9911796707
TMI Blog2019 (8) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income Tax Act, 1961 in respect of BFX-P?" 3. Since the learned advocates for the respective parties were heard at length, with the consent of the learned advocates, the matter was taken up for final hearing. 4. The assessee is a listed company engaged in the business of manufacturing and export of bulk drugs, drug intermediates and fine chemicals (organic and inorganic). During the year under consideration, the assessee claimed deduction of Rs. 1,54,60,676/- under section 10B of the Act. The assessee had shown total export sales of Ankleshwar EOU is shown at Rs. 25,22,87,369/- and had stated that the Ankleshwar EOU enjoyed a gross profit margin of 28.34%. The Assessing Officer was of the view that it can therefore be said that the cost of goods sold by the Ankleshwar EOU was Rs. 19,65,77,348/-. Out of the total sale of Rs. 14,66,72,339/- by the General Unit of Ankleshwar, sale of Work in Progress (WIP) of Rs. 8,35,84,056/- was shown to have been made to the Ankleshwar EOU. According to the Assessing Officer, the work in progress was nothing but semi-finished goods and hence, it could not be said that what has been exported by Ankleshwar EOU was also manufactured by it. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 10B of the Act on account of conversion of Benzarone Crude to Benzarone Pure. The assessee had not provided any details for BFX-P and therefore, the Commissioner (Appeals) held that it is not eligible for deduction under section 10B of the Act on account of this item also. 6. The assessee carried the matter in appeal before the Tribunal. By the impugned order, the Tribunal held that the controversy is now well settled by the decision of the Supreme Court in the case of Income Tax Officer, Udaipur v. Arihant Tiles and Marbles Private Limited, (2010) 320 ITR 79 (SC), wherein it is held that even conversion of marble blocks by sawing them into slabs and tiles and polishing amounts to "manufacture or production of article or thing" and that the products as inputs and as outputs were different for all practical purposes of their use and application. The Tribunal held that even a purification process, or removal of impurities, as long as the end product has different usage, value and applications does amount to a new product coming into existence. It, accordingly, modified the order passed by the Commissioner (Appeals) in respect of exclusion of profits in respect of the two pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lead, if any, and ascorbic acid IP was resulted. The Tribunal observed that it was an undisputed fact that it was ascorbic acid which was imported and put for processing and what was resulted was also ascorbic acid but of finer quality. The Tribunal noted that despite repeatedly asking, the Authorized Representative was unable to show whether ascorbic acid FCC Grade IV could or could not be used in place where ascorbic acid IP is used or where use of ascorbic acid FCC Grade IV is prohibited by law or regulation in cases where ascorbic acid IP is used. The Tribunal held that in the absence of any material to the effect that the use of ascorbic acid FCC Grade IV and ascorbic acid IP are different and ascorbic acid FCC Grade IV could not be used in place where ascorbic acid IP is used, the contention of the Authorized Representative that it is undertaking the manufacturing or production of finished goods namely ascorbic acid IP cannot be accepted. The Tribunal, accordingly, held that no manufacturing or production of any new article or thing has taken place from import of finished goods of ascorbic acid FCC Grade IV. Mr. Patel, accordingly, urged that the appeal requires to be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re or production" within the meaning of such expression as envisaged under section 10B of the Act. 10. A perusal of the record of the case reveals that insofar as the Assessing Officer is concerned, he has not carried out any detailed inquiry as regards the process carried out on the work in progress to examine as to whether the process would amount to manufacture or production. Such exercise, however, has been carried out at the stage of appeal before the Commissioner (Appeals). 11. Before the Commissioner (Appeals), the assessee had produced flow chart of various products right from the inception till the stage of final product. A perusal of the flow chart in respect of Benzarone shows that Stage-I results in the production of "2-Ethyl Coumarone (BZB-B); Stage-II relates to conversion of 2-Ethyl Coumarone (BZB-B) into Benzarone Crude (BZB-D). This Benzarone Crude (BZB-D) is the "work in progress" for the Ankleshwar EOU and in Stage III such Benzarone Crude (BZB-D) is converted into the final product viz., Benzarone Pure (BZN-P). A perusal of the manufacturing process flow chart reveals that Benzarone Crude is subjected to various processes, which finally results into the produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ude is work in progress for that unit. This work in progress viz. Benzarone Crude is transferred to the EOU where the same is subjected to a series of processes and is converted in Benzarone Pure (BZN-P) in the third stage. The question that arises for consideration is whether the third stage in the process is a manufacturing process. A perusal of the third stage process shows that Benzarone Crude is placed in a reactor and is subjected to heating and cooling processes and is thereafter centrifuged. It is then repeatedly subjected to such processes and then vacuum dried and subjected to milling and then sifted and the resultant BZN-P Benzarone Pure is then packed. While the processes carried out on Benzarone Crude may be physical processes which do not result in any change in the structural and chemical formula, Benzarone Crude as such is not marketable. It is only after it is subjected to various processes resulting in the production of Benzarone Pure, that it becomes a commercially marketable product. 15. This court in the case of Commissioner of Income Tax v. Mitesh Impex (supra) has recorded that the courts have accepted the principle of fairly universal application that where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the petitioner's own case in respect of ascorbic acid FCC Grade IV referred to by the Tribunal in the above referred decision. 18. The Supreme Court in Income Tax Officer, Udaipur v. Arihant Tiles and Marbles Private Limited (supra), on which reliance has been placed by the Tribunal, has referred to its earlier decision in the case of Commissioner of Income Tax v. N.C. Budharaja & Co., (1993) 204 ITR 412, wherein it has held that the test for determining whether "manufacture" can be said to have taken place is whether the commodity, which is subjected to a process can no longer be regarded as the original commodity but is recognised in trade as a new and distinct commodity. The word "production", 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. The word "production" takes in all the byproducts, intermediate products and residual products which emerge in the course of manufacture of goods. Applying the said decision, the Supreme Court held that blocks converted into polished slabs and tiles after undergoing the process indicated therein certainly results in emergence of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
