TMI Blog2019 (3) TMI 1104X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, the context is whether the industrial activity in the form of dehusking of Paddy into Rice amounts to Industrial undertaking engaged in the 'Manufacture or production' of Rice or not. In the said context, in view of the aforesaid cases, we find no reason to hold that the activity of dehusking of Paddy into Rice will not amount to manufacture or production . We do not find justification to give a narrower meaning to these terms, which, by themselves independently or jointly as employed in the said provisions of Section 80IA are wide enough to cover the industrial activity undergone by the Assessee - the Assessee is entitled to the benefit of deduction under Section 80 IA - Decided against revenue. - Tax Case Appeal Nos. 51 to 55 of 2009 - - - Dated:- 20-2-2019 - Dr. Justice Vineet Kothari And Mr. Justice C.V. Karthikeyan For the Appellant : Mr.M.Swaminathan Senior Standing counsel Assisted by Ms.V.Pushpa, Ms.Premalatha For the Respondent : Mr.A.S.Sriraman for Mr.S.Sridhar COMMON JUDGMENT DR.VINEET KOTHARI, J. The Revenue has filed these appeals under Section 260A of the Income Tax Act, 1961, (for short the Act ) aggrieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rice did not amount to 'Manufacture' and therefore, the Assesee raised an objection by stating that dehusking of Paddy was not excisable goods. The learned Tribunal relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Cynamid India Limited [Civil Appeal Nos.4403 and 4404 of 1996] with regard to the same for holding so in favour of the Assessee. Paragraphs 29 to 31 of the said order of the learned Tribunal are quoted below for ready reference. 29. Therefore, the decision in the case of M/s.Cynamid India Ltd., is applicable to the facts of this case wherein the Apex Court has observed as under: 5. The High Court has answered the question in favour of the assessee and against the Revenue. Having referred to the definition of `agricultural product' in Black's Law Dictionary, the High Court has held that the operation of de-husking Paddy is not an industrial or manufacturing operation as commonly understood; it is essentially an agricultural operation and such changes as are brought about in the product are an outcome of agricultural operation; Both Rice and husk remain in their natural form as a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t into existence. Similarly, if an orange is peeled and the fruit is taken out, no new article is brought into existence and the fruit taken out cannot be said to be a manufactured product. Rice is fashioned by nature in the form of Paddy and obtaining of Rice is a mere liberation of the natural product. In getting the Rice imbedded in Paddy no transformation takes place and no manufactured article is got. 12.As Paddy does not suffer any transformation and a new and different article does not emerge when it is milled or hulled, the process of milling or hulling cannot be called a process of manufacture and Rice cannot be called as a manufactured article. The use of the expression convert in obtaining Rice from Paddy is itself, in our opinion, inappropriate and in accurate, because, by removing the husk by whatever process it may be, one thing is not converted into another thing. There is, therefore, no consumption of Paddy in the manufacture of other goods for sale or otherwise. The view taken by the Tribunal in this behalf must, therefore, be upheld . The Court, therefore, concluded that the respondents were not liable to pay tax on the purchase turnover of the Padd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of sales tax. Paragraphs 2 to 5 of the said Judgment are quoted for ready reference. 2. The only question that arises for decision in these appeals is whether Paddy and Rice can be considered as identical goods for the purpose of imposition of sales tax . Under the concerned Sales Tax Act exemption from payment of sales tax is provided if the very Paddy in respect of which purchase tax was levied was sold and not if that Paddy is converted into Rice and sold. It is contended on behalf of the appellants that Paddy and Rice are identical goods and, therefore, when the law grants an exemption in respect of Paddy, that exemption is also available to transactions relating to Rice. The argument proceeded on the basis that Rice was nothing but dehusked Paddy. Both Rice and Paddy are identical goods. When Paddy was dehusked, there is no change in the identity of the goods. 3. In support of their contention, the appellants cited to us certain dictionary meanings of the word Paddy to show that Rice is nothing but dehusked Paddy. This Court has firmly ruled that in finding out the true meaning of the entries mentioned in a Sales Tax Act , what is relevant is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sold were iron and steel . 5. It was contended on behalf of the appellants that the essential question that we have to decide is whether the goods sold differed in identity from the goods purchased. It was urged that merely because Paddy was dehusked and Rice produced, there was no change in the identity of the goods. Identity of goods is one of the essential elements to be borne in mind in deciding the nature of the transaction. It was so decided in Tungabhadra Industries Ltd. v. Commercial Tax Officer, Kurnool [1960] 11 S.T.C. 827 (S.C.) : . In that case the question arising for decision was whether hydrogenated oil continued to be groundnut oil. This Court held that the hydrogenated groundnut oil continued to be groundnut oil. In arriving at that conclusion this Court took into consideration that the essential nature of the goods had not changed after the groundnut oil had been subjected to chemical process. Similar view was taken by this Court in State of Gujarat v. Sakarwala Brothers [1967] 19 S.T.C. 24 (S.C). Therein the question whether patasa, harda and alchidana could be considered as sugar . This Court held that when sugar was processed into patasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astructural development and other sectors and those engaged, in the process of manufacture or production of articles or things not included in the Eleventh schedule of the Act, were held entitled to avail such deduction. 15. The words manufacture or production employed jointly in the said provisions do not permit us to take a narrow or pedantic approach in the matter. On the other hand, a pragmatic and purposive interpretation deserves to be put to these words of wider connotations. 16. These words Manufacture or production cover within their ambit any activity by which, a different commercial article, having a different commercial value, is brought into existence by the process of 'Manufacture or Production'. When the Paddy in the husk is converted into Rice by the process of dehusking, by manual or mechanical process it cannot be said, by any stretch of imagination that there is no transformation of article. A husked Paddy is not a de-husked Rice, and not only the form undergoes a change but also the value addition happens by such process. A different commercial article undoubtedly comes into being. The industrial activity by employing men and machine in the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it under Section 35 of the Income Tax Act, which was designed for development of agricultural research specified thereunder. Similarly, the Division Bench of Karnataka High Court, in the case of B.Raghurama Chetty case (supra) held that the said process of dehusking and milling of Paddy did not bring about new and different article and therefore, Paddy could not be said to have been consumed in the process of manufacture of Rice and hence, it will not amount to violation of the provision of Section 6 (1) of the Karnataka Sales Tax Act and the Assessee would not be liable to pay Additional Sale Tax. 18. Therefore, we are of the opinion that it would depend upon the context in which the words Manufacture or production have to be interpreted by the Court of law. In the present case, the context is whether the industrial activity in the form of dehusking of Paddy into Rice amounts to Industrial undertaking engaged in the ' Manufacture or production' of Rice or not. 19. In the said context, in view of the aforesaid cases, we find no reason to hold that the activity of dehusking of Paddy into Rice will not amount to manufacture or production . We do not find justific ..... X X X X Extracts X X X X X X X X Extracts X X X X
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