TMI Blog2000 (2) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... see is not engaged in any manufacturing process and thereby disallowing the claim of the assessee under section 80-I of the Income-tax Act, 1961. Before the authorities below the assessee gave details of process involved in the manufacture of above sugar which are given as under : "The main raw material is sugar purchase mostly from sugar co-operative mills. The sugar is mixed with water and melted in the filter unit. The filtered melt is transferred to the rotary belt where semi finished goods in the form of seeds are added to the melt. The rotational processing in rotary pan results in crystallisation of the seeds which are then stored in crystalliser and then cured in centrifugal machine in which crystals are separated from the sugar liquid. Afterwards, the crystals are dried and graded on hopper and packed in bags for sale. The separated sugar liquid is recycled again the process above. During the grading the crystals of desired size are separated for sale as candy sugar and remaining crystals of uneven size are recycled in the process as semi-finished goods (seeds). The crystals of fine size are being sold as PG sugar. The purity of sugar liquid goes down after 3 to 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though it has undergone a degree of processing it must be regarded as still retaining the original identity." Applying the test laid down by various Courts as mentioned above, the Assessing Officer held that making of sugar candy with the help of plant and machinery does not result into manufacture of a commodity which is different from one which is fed into the plant for melting washing and segregating different sizes and that the plant and machinery has been used by the assessee for the purpose of removing the impurities, cleaning and giving different sizes to the sugar and in the process original commodity continues to retain its substantial identity. Hence, according to the Assessing Officer there is no transformation into a new and different article. The Assessing Officer also relied upon the decision of the Vasantha Co. v. State of Madras [1963] 14 STC 696 to 701 (Mad.). In that case, the assessee was dealer in sugar and the question before the Hon'ble Court was whether sugar candy is different from sugar and exempt from payment of sales tax. In that case, after considering various facts and circumstances of the case and the opinion of National Sugar Institute of Kanpur, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elaborating the decisions relied upon by the Assessing Officer the CIT(A) confirmed the finding of the Assessing Officer. Further relying upon the decision of the Maharashtra Sales-tax Tribunal in the case of Industrial Mineral Chemicals v. State of Maharashtra [1995] 12 MTJ 325, the learned CIT(A) held as under: "It is admitted position that manufacture can be said to have taken place if the process results in creation of commodity having different identity, character and use. But where the commodity retains continuing substantial identity through process stage, it cannot be said that it has been manufactured. The Courts have further held that the nature, extent of process may vary from case to case with each process suffered the original commodity experiences a change, but it is only when a change or series of changes take the commodity to the point where commercially it can no longer be regarded as original commodity, but instead recognised as new distinct articles then a manufacture can be said to take place. But where, there is no essential different identity between the original commodity and processed article, it is not possible to say that one commodity has been consume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence on the basis of illogical factors like chemical composition of the end products, nomenclature, appearance (retaining substantial original identity) etc. The learned counsel further submitted that the authorities below erred in making conflicting arguments in respect of the definition of manufacture under Bombay Sales-tax Act. At first instance, stressing that as the particular term is not defined under the Income-tax Act, the Department should be guided by the definition given under any other Act (Sales-tax) and thereafter observing that as the definition of the term 'manufacture' under the Bombay Sales-tax is very wide, there may be very absurd results and even the smallest change can come within the ambit of manufacture under Bombay Sales-tax Act. According to the learned counsel, the authorities below have made illogical application of the decision of Maharashtra Sales Tax Tribunal in the case of Industrial Mineral Chemicals wherein it had been decided that the activity of conversion of the copper sulphate powder into crystals is not manufacture. However, the learned counsel submitted that there is observation in judgment itself that 'thus all these certificates do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1986] 162 ITR 846 (SC) Processes like bleaching, dyeing, printing, etymologically also meant manufacturing process. (f) CIT v. Sterling Foods (Goa) [1995] 213 ITR 851/79 Taxman 381 (Bom.) - Prawns do not amount to manufacture or production of article, The learned counsel placed reliance for the proposition that a statutory enactment must ordinarily be construed according to the plain natural meaning of its language and no words should be added. (g) Nishit Synthetics (P.) Ltd. v. ITO [1984] 7 ITD 486 (Ahd. 'A') - Converting flat yarn into twisted yarn under mechanical process with the aid of chemicals and the assessee is entitled to deduction under section 80-I. (h) Sixth ITO v. General's New Tread [1985] 13 ITD 460 (Bang. - Bench) (SB) - Machinery employed in retreading of tyres was entitled to claim under section 32A. (i) ITO v. Maddi Satyanarayana Co. (P.) Ltd. [1984] 8 ITD 249 (Hyd.) - Redried tobacco which was end-product produced by assessee company was commercially different from fluecured tobacco purchased by it from farmers and hence the assessee was entitled to relief under section 80-I. Kiran Tobacco Products (P.) Ltd. v. First ITO [1991] 36 ITD 177 (Bang.) - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied upon the decision of the Supreme Court in the case of CST v. Harbilas Rai Sons [1968] 21 STC 17 where it was held that boiling and cleaning of pig bristles with soap and other chemicals and arranging them according to their size to obtain cleaned bristles is not manufacture. He submitted that though the assessee is engaged in a process, but it is not a manufacturing process. According to the learned D.R. manufacture implies a change, but every change is not manufacture. In support of this argument, he relied on the decision of the Supreme Court in the case of Union of India v. Delhi Cloth General Mills Co. Ltd. AIR 1963 SC 791. The learned D.R. submitted that in the case of the assessee, there is no transformation of sugar into anything else and even after converting into candy sugar it remained sugar only. No new and different article has emerged. The character of candy sugar is just the same as was the character of sugar on which the process of cleaning and purification was applied. 8. To the contention of the learned counsel that after the sugar is processed a new product by name i.e. candy sugar comes into existence, the learned D.R. submitted that the word 'candy' i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the learned counsel that in the earlier assessments deductions had been allowed under section 80-I, the learned D.R. submitted that the earlier two assessment years have been reopened under section 147 of the Income-tax Act, 1961, as mentioned by the Assessing Officer in his letter placed at page 1 of the Revenue's paper book and as such the position has not been allowed to settle by the Department and the ratio of the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 and Bombay High Court in H.A. Shah Co. v. CIT [1956] 30 ITR 618 will not apply to that effect. 9. As regards the reliance by the learned counsel on the letters from its customers like Ranbaxy Lab. etc. that the user is different, the learned D.R. submitted that it is the additional evidence and cannot be admitted unless an opportunity has been granted to the opposite party to rebut. He further submitted that the opinions of the different experts quoted by the learned counsel for the assessee were of no use to the assessee in view of the judgment of the Allahabad High Court in the case of CIT v. Smt. Prem Kumari [1984] 146 ITR 191/15 Taxman 375, according to which "experts gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rilled ammonium nitrate. 7. State of Tamil Nadu v. Bharat Dairy Farm 1992 (61) ELT 25 (Mad.), Obtaining butter from cream. 8. Union Carbide India Ltd. v. Union of India 1986 (24) ELT 169 (SC), Making aluminium cans from aluminium slug. 9. Union of India v. Parle Products (P.) Ltd. AIR 1994 SC 106, Converting aluminium foils into paper back aluminium foils. 10. CST v. Damodar Padmanath Rao [1968] 22 STC 187 (Bom.), Mixing bettle leaves and bettle powder to form Pan Pattis 11. Industrial Mineral Chemicals' case. Conversion of copper sulphate powder into copper sulphate crystal 12. 20 STC 261 (Ker.) Making Prawn pulp from Ray Prawns. 13. CST v. Bombay Traders [1976] 38 STC 286 (Bom.) Activity of frying and spicing of plain cashews to obtain fried cashew nuts. The learned D.R. concluded that in view of the above authorities, it can safely be said that the assessee was not carrying on any manufacturing process; that the end product i.e. candy sugar was not distinct from raw-material i.e. sugar and accordingly, the authorities below were justified in rejecting the assessee's claim under section 80-I. 10. We have considered the rival submissions and perused the facts o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent article must emerge having a distinctive character, name and use" . In the case of the assessee before us, there is no transformation of sugar into anything else, and even after converting into candy sugar it remains sugar only. No new and different article has emerged. The character of candy sugar is just the same as was the character of sugar on which the process of cleaning and purification was applied. It may be seen that the emphasis is on transformation of the original commodity into something else. The emphasis is also on change in the character of original article and character does not mean the shape, colour and purity of a substance. When sugar is converted into candy sugar, there is no transformation, and there is no change in the character of sugar. It just remains sugar, though in a purer form. 11. The Hon'ble Supreme Court in the same para has held that word 'manufacture' used as a verb is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some change in a substance however minor in consequence the change may be. Further, the Hon'ble Supreme Court has clearly brought cut that manufacture means not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fruit in a more convenient form and by reason of being canned it is capable of storage without spoiling. The additional sweetness in the canned pineapple arises from the sugar added as a preservative. On a total impression, it seems to us, the pineapple slices must be held to possess the same identity as the original pineapple fruit.' The above observations of the Hon'ble Supreme Court make it clear that conversion of sugar into candy-sugar is not manufacture. Both the traders as well as the consumer would regard both sugar and candy sugar as sugar only. The only difference may be that sugar candy is a presentation of sugar in more convenient and, purer form. Even when the consumer is purchasing the candy sugar he does not consider it any different from the substance sugar. 13. In the case of Tungabhadra Industries Ltd. v. CTO [1960] 11 STC 827, the Hon'ble Supreme Court has decided that purification/refining of groundnut oil to obtain refined groundnut oil does not amount to manufacture. Since there is no change in the nature of the substance which remains groundnut oil even after purification. The important observations of the Hon'ble Supreme Court at page 831 are reprodu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various medicines more particularly in case of Homeopathy medicines. 14. The Hon'ble Supreme Court in the case of Sterling Foods v. State of Karnataka [1986] 63 STC 239 has observed that: "the test which has to be applied for the purpose of determining whether a commodity subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. Applying the above test it was held that processed shrimps, prawns and lobsters are commercially regarded as the same commodity as raw shrimps, prawns and lobsters. When raw shrimps, prawns and lobsters are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, they do not cease to be shrimps, prawns and lobsters and become another distinct commodity. They are still known as shrimps, prawns and lobsters. There is no essential difference between raw shrimps, prawns and lobsters and processed shrimps, prawns and lobsters are ready for table while raw shrimps, prawns and lobsters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is paying excise duty on conversion of sugar into candy sugar will have no bearing on the interpretation whether or not the process is manufacturing. The excise duty levied on the assessee is for the Act of converting sugar into candy sugar and not for the reasons that the activity involved is manufacturing. There is no finding by the Excise Department that the activity involved is manufacturing. Therefore, it does not call for any comments. Further, there is no rule that the process of obtaining an item which is exciseable under Excise Act will certainly amount to manufacturing, just as there is no rule that the process of obtaining an item which is not exciseable under excise law cannot amount to manufacture. 17. One of the arguments raised by the learned counsel was that in the earlier two assessment years the assessee had been allowed deduction under section 80-I for the same process and hence the deduction under section 80-I should be allowed in this year also. This argument cannot be accepted because the theory of res judicata does not apply to the Income-tax proceedings. We further find that in earlier assessments in years in which the assessee had been allowed dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self and nothing else. 19. Coming to the cases relied upon by the learned counsel for the assessee, we are of the view that the same are distinguishable on facts. In fact, the cases on which we have relied are directly on the issue and squarely cover the issue raised in this appeal by the assessee. For the same reasons, the reliance placed by the learned counsel on the expert opinions is of no assistance to the assessee. 20. In the light of our above discussion, we uphold the findings of the authorities below and dismiss the ground raised by the assessee. 21. As regards the additional deduction under section 80-1 of Rs. 97,750 agitated separately in Gr. No. (1A), we confirm the finding of the authorities below for the reasons given supra in the main ground. Since the assessee is not entitled to deduction under section 80-I because it is not carrying on any manufacturing process there is no question of allowing additional deduction under section 80-I. Accordingly, ground No. (1A) is also rejected. 22. The next grievance of the assessee is that the learned CIT(A) is not justified in not allowing secret commission of Rs. 4,93,490. The assessee had claimed an amount of Rs. 4,93 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments are illegal or opposed to public policy, or have pernicious consequences to the nations' life as a whole. It is not open to a businessman to bribe a public official and say that the bribe was necessary and expedient in his business interest and therefore, the amount paid by way of bribe ought to be deducted as business expenditure under section 37." 23. Shri S.N. Inamdar, the learned counsel for the assessee reiterated the submissions made before the CIT(A) and further relied upon the four authorities cited by him before the Assessing Officer and the CIT(A) as detailed in para 19 above. He submitted that while dealing with the public limited companies, the business cannot be obtained without payment of secret commission. The practice is prevailing worldwide from top to bottom in every field. Even the ordinary person is facing the problem of secret commission every day in his routine life. Thus in these circumstances to ask for further evidence to establish the payments and the practice prevailing which is bitter truth of day-to-day life is absolutely uncalled for. He submitted that the assessee has not maintained the names and addresses of the payees. But it was because the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entertainment expenses to the tune of Rs. 32,564 as per audit report. The Assessing Officer worked out the disallowance under section 37(2) as under: Total expenditure Rs. 32,564 Less Admissible Rs. 10,000 50% of balance Rs. 22,564 Rs. 11,182 ----------- Rs. 21,282 ---------- Inadmissible entertainment expenditure Rs. 11,282 ---------- 27. The assessee appealed to the CIT(A) and submitted that the tea expenses for the factory and office were exclusively for staff purposes and it is not for the entertainment of visitors. The CIT(A) states 'however, no evidence in support of its claim has been produced before the undersigned. Under the circumstances, it appears that the Assessing Officer has correctly worked out the disallowances as per section 37(2) of the Income-tax Act, 1961." He accordingly upheld the disallowance of Rs. 11,282. 28. Shri S.N. Inamdar, the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturing process despite the fact that ingredient of the original commodity continues to remain in the new article. For this proposition, reasons would be giver, at the appropriate place in my order. 35. So, in my view, the real question is as to what test should be applied to determine whether article produced is different or not from the original commodity subject to process. Various tests have been applied by the Supreme Court from time to time. The most prevalent test is test of commercial parlance i.e. the sense in which the people in the trade dealing with the commodities think of such commodities. In this connection, reference can be made to the judgment of the Hon'ble Supreme Court in the case of Pio Food Packers. The test applied by the Supreme Court appears at page 65 of the reports as under: --- "There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture." Applying the aforesaid test, the court held at page 66 as under :--- "In the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the table. Consequently "Betel Leaves" were held to be different from "Vegetables". Applying this principle, it was held by the Apex Court in the case of Ganesh Trading Co. v. State of Haryana [1973] 32 STC 623 that Paddy and Rice are different commodities. On the same principle, it was held again in the case of State of Karnataka v. Raghurama Shetty [1981] 47 STC 369 (SC) that process of milling of Paddy into Rice amounts to process of manufacturing. Similarly in the case of Sri Siddhi Vinayak Coconut Co., 34 STC 103, Larger Bench of Five Judges held that Watery Coconut and Dry Coconut are different commodities. 37. The third test applied by the Hon'ble Supreme Court is the 'Functional or user test." In the case of Atul Glass Industries (P.) Ltd. v. Collector of Central Excise [1986] 63 STC 322, the Apex Court at page 327 held as under :--- "The test commonly applied to such cases is : How is the product identified by the class or section of people dealing with or using the product? That is a test which is attracted whenever the statute does not contain any definition. Porritts Spencer (Asia) Ltd. v. State of Haryana [1978] 42 STC 433(SC). It is generally by its func ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical food value as refined groundnut oil. There is no use to which the groundnut oil can be put for which the hydrogenated oil could not be used, nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Similarly we consider that hydrogenated oil still continues to be "groundnut oil" notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil." 38. In the present case, the issue has to be decided keeping in view the above tests. However, before coming to merits of the case it would be useful to refer the following observations of the Full Bench of Kerala High Court in the case of N. Sundareswaran v. State of Kerala [1993] 91 STC 476 :--- "The common parlance test is pressed into service if the article is one in daily household use or is used by the common man. The commercial parlance test is called in aid while dealing with the construction of goods known to the merchant community and the consumers of those goods. In the substantial identity test what is material is whether a distinct article as understood by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ordinary plantation white sugar. This certificate appears at page 53F of the paper Book. It is also useful to note that 'Candy Sugar' is an excisable item under Central Excise Act. Excise duty is payable only on the manufacture of goods. 40. There are two direct decisions of High Courts wherein it has been held that 'Candy Sugar' is different from ordinary sugar. The Madras High Court in the case of Nemichand Parasmal Co. v. Dy. CTO [1984] 55 STC 47 has held that expression 'Sugar' will not include 'Sugar Candy' or "Diomond Sugar". Similar view has been taken by Madhya Pradesh High Court in the case of Channulal Motilal v. CST [1965] 16 STC 297. In this case "Misri Patasha" have been held to be different from 'Sugar". These decisions have been given by applying the test of common parlance. 41. In the proposed order, much emphasis has been laid on the fact that candy sugar is only the purer form of sugar and therefore no emergence of new commodity. According to him essential ingredients continue to remain the same. So the identity of the original commodity is not lost. With due respect, I am unable to agree with this approach. The only relevant criteria is whether the ite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deoiled cake for animal feed though obtained in the course of same process at different stages. Both emerge into different and distinct commodities commercially known in common parlance for distinct and different use. Thereby groundnut protein flour did not remain part of the genus, i.e., deoiled cake, but became a new and different entity known in the commercial parlance." In view of these two Supreme Court decisions, it cannot be said that there is no emergence of different item merely on the ground that properties of both the articles are the same. The only relevant point to consider is whether item produced is known as different item in the commercial or common parlance. Therefore, the claim of assessee cannot be rejected in the present case on the mere ground that properties of sugar continues to remain in the "Candy Sugar". 42. The decision of Supreme Court in the case of Sakarwala Bros. heavily relied upon by the revenue is quite distinguishable and does not help the revenue. In that case, the question was whether "Sugar" as defined in entry 47 of Schedule 'A' of Bombay Sales Tax Act would include Patasha, harda Elaichidana. Entry 47 had adopted the meaning Sugar as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section 80-I of the Income-tax Act, 1961. In accordance with the majority view, the appeal is allowed. THIRD MEMBER ORDER Per M.V.R. Prasad, A.M. As there is a difference of opinion between the learned Accountant Member and the learned Judicial Member, the matter has been referred to me by the Hon'ble President of the Income-tax Appellate Tribunal under the provisions of section 255(4) of the Income-tax Act, 1961, and the question referred reads as follows :--- "Whether on the facts and in the circumstances of the case, the assessee is engaged in manufacturing process and thereby eligible for deduction under section 80-I of the Income-tax Act, 1961 ?" 2. The assessee-firm deals in sugar and also claimed to be carrying on a manufacturing activity which results in the production of the following commodities : --- (a) Candy sugar (b) P.G. Sugar, i.e., Pharma grade. (c) Pulverised sugar (d) Bura sugar The items at (a) to (c) are claimed to be used by pharmaceutical companies, whereas item at (a) above is a by-product of sub-standard quality developed during the manufacture of items at (a) to (c) above. Candy sugar is known by various names in differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercial starting sugar. 4. The product cut giving very small size crystals when suitably graded is the 'Pharma Sugar' used by the pharmaceutical industry for use in drug formulations. 'Candy Sugar' or 'Pharma Sugar' when finely ground and mixed with food grade starch gives 'Icing Sugar' used in food industry. Both these sugars are also manufactured by M.B. Chemicals at their plant, and since they are further derived from Candy Sugar, they too involve all the processing mentioned above and starting from the commercial sugar. 5. The result of the operations is also the by-product called 'bura sugar', which in fact contains most of the impurities extracted from the commercial sugar. 6. Study of the plant and the process is convincing beyond doubt to state that M.B. Chemicals Ltd. plant at Nilgavan is a genuine manufacturing activity involving intricate processing, energy consumption and strict quality control." It has also filed before the revenue authorities a certificate from Vasantdada Sugar Institute, which may be seen at page 53F of the APB, and it reads as follows :--- 'To whomsoever it may concern 1. This is to certify that M/s. M.B. Chemicals at Nilgavan in Malegaon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 'Candy Sugar' is a different commercial product than ordinary plantation white sugar." The claim of the assessee is that the candy sugar produced by it is used by pharmaceutical companies and these companies cannot use ordinary grade sugar and in support of this claim, the learned counsel for the assessee has filed some certificates, a few of which are reproduced below: --- 4. One such certificate given by Ranbaxy Laboratories Ltd. may be seen at page 53A of the APB and it reads as follows:--- "This is to certify that we have been purchasing Pharmaceutical Grade Sugar (P.G. Sugar) from M/s. M.B. Chemicals since 1994. Pharma Sugar is a different commercial commodity than ordinary sugar. We purchase this as a raw material for our product. Ordinary commercial sugar cann't be used in place of Pharma Grade Sugar. For Ranbaxy Laboratories Limited Sd/- (S.Saxena) Asstt. Manager-Quality Assurance" 5. Certificate given by Ajanta Pharma Ltd. may be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us ceremonies and for mouth freshening with 'Soumph' and is also used in pharmaceutical companies for sugar coating in some formulations. It is claimed that ordinary sugar cannot be used for these purposes. It is also claimed that sugar undergoes a chemical change during the processing. Bura sugar, the by-product, is used as a substitute for jaggery and with ghee is used as a delicacy. It is also claimed that the end users consider candy sugar and bura sugar as different from sugar and the excise authorities also levy excise duty on candy sugar even though candy sugar is produced out of duty paid sugar. The learned counsel for the assessee further mentioned that the learned Accountant Member has noticed the distinction between "production" and 'manufacture' in para 10 of his order but did not take the distinction to its logical end and while arriving at the conclusion that the assessee is not engaged in manufacturing activity, ignored that distinction. 9. The learned counsel for the assessee also claimed that the order of the learned Judicial Member is on the correct lines because, inter alia, is supported by two decisions of the High Courts which are cited by him. These are the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also pleaded that every process on which excise duty is leviable is not a manufacturing process and so the fact that excise duty has been levied in the present case does not take the case of the assessee far. The learned DR relied strongly on the decision of the Maharashtra Sales Tax Tribunal in the case of Industrial Mineral Chemicals wherein it was held that conversion of copper sulphate powder into copper sulphate crystal is not a manufacturing activity. Heavy reliance is also placed on the decision of the Apex Court in the case of Tungabhadra Industries Ltd. wherein it was decided that purification/refining of groundnut oil to obtain refined groundnut oil does not amount to manufacture since there is no change in the nature of the substance. It is also pleaded that in the case of an exemption provision, if there is a doubt, the benefit of doubt has to be given to the State, in view of the decision of the Apex Court in the case of Novopan India Ltd. v. Collector of Central Excise and Customs [1994] 73 ELT 769. 11. In his rejoinder, the learned counsel for the assessee mentioned that even the Webster's Dictionary calls sugar candy a food product. He has also mentioned that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cates are indicative of the fact that candy sugar is a different commodity from sugar and that it is not only known by a different name but has also different uses and serves different purposes from ordinary grade sugar. 13. Sales Tax cases which hold that candy sugar is only a different form of sugar are, to my mind, distinguishable inasmuch as they were dealing with a different legislative provision. In the case of Vasantha Co., on which the learned DR relied, it was held that sugar which was exempted from the levy of sales tax by two notifications issued by the State Government did in the context in which the exemption was granted take in sugar candy also. The Hon'ble Madras High Court observed as follows:--- "Having regard, therefore, to the underlying purpose of the issue of these notifications and that purpose being linked to that set out in the Central Act relating to the levy of additional excise duty, the State must necessarily have intended that the exemption should cover sugar candy as well, and this is so, even apart from the question whether sugar as generally understood includes sugar candy within its scope or not." It may be observed from the above remark tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcially purchased or sold as sugar. The Legislature, in entry 47, does not use the word sugar simpliciter. It has in terms stated that what is covered is sugar as defined in item No. 8 of the First Schedule to the Central Excises and Salt Act, 1944. When we turn to the definition appearing in the aforesaid item No. 8 that definition is not intended merely to cover sugar as known in common parlance. As stated by us earlier, it is intended to cover all forms of sugar. It is further intended to cover only sugar in any form which contains more than 90 per cent of sucrose. A definition which refers to the chemical contents of an article cannot be said to be a definition which is intended to cover the article as understood in common parlance. It is with a view to give a meaning different from that which the article bears in common parlance that a special definition has been given, and it is not possible for us to interpret the words used in entry 47 as only covering the term sugar as used in common parlance." It may be observed from the above remarks that the decision of the Hon'ble Gujarat High Court turned on the artificial definition of "sugar", i.e., that its contents should be mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I dismiss this appeal." This view also finds support from the decision of the Hon'ble Madhya Pradesh High Court in the case of Channulal Motilal in which it was observed as follows :--- "3. In regard to the first question, the Government Advocate, who appeared for the Revenue, conceded that sugar is the only constituent of the products called "Batasa", "Chiranji", "Mishri", etc. The point, therefore, is whether these products which are wholly made of sugar, can be regarded as sugar within the meaning of Entry 41 of the list of goods exempted from tax as enumerated in Schedule I to the Act. The applicant's counsel, Shri R.S. Dabir forcefully urged that these products, which were made of sugar only, could not be regarded as anything other than sugar only because they were given other forms. In support to this view, the counsel drew our attention to Punamchand Dalichand v. The State of Bombay, a decision of the Bombay Sales Tax Tribunal mentioned at page 367 of S.V. Aiyar's Sales Tax Digest, Third Edition [1959]. The view taken in that case was that if loaf sugar and sugar cubes were exempted, there was no reason why batasha ought not to be exempted also. Even apart from the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to in the above judgment is the vernacular name for candy sugar. This decision is an authority for the proposition that those cases based on Central Excise entry are distinguishable and also for the proposition that in common parlance "mishri" or candy sugar cannot be regarded as sugar, and that the two are commercially different commodities. 14A. The crux of the argument of the learned DR before me has been that sugar and sugar candy have the same chemical composition, notwithstanding the certificate to the contrary obtained by the assessee from Vasantdada Sugar Institute, referred to hereinabove. I do not find much substance in this argument. Simply because the finished product has the same chemical composition as the raw material from which it is made, it does not follow that the process involved does not amount to manufacture. In order that the process to which an article is subjected should be a manufacturing process, it is not essential that the article must change its nature. It is enough if it becomes a different commercial article. This is the proposition laid down by the Hon'ble Allahabad High Court in the case of Badri Prasad Prabha Shankar v. CST 14 STC 208. It h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er augmentation fluid in aeroplane engines during take-off amounts to manufacture. I also find other cases cited by the learned DR like Pio Food Packer's case are distinguishable. In this case, the Hon'ble Supreme Court observed as follows:--- "But where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been 'manufactured'.... Although a degree of processing is involved in preparing pineapple slices from the original fruit, the commodity continues to possess its original identity, notwithstanding the removal of inedible portions, the slicing and thereafter canning it on sugar to preserve it. It is contended for the revenue that pineapple slices have' a higher price in the market than the original fruit and that implies that the slices constitute a different commercial commodity. The higher price, it seems to us, is occasioned only because of the labour put into making the fruit more readily consumable and because of the can employed to contain it. It is not as if the higher price is claimed because it is a different commercial commodity. It is said that pineapple slices appeal to a different sector of the trade and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing consist in the non-oily content of the raw oil being separated and removed, rendering the only content of the oil 100 per cent. For this reason refined oil continues to be groundnut oil within the meaning of rules 5(1)(k) and 18(2) notwithstanding that such oil does not possess the characteristic colour, or taste, order etc. of the raw groundnut oil." The observations of the learned Judicial Member are as follows:--- "hydrogenated oil serves the same purpose as a cooking medium and has identical food value as refined groundnut oil. There is no use to which the groundnut oil can be put for which the hydrogenated oil could not be used, nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Similarly we consider that hydrogenated oil still continues to be 'groundnut oil' notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil." It may be observed that the finding of the apex court is that both groundnut oil and hydrogenated oil are put to the same uses. That, to my mind, is not the case in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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