by the provisions of section 80J(4)(iv). 11. The learned counsel for the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tton is manufacture or production of the articles. The terms 'manufacture and production of article' are not synonymous to each other. The manufacture of article or thing is to bring into being a thing or article and it is synonymous with 'to make'. Thus, a thing or article is manufactured from raw material by the mechanical and chemical process or processes and the resultant end of such process or processes is manufacture of an article or thing. But, production of a thing or article can come into being or in existence by natural, biological, chemical and mechanical processes, namely, plants, trees, crops, grains, fruits, etc., are produced by natural, horticultural, agricultural, chemical and mechanical process and processes. For the purpose of production of an article, seed, earth water and heat, light, etc., are essential and production can be there by natural process, for instance, forest, trees, wild plants are produced by nature itself under natural processes. Thus, production or manufacture of a thing or article are different terms and they are creation of different process or processes or mixed process or processes. Manufacture and production are the outcome of the process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of relief under section 80J. For it to be an industrial undertaking, it has to fulfil all the four conditions laid down therein. An assessee who deals in manufacturing process or processing of goods can be held to be an industrial undertaking, but it cannot also be held that such industrial undertaking is entitled to relief under section 80J. For this purpose, such assessee which is an industrial undertaking has to satisfy all the conditions laid down in section 80J(4) and one of these is that such industrial undertaking should produce or manufacture articles. Pumping oil, water or sewage, generating, transforming or transmitting power and retreading of tyres are manufacturing process of article, but not manufacture of an article. No doubt, in the cases decided under the Sales Tax Act, the process of manufacturing of an article is held as manufacture of an article which is there in reference to the context. Because, under the Sales Tax Act, a manufacture of an article is described as such while under the Act, manufacturing process or processing of goods is described or defined as industrial undertaking. Therefore, we hold that in deciding that there is manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods within the meaning of section 2(6)(d) of the Finance Act, 1968. A company which carries on such activity will not fall within the definition of an industrial company under that provision. 16. Even in the case under the Sales Tax Act, Patel Cotton Co. (P.) Ltd. their Lordships of the Punjab High Court specifically held that ginning the cotton is not 'manufacture'. In the case of P. C. Cheriyan their Lordships held that the broad test for determining whether a process is a manufacturing process is to see whether it brings out a complete transformation for the old components so as to produce a commercially different article or commodity. The retreading of old tyres does not bring into being a commercially distinct or different entity. The old tyres retained its original character and identity as a tyre. Retreading does not completely transform it into another commercial article, although it improves its performance and serviceability as a tyre. Retreading of old tyres is just like resoling of old shoes. No new or distinct article emerges from retreading of old tyres. The old tyre retains its basic structure and identity. 17. Similarly, in the case of South Bihar Sugar Mills Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
