TMI Blog2011 (11) TMI 502X X X X Extracts X X X X X X X X Extracts X X X X ..... unt for taxation and same cannot be taxed again - considering the findings of CIT(A) upholding the activity of the assessee as manufacturing, hence on this count also the assessee succeeds - Decided in favor of assessee - IT APPEAL NO. 708/KOL./2010 - - - Dated:- 25-11-2011 - MAHAVIR SINGH, C.D. RAO, JJ. N.K. Poddar for the Appellant. P.S. Dutta for the Respondent. ORDER Mahavir Singh, Judicial Member This appeal by revenue is arising out of order of CIT(A)-V, Hyderabad in Appeal No 142/DC-16(1)/CIT(A)-V/08-09 dated 27.01.2010. Assessment was framed by DCIT, Circle-16(1), Hyderabad u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") for Assessment Year 2006-07 vide dated 28.11.2008. 2. The first issue in this appeal of revenue is against the order of CIT(A) deleting the addition of additional depreciation added by Assessing Officer by holding that the machinery is not used for any manufacturing or production activity. For this, revenue has raised following ground nos. 1 and 2: "1. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of additional depreciation to the tune of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a new belt. The purpose which a reconditioned belt is to serve is the same as the purpose that the belt before reconditioning was serving. A new article does not come into existence as a result of reconditioning of the old belt." Similarly, it cannot be said that any new product has come into existence by wrapping or neatly packing the old product. iii. It cannot be said that any new article comes into existence when the old product is merely re-conditioned. iv. All the purchases of the semi-finished goods are all from sister concerns belonging to the same Group. v. There is no manufacturing activity involved in the whole process. vi. Pre-heating and spraying, sintering and cooling of the blades are said to take place before oiling the blades. The assessee does not have any machinery through which the process of heating and spraying, etc. can be done as seen from the list of machinery purchased by it. Neither the expenditure incurred in the P L Account shows any payment towards any such charges paid/payable to any outside party for the work of heating, etc. vii. All the machinery purchased is useful for packing into new cartons, it cannot be said that any new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before us. 4. Before us Ld. Sr. DR Shri P. S. Dutta heavily relied on assessment order and findings of the Assessing Officer whereby he has rejected the explanation of the assessee. Ld. Sr. DR stated that entire machinery is useful for the purpose of packing of the produce/manufactured items but this machinery by itself does not enable the assessee to manufacture any new article. He stated that at best, it can be called a processing and not a manufacturing or production as envisaged under section 32(i)(iia) of the Act. 5. On the other hand, Ld. Sr. Counsel Shri N. K. Poddar, first of all, demonstrated before us the process of manufacturing, which is as under: "MANUFACTURING PROCESS We are purchasing Semi finished ground blades not suitable for shaving and the said unfinished blades are being processed further in our factory from grinding till the final packing. All the manufacturing process involve specialized sophisticated technology which is of precision nature. The details of the process involved are mentioned here under: GRINDING: Edges of semi finished ground blades are not suitable for shaving therefore semi finished blades are go through the grinding p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrink wrapped packet of 10 display boxes each are to be packed in outer corrugated box duly stropped with gum tape and stropping rope through stropping machine for disposal of products." He argued in view of this manufacturing process, that the assessee purchases semi finished ground blades not suitable for shaving and then processes them in liquid paraffin oil tank and these naked oil blades so obtained are over wrapped with the wax paper to prevent them from moisture. He stated that wax wrapped blades are covered with outer wrapper by folding and gum fixing operations to get the single blades and then five or ten single blades are filled inside a small packet made from specific flat printed card board material into form named as tucks with the help of cartooning machines meant for this purpose. Further, he stated that each manufactured tuck is then covered with thin BOPP material to prevent the blades from moisture with the help of cello phoning machine and these tucks are kept in tins/hanging cards and then put in cartoons and sold. In view of this process, he argued that when assessee purchases unusable semi finished blades and make them usable for shaving by converting them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... temperature of 150 degree centigrade for the admissible time, removed back for spraying while in hot condition with coating solution LW-1200 with the help of spraying machine. After spray process is over, again these blades along with the charger kept inside sintering furnace at maximum temperature of 370 degree centigrade for melting coating solution and allow it to spread over the edges. Then blades along with the charger are taken out of the sintering furnace, same to be cooled up to the temperature of 100 degree centigrade in the cooling chamber. After the cooling, blades are removed from the charger and shifted to stands for dipping into liquid paraffin oil tank and kept separately for oiling. Then naked oiled blades are over wrapped with wax paper at one point of wrapping machine to prevent blades from moisture. At other point, the wrapping machine wrapped blades into wax paper and fully covered with outer wrapper by folding and gum fixing operation to get the single blade. Here is the process where 5, 6 or 10 single blades can be filled inside a small packet as desired according to the requirement, can be manufactured from the specific flat printed card board material into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cises and Salt and Additional Duties of Excise (Amendment) Act, 1980. Hon'ble Apex Court followed it's view expressed in Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 (SC) that such processes were not so alien or foreign to the concept of " manufacture" that they could not come within that concept is correct and also considered, what applies to main levy of excise duty under the Central Excises and Salt Act, 1944, applies to additional duties of excise under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Ld. Counsel for assessee stated that Hon'ble apex Court has considered that there is no need for enlargement of definition of "manufacture" in the Additional Duties Act as well and section 3(3) of the Additional Duties Act provides for the application of provisions of the Central Excises and Salt Act, 1944, for levy and collection of additional duties as they apply in relation to duties of excise under the main Act. It is plain that the statute expressly makes provisions in the main Act apply in relation to "levy and collection" of the additional duties. The term "levy" is an expression of wide import: it includes both imposition of a tax as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make any radical change in the definition of manufacture as borne out by Hon'ble Apex Court in the case of Ujagar Prints (supra) and also others. In our view, the definition introduced is supporting assessee's case. The process carried out by the assessee on raw grounded blades purchased from market and made the same ready to use in commercial market or consumers, certainly called manufacturing done by assessee in the given facts and circumstances of the case. The raw grounded blades cannot be used for the purpose of shaving and cannot be called a commercially viable product, which is sellable in the market. The final product manufactured by assessee is commercially new and different article having a distinctive name character and use. Accordingly, the assessee is manufacturer and is entitled for additional depreciation u/s. 32(1)(iia) of the Act on additional machineries purchased and used for packaging. We confirm the order of CIT(A) and this issue of revenue's appeal is dismissed. 9. Next issue in this appeal of revenue relates to the order of CIT(A) deleting addition of Rs. 28,27,662/- on account of wastage in the production process. For this, revenue has raised following tw ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
