TMI Blog2019 (8) TMI 355X X X X Extracts X X X X X X X X Extracts X X X X ..... his order shows that except for the work in progress being shown as BFX-P, no further details have been provided regarding the final product or the chemical formula. In the absence of any material having been placed on record to indicate the process carried out on BFX-P, it cannot be said that any process of manufacture or production has taken place so as to entitle the assessee to deduction u/s 10B in respect of the said product. The Tribunal was, therefore, not justified in allowing the deduction u/s 10B in respect of BFX-P. - answered in favour of the revenue and against the assessee - R/TAX APPEAL NO. 1283 of 2018 - - - Dated:- 11-12-2018 - Ms. Justice Harsha Devani And Honourable Dr. Justice A. P. Thaker For the Petitioner : Mr. Varun K. Patel For the Respondent : Mr B S Soparkar ORAL JUDGMENT Ms. Justice Harsha Devani 1. Heard Mr. Varun Patel, learned Senior Standing Counsel for the appellant and Mr. B. S. Soparkar, learned advocate for the respondent. 2. Having regard to the submissions advanced by the learned advocates for the respective parties, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an article or not, and to determine whether the profit related to sale of such products earned by EOU can be said to be eligible for profit under section 10B of the Act. During the course of the appellate proceedings, complete details of the work in progress transferred to the EOU and subsequent conversion of such work in progress to final product by the EOU which came to be filed. From the detailed chart given by the assessee, the Commissioner (Appeals) noted that the physical and chemical differences between work in progress and the final product had also been filed which give the molecular formula, structural formula, difference in chemical and physical properties and chemical use of the work in progress and the final products. On a perusal of all the details, the Commissioner (Appeals) was of the view that except for conversion of Benzarone Crude to Benzarone Pure, in all other processes involving conversion of work in progress to final products, a new product results and such conversion amounts to manufacture or production of a new article or thing and hence, the deduction under section 80IB of the Act was allowable to that extent. However, insofar as the conversion of Benzaro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot amount to manufacture and accordingly, did not grant the benefit of deduction under section 10B of the Act to the assessee. It was submitted that insofar as BFX-P is concerned, the assessee had not produced the process carried out in respect thereof and hence, the Commissioner (Appeals) was wholly justified in holding that no process of manufacture or production had been carried out and hence, the assessee was not entitled to the benefit of deduction under section 10B of the Act in respect of the said product. 7.1 Referring to the impugned order passed by the Tribunal, it was submitted that the Tribunal has not disturbed the findings of fact recorded by the Commissioner (Appeals), but by mainly placing reliance upon the decision of the Supreme Court which was rendered in the context of a totally different product, has held that the conversion of Benzarone Crude to Benzarone Pure amounts to manufacture. It was submitted that the Tribunal has not even taken into notice the fact that the assessee had not produced any details with regard to the manufacturing process in respect of BFX-P. Reference was made to the decision of the Supreme Court in the case of Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several processes are carried out on the Benzarone Crude (BZB-D) as reflected in Stage-III of the manufacturing process flow chart which results into production of Benzarone Pure (BZN-P), which is a marketable product. Reference was made to the decision of this court in the case of Commissioner of Income Tax v. Mitesh Impex , (2014) 367 ITR 85 , wherein the court was dealing with the question as to whether treating the processes employed by the assessee in segregating the metal scrap from cable scrap was manufacture or produce within the meaning of section 10B of the Income Tax Act. The court, after going through the process of the final product, found that the raw material of the assessee is of no use in foundry or industries and that the final products being the scrap of specific metal/non-metal material had distinct identity, use, character and name. The final products had been obtained after applying one or more process may be manually or mechanically and thereafter, the different commodity had come into existence. Therefore, the process employed by the assessee unit was falling in the four corners of manufacture or produce. It was submitted that the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or manufacturing medicines for human consumption and is derived by removing impurities from Benzarone Crude and it is necessary for medical purpose and human consumption. For bringing desired purity level in Benzarone Pure, the company has to follow a long drawn process. Further, Benzarone Crude is not marketable as such until and unless the same is being converted into Benzarone Pure. Hence, Benzarone Pure is a commercially distinct product from Benzarone Crude. The process carried out on Benzarone Crude makes it a commodity fit for use for which it would not be otherwise be fit. The manufacturing process carried out on Benzarone Crude brings into existence Benzarone Pure which is a new article or thing distinct in identity and character. The Commissioner (Appeals), in his order dated 23.02.2012, has referred to the stages involved after the transfer of work in progress to the General Unit. He, however, found that the chemical and structural formula of Benzarone Crude and Benzarone Pure are one and the same and all processes involved in purifying Benzarone Crude to Benzarone Pure are physical processes and no chemical conversion takes place. He, therefore, was of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result of the process, it would amount to manufacture of an article or thing. 16. The Tribunal in Tonira Pharma Ltd. v. Assistant Commissioner of Income Tax, Bharuck Circle, Bharuch (supra), has observed that the provisions of section 10B would be applicable to an industry which is manufacturing or producing any article or thing. The foremost condition is that such 100 per cent export oriented unit should manufacture or produce any article or thing or computer software that fulfills all other conditions as stipulated in sub-section (2). The essence of manufacturing is the change from one object to another for the purpose of making it a different marketable commodity. Every change in the raw material could not be called as manufacturing unless a new product which has a separate commercial identity in the market comes into existence. The transformation to the raw material should be of such a nature that a new and different article or thing emerges which is distinct in name, character and use. The essence of determining whether new article or thing is manufactured or produced lies in the identity and use of the commodity before undergoing the processing and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is subjected to for the purpose of converting it into Benzarone Pure as well as considering the fact that the Benzarone Pure is a distinct marketable commodity, different from Benzarone Crude which is not capable of being used as such, the conversion of Benzarone Crude to Benzarone Pure would fall within the ambit of the expression manufacture or produce as contemplated under section 10B of the Act. The Tribunal was, therefore, justified in holding that the assessee is entitled to deduction under section 10B of the Act in respect of the said product. 20. Insofar as the second question regarding deduction under section 10B of the Act in respect of BFX-P is concerned, it is an admitted position that no manufacturing process in respect of the said product has been brought on record either before the Commissioner (Appeals) or even before this court. The chart referred to by the Commissioner (Appeals) in his order shows that except for the work in progress being shown as BFX-P, no further details have been provided regarding the final product or the chemical formula. In the absence of any material having been placed on record to indicate the process carried out on BFX ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
