TMI Blog2015 (6) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... uty draw back by the suppliers and therefore they had to issue disclaimer certificates to the assessee. Therefore the suppliers did not supply any ready made garments. It was also clarified that the assessee is not doing all the processes on each and every piece of garment. For e.g. bar code labels were affixed on some of the garments, emblem graphics, stickers were affixed on some of the garments. Accordingly heat treated emblem was given on some of the garments, ironing was made, packing of garments was also made on different garments. In view of the processes carried out by the assessee as mentioned herein above may be all the processes of the semi finished garments will tantamount and will be treated as a manufacture. As regards the notices remained unserved on the suppliers, it was stated that non service on the supplier was not known to the assesee and therefore such non service of notice cannot make the assessee to loose exemption u/s 10B of the Act. In the circumstances and facts of the case we hold that the assessee is a manufacturer and entitled to exemption u/s 10B of the Act. - Decided in favour of assessee. - ITA No. 1038/Kol/2008 - - - Dated:- 30-4-2015 - Mahavi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the supervision of the assessee on contract basis but here the assessee under appeal did not get the garments manufactured from the sister concern by contract, which is established from the fact that the assessee did not deduct any tax u/s.194C of the I. T. Act, 1961. 6. The Ld. CIT(A)-XIV is mistaken in relying on the case of M/s. Bejbarua Tea Co. Vs. CIT (220 ITR 530) for that the assessee in this case manufactured Tea from tea leaves supplied by the assessee from garden while the assessee under appeal placed purchase order before the sister concern who supplied the finished goods which is established from the manufacturing Alc. submitted by the assessee before the sister concern. 7. The Ld. CIT(A)-XIV is mistaken in considering the fact that the partners of the firm got the garments manufactured in their respective proprietary concern for the reason that the assessee firm placed purchase order to their proprietary concern and purchased the goods which is established from the bills and also from the fact that the assessee firm did not deduct any tax u/s.194C. 8. The Ld. CIT(A)-XIV, is also mistaken in considering the fact that the goods, at least in part,are subjected t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of the firm. 11. The Ld. CIT(A)-XIV erred in considering the fact that the assessee firm performed se end activities at least on a portion of goods. But the expenses claimed in the manufacture account filed by the assessee does not corroborate the fact that the assessee firm perform the end activities such as labeting. heat treatment etc. 12. The Ld. CIT(A)-XIV also erred in relying on the case of M/s. Ektara Exports (P) Ltd. in No. 1046 wherein it had held the issue in favour of the assessee holding that even the process of ironing with the aid of power for making a garment marketable amounted to manufacture for the reason that no expense for electricity claimed by the assessee which does not corroborate the fact that the assessee firm has ironed 4 lakh of garments and also no other work was done after purchase of garments the claims of the assessee that some work has been done after the purchase of garments to make them exportable is not established from the expenses claimed by the assessee in the manufacturing account. 3. The main question which arises from 12 grounds of appeal raised by the revenue is that the assessee is not a manufacturer and therefore exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t manufacture or produce any article or things. From the Item No. B of 28(b) of Audit Report (in Form No.3CD) where datas of Finished Products/ by products are furnished has been kept blank which means that the assessee firm did not manufacture any Article or things, As the assessee claimed deduction u/s.10B. in course of hearing, the assessee was asked to file the Manufacturing Alc. Along with the short description of manufacturing procedure and the same were filed. The Manufacturing A/c. is annexed (Annexure-3) with the order. On examination of the above Alc. it is found that cost of raw materials i.e., cost of 683.92 kgs. Of cloth amounting to ₹ 2,22,592/- and cost of 3939 Kgs. Of yarn were not debited. As the raw materials were not used, there was no manufacturing activities. Vide letter dated 2 1.09-.2006 (Annexure-a) the assessee' stated that cost of manufacturing consists of purchase, freight inward, insurance, packing charges, printing and Jabelinq, printing stationery and salary. Here purchase does not include purchase of raw material but ready made garments produced by others. The short description of manufacturing process is re-produced below : AP.E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of the above discussion, the exemption of ₹ 2.17.79.599/- claimed u/s.10B is disalIowed as no manufacturinq was done in compliance to Section 10B. 4.1. Before the ld. CIT(A) the assessee made the submissions which was sent to the AO for report. The report was obtained by the ld. CIT(A) and after considering the report of the AO and submissions of the assessee before the ld. CIT(A) observed that the assessee has fulfilled all the conditions stipulated u/s 10B of the Act vide pages 9, 10 and 11 of his order. 5. The ld. DR relied upon the order of AO and the remand report of the AO where as the Authorised Representative relied upon the submissions made before the ld. CIT(A) and AO and the reply to the remand report by the AO and have relied upon the decisions of various courts of law and the definition of manufacture as mentioned in the order of ld. CIT(A). 6. We have heard the rival contentions and perused the facts of the case. The undisputed facts in the case of the assessee are that the assessee is an approved hundred per cent export oriented unit approved by the Development Commissioner, Falta Special Economic Zone. The assessee firm has filed its ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds Act, 1952, Sec.2(10). 6.1. It was also stated that the term Manufacture has been defined in clause 9.32 of Rules and Regulations relating to EOU framed by Government of India 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, re-packing, polishing, labeling, reconditioning, repair, remarking, refurbishing, testing, calibration, re-engineering. Manufacture, for the purpose of this policy, shall also include agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining. 6.2. The ld. Counsel also brought to our notice the definitions of manufacture u/s 2(f) of the Act of Central Excise Act, 19044 and also notification of Central Excise in this respect. It was also argued that the expression manufacture has been defined in the Central Excise Act which is a charging Act for imposing duty on goods manufactured and that of the legislature as defined the expression manufacture . 6.3. The ld. Counsel relied upon the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee's claim 6.4. As regards the allegation of the AO the assessee has submitted the explanation with regard to the observations of the AO that the assessee did not manufacture any article or any thing because the assessee had neither used the machines during the relevant financial year nor consumed the raw material. It was explained that the assessee firm was buying semi-finished garments and then various manufacturing function according para 930- Exim Policies 2006-07 like finishing, labelling hanger P/P bags, packing, ,ironing etc were made. It is also an undisputed fact that the assessee garment unit was approved by the Development Commissioner, Falta Special Zone and if the assesee did not manufacture any garments, the Development Commissioner could withdraw the approval which has not been done. Our attention was drawn to the decision in the case of Shilpi Advertising Ltd. Reported in 263 ITR 479and CBDT Circular No.495 dt.22.09.87 and 694 dtd. 23.11.1999 wherein it has been held and mentioned that where a unit was in a free trade zone and was engaged in assembling or processing of goods for export and was earning foreign exchange, it would qualify for deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, emblem graphics, stickers were affixed on some of the garments. Accordingly heat treated emblem was given on some of the garments, ironing was made, packing of garments was also made on different garments. In view of the processes carried out by the assessee as mentioned herein above may be all the processes of the semi finished garments will tantamount and will be treated as a manufacture. 6.7. As regards the notices remained unserved on the suppliers, it was stated that non service on the supplier was not known to the assesee and therefore such non service of notice cannot make the assessee to loose exemption u/s 10B of the Act. In the circumstances and facts of the case we hold that the assessee is a manufacturer and entitled to exemption u/s 10B of the Act. Reliance is also placed on the decision of ITAT in the case of M/s. Ektara Exports (P) Ltd in ITA NO.1046/Kol/2005 dated 29th July, 2005 and the decision of Hon'ble High Court where such decision has been confirmed in ITA NO.657 of 2008 dated 10th September, 2008 on similar issue u/s 10A of the Act. Reliance is also placed in ITAT Kolkata Bench in the case of DCIT vs Jaytee Exports in ITA NO.35 36/Kol/2011 dated 3 ..... 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