TMI Blog2019 (5) TMI 1308X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. The AO has reopened the assessment to deny the claim only on the ground that in view of the decision of Hon ble Bombay High Court in case of CIT vs. Premier Construction Co. (supra) the activity carried out by the assessee does not ambit production or article. Hence, the AO never disputed the nature of actually activity carried out by the assessee. Thus, question of genuineness of the activity in the set aside proceeding that too arising from reassessment proceeding after allowing the claim in the assessment frame U/s 143(3) of the Act is not permitted. Hence, in the facts and circumstances of the case, we do not concur with view of the ld. CIT(A) on this objection of incomplete certificate in Form No. 10CCB. The assessee is undertaking the process of broking the big boulders into small size of required dimension then removing the impurities from the surface of the lumbs through machinery boulders, the process is known as dressing process of lumbs then washed by water to remove siliceous and other impurities and therefore, these are crushed to reduce in the desired size and grade of soap stone powder. These different grades of soap powder is being used by differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that the Hon ble Bombay High Court in case of CIT vs. Premier Construction Co. 242 ITR 654 has held that grinding of soap stone is not manufacture so as to entitle the assessee for deduction U/s 80J. In the reassessment proceeding, the AO denied the claim of deduction U/s 80I and 80IA of the Act to the assessee by holding that the process of crushing boulders to obtain stones of smaller size termed as gitti cannot be regarded as a process manufacturing or production. 3. Before us, the ld. AR of the assessee has submitted that in this connection it is stated that the mixed soapstone lumps were purchased by assessee in the form of big builders. Thereafter segregation of soapstone lumps and unwanted material like dolomite, stone etc. is done and whole of ore is sorted and re-handled. The manually sorted soap stone lumps are cleaned by brushes checals etc. to remove the surface impurities and big boulders of soapstone lumps reduced in smaller size of around 12 to 8 inches pieces with the help of hammers. Then the clean and sorted soapstone lumps are washed and lumps is crushed into chips of 1 to 2 inches small pieces. Thereafter the diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion of the appellant and the material placed on record. It may be mentioned that during the year under consideration, the appellant was doing the business in the name of M/s S. Soraster Co. and it had claimed to have two grinding units i.e. Unit No. 1 and Unit No. 2. It has claimed deduction u/s 80I and 80IA of the Act in respect of unit no. 1 and unit no. 2 for the year under consideration at ₹ 1,46,730/- being 20% of ₹ 7,33,650/- and ₹ 7,51,274/- being 25% of ₹ 30,05,095/- respectively. During the appellate proceedings, the appellant has stated the various processes in the manufacturing of talc ore soap stone power as under:- Purchase of Talc ore. Segregation of Talc and unwanted material lime dolomite, stone etc. manually. Sorted talc lumps cleaned by brushes checals etc. to remove the surface impurities. Big boulders to talc are reduced in smaller size or around 1 feet with the help of hammers. Clean and sorted talc lumps are washed and ore is crushed into chips of 1 to 2 inches. Different grades of cleaned sorted chips are blended in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nteresting to note that as per depreciation chart of Unit No. 2 submitted by the appellant there was only a pulveriser having opening WDV of ₹ 2,59,534/- as on 01.04.1996 and no other plant and machinery for crushing, conveying, washing etc., was available as is evident from the details of fixed assets as on 31.03.1997 furnished by the appellant during the appellate proceedings, which is being reproduced as under: S.No. Assets Amount ( in Rs.) 1. Wxhaust Cooler 5,443/- 2. Fan 1,077/- 3. Pulveriser 1,94,650/- 4. Weighing Scale 25,397/- Total 2,26,567/- (vi)(b) These facts itself prove that the appellant at least in Unit No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad the judgment and order of the High Court under (see[1990] 79 STC 156 (MP) (Apex) appeal and we have heard learned counsel. We are satisfied that the crushing of dolomite lumps into chips and powder is not a process of manufacture that brings about a new commercial commodity. The view taken by the High Court must, therefore, be upheld. The appeal is dismissed. (viii) Therefore, in view of the totality of facts and circumstances of the case, as discussed above, and in the absence of complete certificate from a chartered accountant in Form 10CCB, it is held that the appellant was not eligible for deduction u/s 80I and 80IA of the Act. For the other two years, the ld. CIT(A) passed the identical orders. Thus, the ld. CIT(A) has denied the claim of unit No. 1 on the ground that primarily the certificate in Form No. 10CCB was incomplete to the extent of computing of amount of deduction was not mentioned in the said certificate and secondly unit no. 2 was not having the necessary infrastructure to carry out the activity has been claimed by the assessee. It is pertinent to note that as regards objecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are grinded in mills and to produce different grades of soap stone powers. The ld. AR has invited our addition to the invoices to show that soap stone powder of different grade in micron is supplied by the assessee as per the requirement of the buyer. On perusal of these invoices we find that the assessee sold soap stone of different micron ranging from GB-5 to GB-20 to different industrial requirement. It is pertinent to note that the soap stone powder as produced/manufactured by the assessee is being used by various industries including paper, insecticide, cosmetic, textile, rubber, ceramic, paints, fertilizer etc. Thus the requirement of each industry is different as far as the size of the powder grain is concerned. Even otherwise the process of converting the stone which are boulders into soap stone power of different grade involved a series of activities and after undergoing this process the output is entirely distinct from the input. It is also a different marketable product/ article and in the process the assessee has added the marketable value. Though the process has not changed any chemical property of the goods, however the outcome is altogether distinct from the input. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng or production. This distinction has not been taken into account by the Department while rejecting the claim of the assessee(s) for deduction under s. 80-IA of the IT Act, 1961. 12. There is one more judgment of which Shri Bhattacharya, learned Addl. Solicitor General, appearing on behalf of the Department, has placed reliance. That is the judgment of this Court in Rajasthan State Electricity Board vs. Associated Industries Anr. AIR 2000 SC 2382. In that case, the only question that arose for consideration was whether pumping out water from the mines came within the meaning of the word manufacture, production, processing or repair of goods so as to claim exemption from duty under notifications issued under s. 3(3) of the Rajasthan Electricity Duty Act, 1962. In that case, the first respondent was a registered public limited company, engaged in excavating stones from collieries and thereafter cutting and polishing them into slabs. The Rajasthan State Government levied excise duty under the provisions of the Act. A notification dt. 23rd March, 1962 was issued by the State under s. 3(3) of the Act granting exemption from tax on the energy consumed by a consumer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Excise Act. At the outset, we may point out that in the present case, we are not only concerned with the word manufacture , but we are also concerned with the connotation of the word production in s. 80- IA of the IT Act, 1961, which, as stated hereinabove, has a wider meaning as compared to the word manufacture . Further, when one refers to the word production , it means manufacture plus something in addition thereto. The word production was not under consideration before this Court in the case of Aman Marble Industries (P) Ltd. (supra). Be that as it may, in that case, it was held that cutting of marble blocks into slabs per se did not amount to manufacture . This conclusion was based on the observations made by this Court in the case of Rajasthan State Electricity Board (supra). In our view, the judgment of this Court in Aman Marble Industries (P) Ltd. (supra) also has no application to the facts of the present case. One of the most important reasons for saying so is that in all such cases, particularly under the excise law, the Court has to go by the facts of each case. In each case one has to examine the nature of the activity undertaken by an assessee. Mere extract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... production within the meaning of s. 32A(2)(b)(iii) of the IT Act, 1961 and consequently, the assessee was entitled to the benefit of investment allowance under s. 32A of the IT Act. In that matter, it was argued on behalf of the Revenue that extraction and processing of iron ore did not produce any new product whereas it was argued on behalf of the assessee that it did produce a distinct new product. The view expressed by the High Court that the activity in question constituted production has been affirmed by this Court in Sesa Goa's case (supra) saying that the High Court's opinion was unimpeachable. It was held by this Court that the word production is wider in ambit and it has a wider connotation than the word manufacture . It was held that while every manufacture can constitute production, every production did not amount to manufacture. 17. In our view, applying the tests laid down by this Court in Sesa Goa's case (supra) and applying it to the activities undertaken by the respondents herein (reproduced hereinabove), it is clear that the said activities would come within the meaning of the word production . 18. One more aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame constitute manufacturing and production. The Hon ble Jurisdictional High Court in the case of CIT vs. Arihant Tiles Marbles (P) Ltd. (supra) wherein again considered this issue and held in para 14 to 24 as under:- 14. In the present case, the assessing authority has disallowed the Benefit of deduction under s. 80HHC of the Act by observing that the bills raised by the assessees used term dressed marble blocks and in reality, the blocks were neither cut in uniform dimensional size nor polished. The ultimate cutting and polishing is to be done by the end user, so there is no logic behind marble blocks cut and polished before export. Thus, a finding was given that the export of the marble blocks by the assessee is not eligible for the deduction under s. 80HHC of the Act and claim of the assessees under s. 80HHC of the Act was disallowed. 15. The CIT(A) allowed appeals of the assessees by observing that as the marble is a mineral, cut and polished marble blocks shall be covered by entry (x) in the 12th Schedule, the assessees have filed copies of invoices, certificates etc. in support of polishing and value addition and hence, deleted disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it at higher rate, which is clearly high value addition and hence, the benefit of deduction under s. 80HHC of the Act during the relevant assessment years claimed by the assessees cannot be denied in view of decision of Karnataka High Court in God Granites (supra), which has also been affirmed by Hon'ble Apex Court in God Granites (supra). 21. Learned counsel for the assessee-respondents also submitted that the High Court cannot go into questions of facts of the case and the appellant-Revenue has not taken contention that the findings arrived by the learned Tribunal on facts were perverse. In support of their contention, learned counsel relied on decision of Hon'ble Apex Court in the case of Sudarshan Silks Sarees (supra), in which it was held as follows : ... Reversing the decision of the High Court, that the final factfinding authority was the Tribunal and its decision on the facts could be gone into by the High Court only if a question had been referred on whether the finding of the Tribunal was perverse, in the sense that it was such as could not reasonably have been arrived at on the material placed before the Tribunal. In the absen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case we find that the assessee is undertaking the process of broking the big boulders into small size of required dimension then removing the impurities from the surface of the lumbs through machinery boulders, the process is known as dressing process of lumbs then washed by water to remove siliceous and other impurities and therefore, these are crushed to reduce in the desired size and grade of soap stone powder. These different grades of soap powder is being used by different industries and the assessee is accordingly converting raw soap stone into powder as per requirement of industries. Therefore, the outcome being the soap stone powder of different grades is a different and distinct marketable article from the input which is raw boulder soap stone. Accordingly, the process which is undertaken by the assessee is production and manufactured eligible for deduction U/s 80I IA of the Act. The ld. AR has also filed the balance sheet of these years to show the closing stock of the preceding year is reflected as opening stock of the subsequent year in the financial accounts of the assessee and therefore, the assessee has produced all the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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