TMI Blog2008 (12) TMI 752X X X X Extracts X X X X X X X X Extracts X X X X ..... for the period from 23.09.2002 to 31.03.2003. The case had been taken up for scrutiny and notice under section 143(2) of the Act was issued and the petitioner was heard through the representative. Subsequently, on 30.12.2005 a show cause notice was issued. In the show cause notice referring to section 10B, it was stated as follows: As is evident from the foregoing provision of sub section 2(i) and (ii) of the Section 10B and Explanation 2 of section 80IA, you are not eligible for deduction under section 10B as your concern -- 1.Has been formed by splitting up, or the reconstruction, of a business already in existence and also 2.It is formed by the transfer to a new business of machinery or plant previously used for any purpose and this exceeds 20% of the total value of the machinery or plant used in the business. The value of the plant and machinery as per your balance sheet as on 31.03.2003 is ₹ 20,26,25,745/- and of this new machineries attributes to only ₹ 4,30,75,800/- which is only around 21% and nowhere near the stipulated 80%. Hence, you are hereby requested to show cause as to why deduction under section 10B not be disallowed while completing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction activity. 4. Per Contra, Mrs.Pushya Sitaraman, learned senior Standing Counsel, while answering the contention that the CBDT, as one of the members of the Board of Approval of 100% Export Oriented Unit, considered the activity of the petitioner as manufacturing and processing activity, submitted that the difficulty experienced by the person like the petitioner has been taken note of by the Central Government, particularly, the Ministry of Commerce and Industries and Finance and deliberations are going on to give redressal or the benefit conferred under the Statute to 100% export oriented unit, however, she contended that as on date, the position of law is, as stated in the assessment order, which requires no interference from this Court. 5. Heard the learned counsel on either side and perused the materials available on record. 6. Generally, this Court would not entertain a writ petition under Article 226 of the Constitution of India, against assessment orders, as there are effective and efficacious alternative remedies available to the assessee by way of appeals. It is essentially a rule of policy, convenience and discretion. Despite the existence of an alternative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer relied on the judgment of this Court in CIT v. Vijay Granites P. Ltd., (2004) 267 ITR 606 and CIT v. Gomatesh Granites, (2000) 246 ITR 737. 10. In Vijay Granites case, the Division Bench of this Court has held that the act of cutting and polishing granite slabs did not involve any process of manufacture or production, mainly relying upon the reasons stated in the decision of another Division Bench of this Court in Gomestesh's case cited supra. In the said case, it was held that the extraction of granite cannot be regarded as a result of any manufacturing activity and the activity of cutting stones into smaller sizes and polishing the same and thereafter exporting the polished slabs would not amount to production. The decision was arrived at on the basis of the facts of that case, which read as under : In the order of the Tribunal, the business of the assessee is described thus : The assessee is an exporter of unpolished granite blocks...... It owns a compressor and crane. With the help of the compressor, holes are drilled in the hills containing granites in a pattern to facilitate extraction to big blocks more or less in cubical form or about . tonne to on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle or thing and the assessee is entitled to the benefit under sections 32A and 80-I of the Act, has been referred to. But the principles so stated have not been taken into consideration on the simple ground that the judgment in Mysore Minerals's case relied upon the earlier decision in the case of CIT v. Mysore Minerals Ltd., 205 ITR 461, which in turn, relied upon the earlier decision of the Karnataka High Court in Shankar Construction Co. v. CIT, (1991) 189 ITR 463. Those decisions have been overruled by the Supreme Court in Budharaja's case and further observed that the earlier case of Mysore Minerals' case 205 ITR 461 was not accepted by the Division Bench of this Court in Gometesh Granites' case cited supra. Now that the said reasoning is not available, because in the case of CIT v. Sesa Goa Ltd., (2004) 271 ITR 331, Mysore Mineral's case 205 ITR 461 has been approved by the Supreme Court. Mere sieving process of sand which contains iron ore is regarded to be the mining process by the Supreme Court in that case. 12. The Supreme Court in Sesa Goa's case has observed that 'manufacture' and 'production' of any article or thing, has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s meaning amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort . From the wide definition of the word production , it has to follow that mining activity for the purpose of production of mineral ores would come within the ambit of the word production since ore is a thing , which is the result of human activity or effort. It has also been held by this Court in CIT v. N.C. Budharaja Co., (1993) 204 ITR 412 that the word production is much wider than the word manufacture . It was said: (Page 423) The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterised as production, every production need not amount to manufacture. ? The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. It is, therefore, not necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p-breaking activity and, consequently, after placing reliance on the judgment of this Court in Budharaja's case, it has held that the ship-breaking activity resulted in production of articles which emerged when the ship-breaking activity stood undertaken. In our view, the important test which distinguishes the word 'production' from 'manufacture' is that the word 'production' is wider than the word 'manufacture' as held in Budharaja's case. Further, it is true that in Budharaja's case, the Division Bench has used the word 'new article'. However, what the Division Bench meant was that a distinct article emerges when the process of ship-breaking is undertaken. Further, the legislature has used the words 'manufacture' or 'production'. Therefore, the word 'production' cannot derive its colour from the word 'manufacture'. Further, even according to the dictionary meaning of word 'production', the word, 'produce' is defined as something which is brought forth or yielded either naturally or as a result of effort and work (See : Webster's New International Dictionary). It is important to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be manufacturing industry. Under the rules governing the compulsory audit in respect of various businesses also, marble and granite industry has been included in the sector of manufacturing industry. This goes to show that so far as the authorities under the income tax entrusted with the task of its implementation are concerned the cutting of marble and granite blocks into slabs and polishing them for bringing them to the stage of usability as an activity of industrial undertaking engaged in manufacture and production of articles or things are required to be regarded as such. The rules framed under the Act are statutory in nature and became part of the statute. Thus, under the scheme of the Act and the rules framed thereunder, cutting and polishing of marble and granite blocks have been held to be an industrial activity of manufacture. As a block, it is not of any use and has been held to be a manufacturing industry for the purpose of the Act. The assessment order is silent in this regard inspite of pointing out the same. 17. It is further contended that the decision of the Karnataka High Court in Mysore Minerals Ltd.'s case, 250 ITR 725 as affirmed by the Supreme Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned senior counsel contended that in respect of tax administration, the Government has to strike a balance between collection of tax and the difficulties experienced by the subject. He also contended that the benefit conferred by one department of the Government has been taken away by another department of the Government, which is impermissible in law. In support of his contention, the learned senior counsel for the petitioner relied on the Supreme Court judgment in the case of State of Kerala v. Kurian Abraham (P) Ltd., (2008) 3 SCC 582, wherein it was held as follows : Tax administration is a complex subject. It consists of several aspects. The Government needs to strike a balance in the imposition of tax between collection of revenue on one hand and business-friendly approach on the other hand. Today, Governments have realised that in matters of tax collection, difficulties faced by the business have got to be taken into account. Exemption, undoubtedly, is a matter of policy. Interpretation of an entry is undoubtedly a quasi-judicial function under the tax laws. Imposition of taxes consists of liability, quantification of liability and collection of taxes. Policy decisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing officer are yet to file their counter as they are unable to answer this point. 22. The averments contained in the counter affidavit filed in writ petition No.27973 of 2006 is clearly exhibiting the state of affairs prevailing in the Government - One department granting the relief and the other department stalling the same. Of-course, the counter affidavit of the fourth respondent, the Joint Development Commissioner, MEPZ Social Economic Zone, cannot be treated as a statutory provision. But the CBDT and the assessment officer have to answer this point keeping in mind the policy of the Government and also the tax administration. 23. The last contention that the reasoning given in the assessment order that as on 31.03.2003 as per the balance sheet filed along with the return, the new machinery works out to 21.4% and as such the petitioner is not entitled to the relief is not correct, is also having some force, in my view. Because the section does not say as to whether the last date of the assessment year is the date of formation of EOU. According to the petitioner, the EOU was formed and commenced the activities on 23.09.2002 by purchasing 100% new plant and machinery, to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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