TMI Blog2012 (7) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... registered with Central Excise Authorities. Section 2(r) of the Special Economic Zones Act, 2005, which is a Central Act passed by the Parliament in May, 2005, and which Act also governs the said industrial unit owned by Assessee Company herein, also defines the term 'manufacture' to include processes such as 'blending' - in CHOWGULE & CO. PVT. LTD. Versus UNION OF INDIA [1980 (11) TMI 61 - SUPREME COURT OF INDIA]the word used 'producing' in relation to the tea mixture, which was produced through the process of blending. Though Section 10A did not contain a definition for 'manufacture', the definition of the term contained in Section 2(r) of the 2005 Act was incorporated in Section 10AA with effect from February 10, 2006. Admittedly, this definition covers blending also. Therefore, blending and packing of tea done by the assessee qualifies for exemption under Section 10AA - the contention of the assessee that the scheme of income tax exemption available to units in the SEZ u/s. 10A and units in the free trade zone provided u/s. 10AA and the exemption available to 100% EOU u/s. 10B are very similar in nature and the wordings of the statutory provisions are similar in nature i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grow or manufacture any tea. According to the assessee, tea so bought in different auctions is processed with a view to remove all dust and foreign substances and thereafter it blends different varieties of tea to make it of 'uniform and consistent' quality throughout the year. Thereafter, it is packed in consumer packets of 50,100,250,500 or 1000 gms. etc. or packed in the form of tea bags of 1.94 gms or 2 gms etc., as the case may be. During the relevant assessment year 2004-05, the assessee filed its return of income on 01.11.2004 along with the tax audit report in form no.3CA/3CD and in form no.3CEB. 3. The A.O. issued notices under sections 143(2) and 142(1) of the Act for framing assessment. The assessee claimed exemption under section 10B of the Act in respect of its 100% Export Oriented Undertaking (EOU) for export of manufactured jute bags, packet tea, tea bags, bulk tea, etc. The assessee also claimed deduction under section 80HHC of the Act. During the course of assessment proceedings, the AO, while framing assessment vide order dated 08.12.2006 under section 143(3) of the Act in respect of its 100% EOU observed that the assessee was not entitled to any exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 17 ECC 37) the Hon'ble Apex Court held that manufacturing refers to production of articles for use from raw, semi-raw or prepared materials by giving these materials new forms, qualities, properties or combination whether by hand labour or machinery It may be worthwhile to note that manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment labour and manipulation but something was necessary and there must be transformation; a new and different article must emerge having a definite name, greater use; thus manufacture implies bringing in something new. Almost similar definition has been provided by the Hon'ble Apex Court in another singal decision i.e. CIT v. N. S. Budharaja Co. [1993] 204 ITR 412. Similarly, in another important case i.e. Ujagar Prints v. Union of India hers [1989] 179 ITR 317, the Hon'ble Apex Court held that 'manufacture' Involves the change or series of changes brought about by the application of process that take the commodity where commercially it can no longer be regarded as the original commodity but is instead recognized as distinct, new article that has emerge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing order, i.e. gives reasons for refusing the grant of leave then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within tile meaning of article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, Tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supreme Court being the apex court of the country. But, this does not amount to saying that the order of the court, Tribunal or authority below has stood merged in the order of the Supreme Court rejecting the special leave petition or that the order of the Supreme Court is the only order binding as res judicata in subsequent preceding between the parties. Similar view was taken by the apex Court in the case of Supreme Court Employees' Welfare Association, AIR 1990 SC 334. Accordingly, the arguments of the Ld A/R stand rejected and the two decisions expounded by the Hon'ble jurisdictional High Court n the case of Appejay Pvt. Ltd. and Brooke Bon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gunge, Kolkata -700023 for carrying out, on contract basis, various manufacturing, processing, blending, packing including loading and unloading activities for and on behalf of the assessee company. This agreement was initially entered into on 15.05.1996 for 10 years and later revised on 15th May, 2006. The above-said Trot Pvt. Ltd. had provided their own premises with shop floor and warehouse etc. and in turn, the assessee company provided various machineries to the said company for carrying out operations set out hereinabove. All raw materials, packing materials, spares and finished goods are owned by the assessee company and stored at the warehouse facilities provided by the Trot Pvt. Ltd. and some raw materials are stored at other warehouses hired by assessee. 5. The ld. Counsel for the assessee, in view of the above facts, stated that in relation to its 100% EOU unit, the assessee company buys tea of different grades in bulk from various persons and particularly, from recognized auction centres in India and thereafter blend the same in appropriate proportions in accordance with the technical advice received from experts, package the same in specialized paper bags with scree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above-stated agencies used to carry out inspection/ supervision by drawing samples so as to ensure that the packaged tea is free from foreign smell, impurities, free from being mouldi, musty or acidic and is also fit for human consumption and conforms to the specifications as to quality controls as set out in the respective export orders. 6. The ld. Counsel for the assessee explained the process involved in export of blended and processed tea by the assessee which involves various steps right from the purchase of tea in bulk packaging from different Auction Centres in India and overseas to the physical stuffing of the packaged teas in containers for shipment. He stated that teas are purchased mainly from six tea auction centres in India at Kolkata, Siliguri, Guwahati, Cochin, Conoor and Coimbatore. He also stated that it also imported tea from various overseas countries including, inter alia , Argentina, China, Kenya, Sri Lanka etc. According to the Counsel, teas are tasted at testing rooms by assessee's expert tasters from samples of teas bought, which are of different qualities and grades, and thereafter blend sheets are prepared which indicates teas of different qualit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee explained the entire process of manufacturing and blending of different teas. 7. The ld. Counsel for the assessee drew our attention to assessee's paper book-IV at page 387 where percentage of value addition is given. The same reads as under: Details of Sales from 100% EOU during Financial Year 2003-04 (AY 2004-05) Rupee Value Percentage Non-consumer/ Commercial Packing- Bulk Tea 24,23,322.00 0.94% Value added- Consumer Packing of different varieties of products samples of which have been referred to in pages 279 to 281 of Paper Book Volume-III 25,63,17,126.81 99.06% Total 25,87,40,448.81 100.00% The ld. Counsel for the assessee also drew our attention to pages 297 to 281 whereby complete chart of ingredients including value addition is provided in terms of quantity and value. In some of the cases, according to the ld. Counsel, there is 100% value addition, in some, it is 92%, in some, it is 99%, in some, it is 85%. According to the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arris Wild Obsession Forest Fruit Hibiscus, Elder berries, Apple, Mint, Rose Hip Shell, Black Current 100% 8 Harris Royal Dessert Rasberry Apple, Rose Hip Shell, Hibiscus, Corints, Blackberry, Lemon Grass, Blue Mellow 100% 9 Harris Forest Fruit Forest Fruit Hibiscus, Elder berries, Apple, Mint, Rose Hip Shell, Black Current 100% 10 Harris Fruity Roman Orange Apple, Rose Hip Shell, Hibiscus, Orange Peel, Saff Flower 100% 11 Harris Lemon Grass Lemon Grass Cornflower, Lemon Grass, Orange Peel, Rose Petal 85% 12 Hemkop Ortte (Mixed Herbs) Passion Herb, Lave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the said section to include, any - a. process, or b. assembling, or c. recording of programs on any disc, tape, perforated media or other information storage device He further explained the provision that Explanation (iv) of the said section 10B further provided that the word 'produce' for the purpose of the said section, in relation to any article or thing shall include production of computer programme. Ld. Counsel explained that the CBDT vide its Circular No.528 dated 16.12.1988 (1989) 176 ITR (St.) 154 explained the provisions enacted through the Finance Act, 1988 vide paragraph 18.2 of the Circular, wherein it was clearly explained by the CBDT that the said new section 10B had been inserted in the statute book with a view to provide further incentive for earning foreign exchange so as to secure that the income of a 100% Export Oriented Undertaking (EOU), shall be exempt from tax for a period of five consecutive assessment years falling within the block of eight assessment years. It was further explained that the exemption provided under the new section was similar to the one provided under section 10A of the Act to industrial undertakings operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv. Where an assessee avails of the benefit of section 10A or section l0B, it will not be eligible for other tax concessions available under other provisions of the Act during the period of 10 years - Sub-section (6); v. No deduction under the said section would be available for and after the assessment year 2010-2011 - Third proviso to Sub-section (1). 9. Ld. Counsel for the assessee clearly admitted that the expressions 'manufacture' and/or 'produce' have not been defined in the Act in exhaustive manner. For the purposes of section 10B of the said Act, an inclusive definition has been given in respect of the said two words. The expression 'manufacture' or the purposes of section 10B of the Act has been defined to include inter alia any 'process'. He further referred that the Government of India had announced a Special Economic Zone Scheme in April, 2000 with a view to provide an internationally competitive environment for exports. The objectives of Special Economic Zones include making available goods and services free of taxes and duties supported by integrated infrastructure for export production, expeditious and single window approval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10B of the Act. For that Ld. Counsel for the assessee referred to various case laws of Hon'ble Supreme Court and various High Courts. 10. On behalf of Narendra Tea Co. Pvt. Ltd. in ITA No.2089/Kol/2007, Shri S. K. Tulsiyan, Ld. counsel appeared and he stated that his assessee is engaged in the business of purchasing different varieties of bulk tea from the tea gardens/auction houses/market and blend this into a product of specified quality and export it to the buyers abroad. According to Ld. Counsel, the manufacturing process of blending of tea, the assessee set up a new industrial undertaking under SEZ scheme of Govt. of India as envisaged in the export import policy (2002-2007) and its unit is set up in Falta Special Economic Zone at Falta, District South 24 Parganas, West Bengal. According to Ld. Counsel, his unit at Falta was granted permission by Govt. of India, Ministry of Commerce Industry, under SEZ scheme to manufacture bulk tea/packet tea, vide letter no.11299 dated 21.03.2003. Ld. Counsel for the assessee explained the provisions of section 10A and 10B of the Act. He also analysed the definition of manufacture based on SEZ scheme, export import (EXIM) policy a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d states that the total income does not form part of total income but they work independently in their own provisions of one section and one section do not apply to other section in Chapter III. He referred to explanation (4) to section 10A and explanation (1) to section 10AA of the Act. He also referred to the definition of clause (r) to section 2 of the Special Economic Zones Act, 2005 as adopted in explanation (1) to section 10AA of the Act. In view of these provisions, he stated that the definition of the term 'manufacture and produce' clearly reveals that section 10A, 10AA and 10B of the Act have their own, independent and separate definitions and hence, their applicability has been restricted to the respective provision only. He admitted that there is one and the same definition of 'manufacture or produce' in section 10A and 10B of the Act. He stated that it will be out of place to mention that earlier also the definition 'manufacture' were available in section 10A and 10B of the Act even before insertion of new sections 10A and 10B of the Act by the Finance Act, 2001 w.e.f. 01.04.2001. According to Ld. CIT DR, this definition of 'manufacture' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lipton Ltd. v. State of Karnataka (1998) 109 STC 233 and 235 as the facts of the Karnataka High Court and those of Brook Bond case ( supra ) before Calcutta High Court were distinguishable on their facts. Moreover, in the case of Brook Bond Lipton Ltd. ( supra ), the sophisticated mechanical process and electro mechanical weighers were not available as in the case of Brook Bond Ltd. before Hon'ble Calcutta High Court. Therefore, Hon'ble Calcutta High Court was justified in holding that the processing of tea is not manufacture or produce in the facts available on their records. He argued that the contention of assessee that since sophisticated mechanical process and electro mechanical process weigher were used in the case of Madhu Jayanty International Ltd., therefore, this case is covered by decision of Karnataka High Court supra and blending of tea in assessee's case should be held as manufacture as held in the case of Brook Bond Lipton Ltd. ( supra ). In this regard, it was argued that in the case of Tara Agencies, supra, the sophisticated machinery i.e. electrical packaging and weigher were used even then the blending of tea was held as process only which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... narily be understood in the sense in which it is harmonious with the object of the statute to effectuate the legislative intention. It is equally settled law that if the language is plain and unambiguous, one can only look fairly at the language used and interpret it to give effect to the legislative intention. Nevertheless, tax laws have to be interpreted reasonably and in consonance with justice adopting a purposive approach. The contextual meaning has to be ascertained and given effect to. A provisions for deduction, exemption or relief should be construed reasonably and in favour of the assessee. In view of this, he stated that the intention of the legislature has to be gathered from the language used in the statute which means that attention should be paid to what has been said as also to what has not been said. He stated that the wording of section 10A, 10B 10AA of the Act are simple, clear and unambiguous and so the benefit of exemption has been extended by the legislature only to those assessees whose activities are either manufacture or production and therefore, the benefit cannot be extended to the processor as no word process has been inserted in sections 10A and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by assessee that the process involved in export of blended and processed tea by the assessee which involves various steps right from the purchase of tea in bulk packaging from different Auction Centres in India and overseas to the physical stuffing of the packaged teas in containers for shipment. From the documents and facts filed before us it is clear that teas are purchased mainly from six tea auction centres in India at Kolkata, Siliguri, Guwahati, Cochin, Conoor and Coimbatore and also imported tea from various overseas countries including, inter alia , Argentina, China, Kenya, Sri Lanka etc. We find that teas are tasted at testing rooms by assessee's expert tasters from samples of teas bought, which are of different qualities and grades, and thereafter blend sheets are prepared which indicates teas of different qualities/ grades which are to be blended by the contractors on behalf of the assessee to achieve the required standard of tea for export. Tea purchased in various auction centres is passed through a series of automatic cleaning processes through machines owned by the assessee to remove diverse foreign materials including metals, particles from the packaging materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 Export Oriented Undertaking (EOU) is also registered with Central Excise Authorities. Assessee Company has claimed exemption under section 10(B) of the Act, which had been inserted on the statute book by the Finance Act, 1988 w.e.f. 1.4.89. Explanation (iii) of the said section l0B defined the word 'manufacture' for the purposes of the said section to include inter alia 'any process. Section 2(r) of the Special Economic Zones Act, 2005, which is a Central Act passed by the Parliament in May, 2005, and which Act also governs the said industrial unit owned by Assessee Company herein, also defines the term 'manufacture' to include processes such as 'blending'. In Chowgule Co. Prt.. Ltd. v. Union of India [1981] 1 SCC 653 Hon'ble Supreme Court, after considering the judgment of Hon'ble Bombay High Court in Nilgiri Ceylon Tea Supplying Co. v. State at Bombay [1959] 10 STC 500 (Bom), clearly observed that when different brands of tea are mixed for the purpose of producing a tea mixture of a different kind and quality according to preset formula, there is plainly and indubitably processing of the different brands of tea, because these brands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to introduce an element of volition and effort involving the employment of some process for bringing into existence some goods; 19. In Chowgule Co (P) Ltd v. Union of India [1981] 1 SCC 653 AIR 1981 SC 014 Hon'ble Supreme Court were concerned with the question whether the blending of ore, whilst loading it in the ship by means of the mechanical ore handling plant, constituted 'manufacture' or 'processing' of ore for sale within the' meaning of section 8(3)(b) and Rule 13 of the Central Sates Tax Act, 1956. Dealing with this question, their lordships held and observed at pages 659 and 660 of the Reports as under: It still remains to consider whether the ore blended in the course of loading through the mechanical ore. handling plant can be said to undergo processing when it is blended. The answer to this question depends upon what is the true meaning and connotation of the word processing in Section 8(3)(b)and Rule 13. This word has not been defined in the Act and it must therefore be interpreted according to its plain natural meaning. Webster's Dictionary gives the following meaning of the word 'process : to subject to some special p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blending of ore of diverse physical and chemical compositions is carried out by the simple act of physically mixing different quantities for such ore, on the conveyor belt of the mechanical ore handling plant. But to our mind it is immaterial as to how the blending is done and what process is utilised for the purpose of blending. What is material to consider is whether the different quantities of ore which are blended together in the course of loading through the Mechanical ore handling plant undergo any change in their physical and chemical composition is a result of blending and so far as this aspect of the question is concerned, it is impossible to argue that they do not suffer any change in their respective chemical and physical compositions. 20. In paragraph 7 of its said judgment, Hon'ble Apex Court also considered the question whether the different brands of tea purchased and blended by the assessees for the purpose of producing the tea mixture could be said to have been 'processed', after the purchase, within the meaning of the proviso to section 8(a), so as to preclude the assessees from being entitled to deduct from their turnover under section 8(a), so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Born HC)) for the purpose of producing a tea mixture of a different kind and quality according to a formula evolved by them, there was plainly and indubitably processing of the different brands of tea, because these brands of tea experienced, as a result of mixing, qualitative change, in that the tea mixture which came into existence was of different quality and flavour than the different brands of tea which went into the mixture. There are, it is true, some observations in the judgment of the Bombay High Court which seem to suggest that if instead of manual application of energy in mixing the different brands of tea, there had been application of mechanical force in producing the tea mixture, the court might have come to a different conclusion and these observations were relied upon by the Assessee, since in the present case the blending was done by application of mechanical force, but we do not think that is the correct test to be applied for the purpose of determining where there is 'processing'. The question is not whether there is manual application of energy or there is application of mechanical force. Whatever be the means employed for the purpose of carrying out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the assessee, in Chowgule Co (P) Ltd ( supra ), holding, inter alia, that where any commodity is subject to a process or treatment with a view to its development or preparation for the market it would amount to processing of the commodity within the meaning of the Central Sales Tax Act, 1956. Hon'ble Supreme Court, in the said judgment, did not consider the expression manufacture since the question was decided only on the expression processing . However, considering the judgment of the Bombay High Court in the case of Nilgiri Tea Co [1959] 10 STC 500, Hon'ble Supreme Court observed that, for the purpose of producing a tea mixture of a different kind and quality according to a formula evolved by them, there was plainly and indubitably processing of the different brands of tea, because these brands of tea experienced, as a result of a qualitative change, in that the tea mixture which came into existence was of a quality and flavour from the different brands of tea which went into the mixture. 22. In Stroud's Judicial Dictionary (4th Edition - 1971), the word 'Blended' has been defined to mean 'mixed' so as to be 'inseparable and indist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle is produced by this process. The aforesaid view was reiterated by Hon'ble Supreme Court in CIT v. Sesa Goa Ltd. [2004] 271 ITR 331, 334 (SC). The apex court held that extraction and processing of iron ore amounted to production within the meaning of section 32A(2)(b)(iii) of the said Act, which section also uses the expression 'manufacture or production of any article or thing'. 24. In Aspinwall Co. Ltd. v. CIT . (251) ITR 323 (SC), Hon'ble Supreme Court were dealing with the case of an assessee, who after plucking or receiving the raw coffee berries, made them undergo several processes to give them the shape of coffee beans. The court held that since the word 'manufacture is not defined it has to be given a meaning as is understood in common parlance. It is to be understood as meaning the 'production' of article or food from raw or prepared materials by giving such materials new form, qualities or combinations, whether by hand or labour or machines. If the change made in the article results in a new and different article, it was held that then it would amount to manufacturing activity. In Brooke Bond Lipton India Ltd. v. State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Hon'ble Karnataka High Court was dismissed by the apex court with the observations The special leave petitions are dismissed on merits as reported in [1998] 111 STC (St.) Hon'ble Calcutta High Court held and, observed at page 240 of the reports (269 ITR) as under: a. The dismissal of the Special Leave Petition even on the merits in respect of the judgment of the Division Bench of the Karnataka High Court (in Brooke Bond Lipton India Ltd. v. State of Karnataka [1998] 109 STC 235 535 (Kar) did not amount to a declaration of law by the apex court thereby making it binding under Article 141 of the Constitution; b. In such circumstances, the finding of the co-ordinate Bench of the Calcutta High Court in the case of Appeejay Pvt. Ltd. [1994] 206 ITR 367 (Cal) being binding, it must be held that the assessee company in that case was not entitled to deduction for investment allowance under section 32A of the Act; c. Moreover, the facts available in the case decided by the Division Bench of the Karnataka High Court were different, particularly the fact ,of user of sophisticated mechanical process and electromechanical weighers are not available in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in Chowgule Co. Ltd. v. Union of India that blending of tea amounts to processing and as such the assessee was an industrial company in terms of section 2(7)(c) of the Finance Act, 1978; Hon'ble Calcutta High Court in Renderian's case observed that, as there is no specific or separate definition of the expression 'processing' or the expression 'manufacturing', although both the expressions appear in section 2(7)(c) of the Finance Act, 1978, the Tribunal was in error in observing that the end result is tea, having a particular blend, and no commercially new or different article is produced by this process; In Mysore Mineral Ltd. v. CIT [1999] 239 ITR 775 (SC), while considering section 32 of the said Act, the apex court held and observed that the 'provision that confers benefit on the assessee should be so interpreted and the words used therein should be assigned such meaning, as would enable the assessee to secure the benefit intended to be given by the legislature to the assessee. It is also well settled that where there are two possible interpretations of a taxing provision, the one, which is favorable to the assessee, should be preferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961. The Assessing Officer held that 'blending' did not answer the description of manufacture or processing and the assessee was not entitled to deduction under Section 10A of the Act. It was the specific case of the department that blending could be treated as a manufacturing activity only after the definition clause of 'manufacture' contained in Section 2(r) of the Special Economic Zones Act, 2005, was incorporated in the provisions of Section 10AA of the Act with effect from February 10, 2006. The CIT(A) held that the subsequent amendment was clarificatory in nature whereas the Tribunal confirmed the disallowance on the ground that blending and export of tea by the assessee qualifies for benefit only after incorporation of the definition clause of 'manufacture' from the 2005 Act in Section 10AA of the Act. On appeal, Held that the provisions of Section 10A and Section 10AA later introduced serve the very same purpose of granting exemption on the profits earned by industrial units in the free trade zone/special economic zone. Though Section 10A did not contain a definition for 'manufacture', the definition of the term cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner, Ministry of Commerce Industry, Govt. of India. The assessee claimed exemption u/s. 10B of the Act for the AYs 1996-97 onwards, which was granted upto the AY 2000-01. However, for the AYs 2001-02 and 2002-03, exemption was declined for the reasons that by the Finance Act 2000, the definition of 'manufacture' which included 'processing' contained in section 10B of the Act was deleted w.e.f. 01.04.2001. Hon'ble High Court noted that the department's stand is that manufacture or production had liberal meaning under the definition clause contained in section 10B of the Act until its deletion which covers even processing and, therefore, blending and packaging of tea for export was treated as 'manufacture' or 'production' of an article qualifying for exemption. Hon'ble Kerala High Court considered the contention of the assessee that the scheme of income tax exemption available to units in the SEZ u/s. 10A of the Act and units in the free trade zone provided u/s. 10AA of the Act and the exemption available to 100% EOU u/s. 10B of the Act are very similar in nature and the wordings of the statutory provisions are similar in nature. Hon& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Government in exercise of powers conferred by section 40 of the Industries (Development and Regulation) Act, 1951, and the Rules made under that Act. It is pertinent to note that the products for which the assessee's unit is recognised as a 100 per cent. export oriented unit are tea bags, tea in packets and tea in bulk packs. In fact, the assessee is exclusively engaged in blending and packing of tea for export and is not manufacturing or producing any other article or thing. Still it is recognised as a 100 per cent. export oriented unit by the concerned authority within the meaning of that term contained in the definition clause of section 10B of the Income-tax Act and the Department has no case that the assessee's unit engaged in export of tea bags and tea packets is not a 100 per cent. export oriented unit. So much so, in our view, if exemption is denied on the ground that products exported are not produced or manufactured in the industrial unit of the assessee's 100 per cent. export oriented unit, the same would defeat the very object of section 10B. Further, industrial units engaged in the very same activity ; i.e., blending, packing and export of tea in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, blending, repair, remaking, re-engineering and includes agriculture, aquaculture, animal husbandiy, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining In Exim Policy, the expression manufacture is defined, in paragraph 9.30 9.31 thereof almost in the same manner as in the Special Economic Zone Act, 2005, which is as under: Manufacture means to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes such as refrigeration, repacking, polishing and labeling. Manufacture, for the purpose of this Policy, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining. But the only difference between the Exim Policy of 2002-07 and of 2000 is that words and segregation which were appearing in the definition of the expression 'manufacture in the Exim Policy of 2000 was deleted in the Exim Policy of 2002-07. Further, even in Prevention of Food Alternation Rules, 1955, it has been inter alia stated that Tea used in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its said factory situated at I 9/4A, Munshiganj Road (under Falta Export Processing Zone), Kolkata. We find from facts of the case that the details of turnover of the assessee shows Bulk Tea (0.94%), Packet Tea and Tea Bags (99.06%), as per different descriptions, brand names and varieties, as listed APB. Assessee Company is duly registered as a 100% EOU by the Government of India, Ministry of Industry, Department of Industrial Policy and Promotion Secretarial for Industrial Approvals, ECU Section in the state of West Bengal for manufacture of Packet Tea, Tea Bags/Bulk Tea with annual capacity of 3110 Mt. in terms of Registration Certificate dated 26th December, 1995, inter alia, with the condition that its 100% production (excluding rejects not exceeding 5%) would have to be exported and that its registered EOU Unit shall make value addition to a minimum extent of 79%. Undisputedly, the exported consumer products, blended by Assessee in its said factory premises is a case of substantial value addition, as compared to the unblended black tea in granule and dust form normally available for sale in the open retail market throughout India. 34. The subject for consideration unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly held that blending of tea does not amount to 'manufacture' or 'production' of an article, but is only processing. We find that the assessee was exclusively engaged in blending and packing of tea for export and was not manufacturing or producing any other article or thing. It was recognised as a 100% EOU division and the Department had no case that the assessee's unit engaged in export of tea bags and tea packets was not a 100% EOU. If exemption was denied on the ground that products exported were not produced or manufactured in the industrial unit of the assessee's 100% EOU, it would defeat the very object of sections 10B of the Act. 36. We, in view of the above, hold that when the products for which the assessee's unit is recognized as a 100% EOU are tea bags, tea in packets and tea in bulk packs and the assessee is exclusively engaged in blending and packing of tea for export may not be manufacturer or producer of any other article or thing in common parlance. However, for the purpose of Section 10A, 10AA and 10B, we have to consider the definition of the word manufacture as defined in Section 2(r) of SEZ Act, Exim Policy, Food Adulteration Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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