TMI Blog1982 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... to the concessional rate of tax allowed to such a company. In order to appreciate the contentions, it would be necessary to refer to the relevant sections of the Finance Act of the year 1978. The Finance Act provides the definition as follows: "' Industrial company' means a company which is mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining. Though the Explanation thereto is not relevant for our present purpose, it is necessary to refer to the Explanation because it being one of the subjects for consideration by the Kerala High Court that decision would be better understood if the Explanation is kept in view. The Explanation reads as follows : " Explanation.-For the purposes of this clause, a company shall be deemed to be mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining, if the income attributable to any one or more of the aforesaid activities included in its total income of the previous year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this contention and the meaning of the expression used in the Act and contended that it was an " industrial company " in terms of the relevant section of the Finance Act, 1978. These contentions were repelled on behalf of the Revenue. The Tribunal had referred to the definition of " industrial company " used in the relevant section and referred to the decisions of the Calcutta High Court in the case of Addl. CIT v. A. Mukherjee Co. (P.) Ltd. 1978] 113 ITR 718 which also considered the expression " manufacture in the similar clause of the Finance Act, 1978, as given by the Kerala High Court in the case of CIT v. Casino (Pvt.) Ltd. [1973] 91 ITR 289. We will have to refer to the said decisions. The Tribunal then observed as follows, "What are the facts in the present case. The assessee purchased different qualities of tea in bulk in tea auctions. The assessee next the different varieties of tea so purchased from tea tester and gives particular number or name to the blend of the tea tested. Thereafter, it blends different qualities of tea in different proportion and gets the tea so blended tested to develop a particular blend. Thereafter, there is mass blending. The tea so ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the decision of the Supreme Court to which we shall first refer. This decision is a decision of the Supreme Court in the case of Chowgule Co. Ltd. v. Union of India [1981] 47 STC 124; AIR 1981 SC 1014. That was a decision under the Central Sales Tax Act which was concerned with s. 8(3)(b) and r. 13 of the Central Sales Tax Rules which called for an interpretation of the expression " processing ". The question involved before the Supreme Court was what was blending of ore of different qualities for obtaining ore of requisite specification, if it amounted to processing within the contemplation of s. 8(3)(b)-blending done through mechanical ore handling plant and whether the assessee was entitled to include accessories, stores, etc., needed for plant in its registration certificate. The Supreme Court observed that though the blending of different qualities of ore possessing differing chemical and physical composition so as to produce or of the contractual specifications could not be said to involve the process of manufacture since the ore that was produced could not be regarded as a commercially new and distinct commodity from the ore of different specifications blended together, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the generation or distribution of electricity or any other form of power.' The Supreme Court observed as follows (pp. 129-131) of 47 STC : There are two questions which primarily arise for consideration in these appeals. One is whether the blending of ore whilst loading it in the ship by means of the mechanical ore handling plant constituted manufacture or processing of ore for sale within the meaning of section 8(3)(b) and rule 13 and the other is whether the process of mining, conveying the mined ore from the mining site to the riverside, carrying it by barges to the Marmagoa harbour and then blending and loading it into the ship through the mechanical ore handling plant constituted one integrated process of mining and manufacture or processing of ore for sale, so that the items of goods purchased for use in every phase of this integrated operations could be said to be goods purchased for use in mining and manufacturing or processing of ore for sale falling within the scope and ambit of section 8(3)(b) and rule 13. We shall begin with the consideration of the first question, not because it has been formulated as a first question by us, but because on the answer to it depen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ore blended in the course of loading through the mechanical ore handling plant can be said to undergo processing when it is blended. The answer to this question depends upon what is the true meaning and connotation of the word 'processing' in section 8(3)(b) and rule 13. This word has not been defined in the Act and it must therefore be interpreted according to its plain natural meaning. Websters' Dictionary gives the following meaning of the word 'process', 'to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture, development or preparation for the market, etc., to convert into marketable form as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurizing, fruits and vegetables for sorting and repacking'. Where therefore any commodity is subjected to a process or treatment with a view to its 'development or preparation for the market', as, for example, by sorting and repacking fruits and vegetables, it would amount to processing of the commodity within the meaning of section 8(3)(b) and rule 13. The nature and extent of processing may vary from case to case; in one case the processing may be sl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was placed on behalf of the Revenue on the decision of the Bombay High Court in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay [1959] 10 STC 500 before the Supreme Court. There, the assessees in that case were registered dealers in tea under the Bombay Sales Tax Act, 1953, and they purchased in bulk diverse brands of tea and without the application of any mechanical or chemical process, blended these brands of different qualities according to a certain formula evolved by them and sold the tea mixture in the market. The question arose before the sales tax authorities whether the different brands of tea purchased and blended by the assessee for the purpose of producing tea mixture could be said to have been "processed " after the purchase within the meaning of the proviso to s. 8(a) so as to preclude the assessees from being entitled to deduct from their turnover under s. 8(a) the value of tea purchased by them. The High Court of Bombay held that the different brands of tea purchased by the assessees could not be regarded as "processed" within the meaning of the proviso to cl. (a) of s. 8 because there was " not even application of mechanical force so as to subject the commodity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t if any items of goods were purchased by the assessee as being intended for use as ' machinery, plant, equipment, tools, spare parts, stores, accessories, fuel or lubricants ' for the mechanical ore handling plant, they would be eligible for inclusion in the certificate of registration of the assessee. The question which then arises is as to whether items of goods purchased by the assessee for use in carrying the ore from the mining site to the riverside and from the riverside to the Marmagoa harbour could be said to be goods purchased for use in mining or in processing of ore for sale. Now there can be no doubt, and indeed this could not be seriously disputed, that the process of mining comes to an end when ore is extracted from the mines, washed, screened and dressed in the dressing plant and stacked at the mining site and the goods purchased by the assessee for use in the subsequent operations could not, therefore, be regarded as goods purchased for use in mining. The requirement of section 8(3)(b) and rule 13 is that the goods must be purchased for use in mining and not use in the business of mining. It is only the items of goods purchased by the assessee for use in the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances, it is difficult to see how the machinery, vehicles, barges and other items of goods used for transporting the mined ore from the mining site to the Marmagoa harbour can be excluded from consideration on the ground that they are not goods used in processing of ore for sale. The decision of this court in Indian Copper Corporation's case [1965] 16 STC 259 (SC), is directly in point and completely supports this conclusion which we are inclined to reach on principle. The assessee in that case was a company which mined copper and iron ore from its own mines, transported the ore to its factory and manufactured finished products from the ore for sale. There were several questions which arose for consideration before the court in regard to the assessee's claim for inclusion of certain items of goods in its certificate of registration and one of them was whether the locomotives and motor vehicles used for removing ore from the place where the mining operations were concluded to the factory where the manufacturing process was going on, could be said to be goods intended for use in the manufacture or processing of goods for sale within the meaning of s. 8( 3)(b) and rule 13. This court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same construction should not apply. But the Supreme Court made it quite clear that where no definition is provided in the Act itself, as was the case before the Supreme Court and as is the case before us in the instant case, of the expression, the expression used must be understood to imply the meaning given in the common law and it will be given the meaning and the sense in which the people is conversant with the subject-matter with which it deals or refers to. The natural meaning according to the accepted language must be given its full scope. The Kerala High Court also in the decision referred to herein applied the same test after discussion of how the test was to be applied after following the normal meaning given by the Supreme Court in the decision referred to hereinbefore, the relevant portion of which we have set out hereinbefore. Applying this test, in our opinion, the Tribunal was in error in judging the facts of this case by the principle which was not correct in law. There is another aspect on which the Tribunal has based its conclusion relying on the decision of the Kerala High Court that if this operation was done manually and without application of mechanical forc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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