TMI Blog1996 (2) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... of these statutory provisions are available to them. The Assessing Officer (annexure "A"), by order dated August 29, 1983, rejected their claim and this was also further confirmed by the Commissioner of Income-tax (Appeals), Ernakulam (annexure "B"), by order dated March 16, 1984. In reaching this conclusion, the two authorities relied on the position that for the earlier years the claim was declined as one of the grounds for denying the claim. The assessee-company carried appeals to the Income-tax Appellate Tribunal. It was urged before the Tribunal that a notification dated July 8, 1983 (No. 189 of 1983), considered the latex concentrate, preserved latex, etc., as manufactured goods and which was not considered as it was not placed before the Tribunal when matters relating to the previous years 1977-78 and 1978-79 were taken up for consideration. It was urged that the notification made all the difference which would change the situation to such an extent that it would entirely be a different and independent commercial product. It was urged for consideration and the Tribunal accepting the effect of the notification held it to be an entirely different commercial product. At tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd, Kottayam, and the submissions made by the Departmental Representative in the light of the contents thereof. In the process, the Tribunal considered the various stages. The Tribunal considered processing into preserved field latex observing the method of preservation by ammonia application. In the process of understanding the situation, the Tribunal also considered the method of preserving latex concentrates, to mean the removal of a substantial quantity of serum from field latex, for the purpose of making latex richer in rubber content. After considering, the Tribunal has considered the process of centrifuging and has explained the real principle of centrifuging in the process. It is observed that the process is basically the same as that of creaming, requiring replacement of gravitational force bringing about separation of rubber particles by a process commonly known as creaming. It is also taken into consideration that the process gets subjected to strong centrifugal force which is in fact several thousand times faster than the normal gravitational force. With emphasis it is observed that the efficiency of this centrifuging process depends on certain important factors such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... field latex cannot be used under certain products requiring high quality of rubber. Such products are also specified by the Tribunal emphasising in regard thereto that the ideal raw material for them is centrifugally concentrated latex. In this manner, after analysing the entire process, the Tribunal records that although the centrifuged latex and the normal field latex on the other containing the same hydrocarbon, there is a lot of difference in their physical nature. It is observed that qualitative changes distinguish the centrifuged latex wholly from the normal latex. Reference is also made to the properties highlighted in the context by the Rubber Board to show the distinction between centrifuged latex and the normal field latex. It is emphasised that the natural field rubber is not possible to be used straightaway for manufacture and it is the process known as centrifuging process ultimately in the production of an intermediary product as centrifuged latex. What is common is the latex part thereof, however, making the two distinct and separate from each other. It is emphasised that the chemical changes which go to make the natural field latex a marketable intermediary prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e process. We will also have to assume that centrifuged latex gets a distinct market of its own unlike the natural latex which has no market by reason of its not being a product that can be used for further process, unless it is processed further as discussed hereinbefore. To consider the situation, we will have to consider three decisions of the Supreme Court Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 ; Ujagar Prints v. Union of India [1989] 179 ITR 317 ; and CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 answering what is needed. In fact the question jets a direct answer in the very first case of Empire Industries Ltd. [1986] 162 ITR 846, where the Supreme Court had an occasion to consider the judgment of the Gujarat High Court in Vijay Textile v. Union of India [1979] 4 ELT(J) 181 together with the Central Ordinance No. 12 of 1979, later replaced by the Central Excises and Salt and Additional Duties of Excise (Amendment) Act, 1980. The petitioner-company was an independent processing unit engaged in job activities of dyeing, printing and finishing of man-made/cotton fabrics. The factual peculiarities show that the fabrics received for processing were in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he process of manufacture, doubtless covering the transformation if properly construed. It is observed that the question as to whether actually there is manufacture or not would ultimately receive an answer with a commercial outlook alone in contradistinction with other aspects. It would be seen and that too on a careful reading of the subsequent Constitution Bench decision of the Supreme Court in Ujagar Prints' case [1989] 179 ITR 317 that the judgment of the Gujarat High Court in Vijay Textile's case [1979] 4 ELT(J) 181 created certain situations, making out a case for the Constitution Bench to consider the question in the context. In fact at page 336 of the report, it is so observed that in fact, when the judgment in Empire Industries'case [1986] 162 ITR 846 (SC) has decided the question, the Constitution Bench thought that it should examine the submissions on the point as the matter is referred to a larger Bench. It is to be noted, as emphasised even earlier that the question is concluded by the pronouncement in Empire Industries' case [1986] 162 ITR 846 (SC) and is sought to be reagitated before the Constitution Bench. Independently, therefore, the Constitution Bench has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "production", the word "production" has a wider connotation than the word "manufacture". Illustratively, it is observed that every manufacture can be characterised as production but not vice versa. To appreciate the discussion, these words are understood in the process of logical relationship of the genus and species inter se In fact, N. C. Budharaja and Co.'s case [1993] 204 ITR 412 (SC) is in regard to the approach of interpretation to declare that the principle of adopting a liberal interpretation which advances the purpose and object of a beneficial provision cannot be carried to the extent of doing violence to the plain and simple language used in the enactment and it is further observed that it would not be reasonable and permissible to rewrite the section or substitute words of its own for the actual words employed by the Legislature in the name of giving effect to the supposed underlying object. This was in the process of understanding the contention as to whether the construction of a dam could be understood as manufacture or production as is required in the context. Going through the said decision, it is seen as to whether the work undertaken by the assessee as a contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e answered in Woodland Estates' case [1965] 58 ITR 612 (Ker) was whether the process of conversion of latex into sole crepe is a process employed by the cultivator of rubber to make the produce marketable and on the basis thereof on the assumption, it is observed that even though the process makes it fit for marketing the rubber is still a produce from land. Reliance is placed on the earlier decisions. In our judgment the position is neatly covered by the decision of the Constitution Bench in the Ujagar Prints' case [1989] 179 ITR 317 (SC) laying emphasis on the commerciality as the determination factor for the purpose of a claim for deduction in the context. In fact the Constitution Bench has declared the law as to what is to be understood as manufacture and production whether it is in the context of levy of tax, grant of deduction or even otherwise. The Constitution Bench itself has observed that the problem is of application. It is not poss ible to consider the decisions cited for the above reasons. Learned counsel placed reliance on yet another decision of this court in Meenachil Rubber Marketing and Processing Co-operative Society Ltd. v. CIT [1992] 193 ITR 108 (Ker). It mus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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