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TMI Blog2007 (5) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... urt not amounting to manufacture can still be considered production for the purpose of Sec.80IA/80IB? 3. The facts of the present cases are that assessee is engaged in activity of sawing of marble blocks into slabs and tiles and marketing them in indigenous as well as foreign market. He is not engaged in winning marble blocks as a mineral but purchases the blocks from the market. 4. In relation to profit derived from the export of marble slabs and tiles to foreign market, the assessee-appellant has claimed benefit of deduction under Section 80 HHC of the Income Tax Act, 1961 and which was allowed by the Assessing Officer. 5. However, he also claimed deduction under Section 80IA, subsequently renumbered as 80IB of the Act of 1961, as an industrial undertaking which manufactures or produces articles or things not being any article or thing specified in the list in eleventh Schedule. The assessee claimed that sawing of marble blocks and bringing out marble slabs and tiles amounts to manufacture of marble slabs and tiles and fulfills condition of claiming deduction as an industrial undertaking, which manufactures or produces an article or thing not specified in the list in the eleve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of excise duty. 12. However, learned counsel for the assessee has urged that the Supreme Court in Lucky Minmat P. Ltd.'s case [2000] 245 ITR 830, has distinguished the other decision of the Rajasthan High Court in Commissioner of Income Tax vs. Best Chemical & Lime Stone Industries Pvt. Ltd. [1994] 210 ITR 883, which judgment still survives and instant case falls within the ratio laid down in Best Chemical's case. It was further urged that both the cases namely; Lucky Minmat P. Ltd.'s case [2000] 245 ITR 830 & Aman Marble's case [2003] 157 ELT 393 (SC) rested on the consideration of activity viz-a-viz manufacture of an article or thing but both are not the authorities for considering whether the activity amounts to producing an article or thing. It was urged that all manufacture necessary amounts to production or an article or thing, but all production need no necessarily fall within the purview of manufacture. It was urged that any term used in a statute must be interpreted in its own context and interpretation used in relation to one statute be not brought ipso facto while interpreting another statute. Where commodity produced in natural state is not usable and consu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that activity of cutting of marble blocks into marble slabs does not amount to manufacture so as to bring it within the net of levy of excise Duty. In coming to this conclusion, the Court relied on Rajasthan State Electricity Board v. Associated Stone Industries [2000] 6 SCC 141, in which the Apex court observed that excavation of stones from a mine and thereafter cutting them and polishing them into slabs did not amount to manufacture of goods. Whether excavation of stone from mines amounts to production was not the issue before Rajasthan High Court or Supreme Court. 19. The Karnataka High Court in Commissioner of Income Tax vs. Mysore Minerals Ltd. (No.1) [2001] 250 ITR 725, was considering whether the activity of cutting granite blocks into slabs and sizes and polishing them falls within the purview of Section 32A of Income Tax Act, 1961so as to allow the machinery used for such activity eligible for investment allowance and whether it also becomes eligible to deduction under Section 80-I which is available to "industrial undertaking engaged in manufacturing or production of goods." The Karnataka High Court opined as under (page 727) : "Section 32A refers to investment allowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment allowance was held deductible in terms of plant and machinery installed by the assessee for excavation and processing mineral ore under Section 32A. It also held that it is not necessary that the mined ore must be a commercially new product for the purpose of Section 32A. Other provisions of the Act such as Section 33(1)(b)(B) show that mining of ore is stated to be production. 21. Thus the decision of Karnataka High Court affirmed by the Supreme Court deals with the same commodity and same expression in the same enactment with which we are concerned and clinches the issue in favour of the appellant. 22. We also find that even under the Income Tax Rules, 1962 assessee under Section 44AB read with Rule 6G is required to furnish report of audit of his accounts and also required to furnish statement of particulars in form No.3CD provided under the Rules which include furnishing information about the nature of business carried on by the assessee in Part B of the Annexure to be appended to the statement of particulars in which the 'marble & granite' has been classified under the manufacturing industry sector. Thus, for the purpose of income tax, under the rules, marble & g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the earlier judgment in CIT Vs. Best Chemical & Lime Stone Industries Pvt. Ltd. [1994] 210 ITR 883 (Raj) in which the business of extracting lime stone and its sale either as converted into "lime rodi" or lime dust were held to be manufacturing activity. The only argument before the Supreme Court was that the High Court judgment in the case of Best Chemical had wrongly been distinguished. That contention has been rejected by the Supreme Court. 27. It is apparent that the aforesaid judgment is founded on the ground that the commodity in Best Chem's case [1994] 210 883 (Raj) being different than what was in the case in hand, the judgment was rightly distinguished. The Supreme Court was not examining the issue about the fact whether the business of mining of lime stone and marble blocks, thereafter cutting and sizing the same before it is sold in market is a manufacturing or production, as the case may be. Apparently, the earlier decision of the Supreme Court in Chowgule and Co. Pvt. Ltd vs. Union of India [1981] 47 STC 124 in which the activity of mining was held to result in production of goods, and the later judgment of Supreme Court in CIT Vs. Sesa Goa Ltd. [2004] 271 ITR 331 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iple applied by the Supreme Court was that if without applying the process a thing in its raw form cannot be usable and it is made usable for particular purpose, it amounts to manufacture. 33. The Court approved the principle enunciated in Saraswati Sugar Mills vs. Haryana State Board [1992] 1 SCC 418 that essence of manufacture is a change of one object to another for the purpose of making it marketable. 34. On this principle, the Court accepted the contention that by cutting Jumbo rolls into smaller sizes, a different commodity has come into existence and the commodity which was already in existence serves no purpose and no commercial use, after the process. A new name and character has come into existence. The original commodity after processing does not possess original identity. Obviously, so far as physical characteristic of Jumbo rolls and its shorter version in the form of typewriter and telex roll may have the same physical properties, nonetheless on the basis of their different use as a marketable commodity and after being cut, the same cannot be used for the purpose for which it could be used in original shape, the activity was held to be manufacture. 35. The principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consumable and marketable stage and has been brought to the market in different grades, subsequent blending of different tea merely as an marketing strategy was held to be not a manufacturing activity or production. 38. Significantly, what emerges as ratio of the decision is where the natural produce when it is brought into existence out of surface is not usable or consumable then bringing it to marketable or consumable stage from where it can reach the end consumer was held to be an activity of manufacturing. This was reflected in the fact that tea being a natural vegetable product and income derived therefrom falls within the ambit of agricultural income and exempted from tax. If the producer of tea himself applies the process of bringing it to consumable stage to be marketed thereafter, it still carries the character of agricultural income because of provision under clause (1A) of Section 2 of Income Tax Act, 1961 and remains exempted from tax. If two activities are carried on by different persons, while the grower of tea remains exempted from tax as his income from growing tea leaves has attributes of agricultural income, the person who applied the process thereafter to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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