TMI Blog2014 (8) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... April 2012. It should be at the place notified by the Board in accordance with the scheme - the assessee was registered with the excise department - In the audit report of the excise department the assessee has been shown to be engaged in the manufacture of Malt Based Foods, falling within chapter 19 of CETA attracting central excise duty - CIT(A) in coming to the conclusion that assessee was engaged in the activity of manufacturing and production, eligible for deduction u/s 80IC, has drawn support from various judicial pronouncements - assessee has already been allowed deduction u/s 80IC in earlier years from A.Y. 2005-06 to A.Y. 2008-09 - No change in facts for the assessment year in question has been brought on record – thus, the order of the CIT(A) is upheld – Decided against Revenue. - ITA No. 3643/Del/2013 - - - Dated:- 22-8-2014 - George George K, JM And B. C. Meena, AM,JJ. For the Appellant : Shri S. N. Bhatia For the Respondent : Dr. Rakesh Gupta ORDER Per B. C. Meena, A. M. :- This is department s appeal assailing the CIT(A)-VIII, New Delhi s order dated 28-3-2013 relating to A.Y. 2009-10. The sole effective ground raised is as under: Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s GSKCH thereafter the assessee appellant would do processing by using its own Plant Machinery followed by packing of final products. The raw-materials supplied by M/s GSKCH and others, are Skimmed milk powder, whey powder, Fine crystalline sugar, Dry vitamin premix. Ascorbic Acid which are raw materials for Horliks. Raw materials supplied for Boostre Fortified Base, Fine crystalline sugar, Cocoa powder, Cocoa flavor DC 499, Cocoa flavor DC 497, Vanilla Flavor De 110. These raw materials upon processing are converted into Horlicks Boost. Detailed Note on manufacturing process was filed before the Ld. A.O. during the course of assessment proceeding together with copy of Product Process Flowchart which would show the various stages through which various types of the raw-materials pass are subjected to mechanical processing. These evidences are enclosed in the paper book also. (iii) The assessee was registered with Central Excise according to which also, products manufactured by appellant are treated as manufacturing. A Fresh process flow chart is enclosed explaining in greater detail the entire manufacturing process and it may be appreciated that inputs and outputs are d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 80-lC, reads as under: Special provisions in respect of certain undertakings or enterprises in certain special category States. 80IC(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in subsection (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3). (2) This section applies to any undertaking or enterprise, (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 80-IC is whether it manufactures or produces any article or things. According to the Assessing Officer, expression manufacture has been defined in section 2(29)(B)(a) which read as under: (29BA) manufacture . with its grammatical variations, means a change in a non-living physical object or article or thing,- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use; or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure . The stand of the AO is that the activity carried out by the assessee was not manufacturing and there was no chemical change in the composition of the raw material. The appellant has placed in the written submissions a flow chart exhibiting the activities carried out by it before producing altogether distinct saleable commodity which has its own identification in the commercial world. In the case of India Cine Agency, Hon'ble Supreme Court has considered the judgment rendered in the case of Sesa Goa (supra) and all other decisions on the point which con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. (See Collector of Central Excise v. Rajasthan State Chemical Works [1991) 4 SCC 473) - = (2002-TIOL-66-SC-CX). 7. To put it differently, the test to determine whether a particular activity amounts to manufacture' or not is: Does a new and different good emerge having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its character, use and name, whether be it the result of one process or several processes- 'manufacture' takes place and liability to duty is attracted. Etymologically the word 'manufacture' properly construed would doubtless cover the transformation. It is the transformation of a matter into something else and that something else is a question of degree, whether that something else is a diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intermediate (High fat). Post addition of all the material mixing is done for 5 minutes. The finished product is discharged flows with gravity through screw conveyor into vibro sieve. Sieved product is passed through metal separation system. After wards packing is done in Jars Pouches by Jar Filling machine From Auto pack and Pouches by Bosch machine. As regards the manufacture of Boost the two stages involved are as under: i. Manufacture of flavored fortified base Material are weighed as per manufacturing go formula transferred from drums into blender through pneumatic conveying system. Sequence of addition is 575 kg (5 drums) fortified base for Boost, pre-blend of fine crystalline sugar, cocoa powder coca flavor DC-499, COCA FLAVOR dc-497, vanilla flavor DC-l1 0 and 460 kg (4 durms) of fortified base for Boost. After conveying one batch is mixer, mixing to be done for 1 minutes at 5.5 RPM Composite sample is collected for analyzing BFC. Afterwards it is transferred to warehouse for captive consumption. The mixed powder is named as Part-B or flavored fortified base for Boost. Part-B itself is not a saleable product ii. Manufacturing process of Boost: Materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word manufacture . Applying the above test to the facts of the present case, we are of the view that, in the present case, we are of the view that, in the present case, the assessee has under taken an operation which renders a blank CD fit for use for which it was otherwise not fit. The blank CD is an input. By the duplicating process undertaken by the assessee, the recordable media which is unit for any specific use gets converted into the programs which is embedded in the mastiff media and, thus, the blank CD gets converted into recorded CD by the afore stated intricate process. The duplicating process changes the basic character of a blank CD, dedicating it to a specific use. Without such processing, blank CDs would be unfit for their intended purpose. Therefore, processing of blank CDs would be unfit for their intended purposes. Therefore, processing of blank CDs dedicating them to a specific use, constitutes a manufacture in terms of section 80IA(12) read with section 33B of the IT Act Similarly, in the case of CIT v. Emptee Poly-Yarn P. Ltd. (supra), the Hon'ble Supreme Court has followed the decision in the case of CIT vs. Oracle Software India Ltd (supra), and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowable. In view of the findings above that the appellant is engaged in the process of manufacturing and production and in view of the judicial decisions on the subject discussed above and also in view of the fact that the deduction has been allowed to the appellant in the earlier years it is held that the appellant is entitled to the claim of deduction under the provisions of section 80lC. The disallowance made by the AO is deleted. 3. We have considered rival submissions of both the sides and have gone through the entire material available on record. The assessing officer disallowed the claim of deduction u/s 80IC by observing that assessee was not engaged in manufacturing activity. Therefore, the main issue involved is whether the activity carried on by the appellant was a manufacturing activity. To examine whether the assessee had to fulfill the conditions contemplated u/s 80IC, it is imperative to take note of the relevant statutory provisions. Sub-section (1) of section 80IC provides a deduction in respect of profit and gains derived by an undertaking or enterprises from any business referred to in sub-section (2), while computing the total income of an assessee. Sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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