TMI Blog2022 (12) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... nalysing this process ld. CIT(A) has rightly arrived to the conclusion that the assessee is engaged in the production activity and thus, eligible for deduction u/s 80IC/80IE of the Act. Since ld. D/R has failed to controvert these facts and the applicability of the ratio laid down in Hindustan Petroleum Corpn. Ltd. (supra) by placing any other binding precedence in its favour and since all other necessary requirements as provided u/s 80IC/80IE of the Act have been complied, we fail to find any infirmity in the finding of ld. CIT(A) and thus, all the grounds of appeal raised by the Revenue are dismissed. - I.T.A. Nos.: 318 & 319/Gty/2018 And I.T.A. Nos.: 238, 239 & 240/Gty/2018 - - - Dated:- 8-12-2022 - Dr. Manish Borad, Accountant Member And Sri Sonjoy Sarma, Judicial Member For the Revenue : Smt. I. Gyaneshori Devi, JCIT For the Assessee : Sh. Ramesh Goenka, FCA ORDER PER MANISH BORAD, ACCOUNTANT MEMBER: The captioned appeals filed by the Revenue pertaining to the Assessment Years (in short AY ) 2012-13, 2013-14 2014-15 are directed against separate orders passed u/s 250 154 of the Income Tax Act, 1961 (in short the Act ) by ld. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IC/80IE of the Income Tax Act, 1961. (ii) That on the facts and circumstances of the case, the Ld. CIT(A) erred, in facts as well as in law in deleting the addition/disallowance of Rs. 56,14,942/- toward assessee s claim for deduction u/s 80IC of the Income Tax Act, 1961 in respect of its industrial unit located at Sivasagar. (iii) That on the facts and circumstances of the case, the Ld. CIT(A) erred in facts as well as in law in deleting the addition/ disallowance of Rs. 37,93,171/- toward assessee s claim for deduction 80IE of the Income Tax Act, 1961 in respect of its industrial unit located at North Lakhimpur. (iv) That on the facts and circumstances of the case, the Ld. CIT(A) erred in facts as well as in law in deleting the addition/ disallowance of Rs. 1,37,24,383/- toward assessee s claim for deduction 80IE of the Income Tax Act, 1961 in respect of its industrial unit located at Duliajan. (v) That the appellant craves leave to add, alter or amend any or all of the grounds of appeal before or during the course of appeal. I.T.A. No.: 239/Gau/2018: (i) That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit located at North Lakhimpur. (iv) That on the facts and circumstances of the case, the Ld. CIT(A) erred in facts as well as in law in deleting the addition/ disallowance of Rs. 1,96,11,395/- toward assessee s claim for deduction 80IE of the Income Tax Act, 1961 in respect of its industrial unit located at Duliajan. (v) That on the facts and circumstances of the case as well as on the points of law the Ld. CIT(A) has erred in admitting additional evidences without calling for remand report from the AO which was in clear violation of Rule 46A of the Income Tax Rules, 1962. (vi) That the appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of appeal. 4. As the issues raised in these appeals are common and as the facts are identical, for the sake of convenience and brevity, they are heard together and disposed off by way of this common order. From perusal of grounds of appeal, we note that Revenue has challenged the finding of ld. CIT(A) allowing the claim of the assessee towards deduction u/s 80IC of the Act for the profits earned from Sivasagar unit and for deduction claimed u/s 80IE of the Act for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Supreme Court of India in the case of CIT vs. Hindustan Petroleum Corpn. Ltd. Reported in [2017] 396 ITR 696 (SC) and allowed the assessee s claim made u/s 80IC/80IE of the Act. 10. We have heard rival contentions and perused the records placed before us. Revenue is aggrieved with the finding of ld. CIT(A) allowing the assessee s claim for deduction u/s 80IC of the Act for Sivasagar unit and u/s 80IE of the Act for North Lakhimpur and Duliajan units accepting that assessee s activity of converting of oxygen in its liquid form into oxygen in gaseous form tantamount to production and thus, qualify for deduction u/s 80IC/80IE of the Act. 11. We find that ld. CIT(A) following the ratio laid down by the Hon'ble Supreme Court of India in the case of Hindustan Petroleum Corpn. Ltd. (supra) has allowed the claim of the assessee observing as follows (relevant extract): vi. I have gone through the above submissions of the Appellant and have considered the facts and evidences on record. vii. The present appeal has been filed since the Ld. AO did not consider the production of Oxygen gas from Liquid Oxygen as production or manufacture so as to be eligible for deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts to production or manufacturing for the purposes of the aforesaid provisions of the Act. 2. The Assessing Officers (AOs) had disallowed the deduction claimed by the assessees holding that they did not engage in the production or manufacture activity because of the reason that LPG was produced and manufactured in refineries and thereafter there was no change in the chemical composition or other properties of the gas in the activity of filling the cylinder. This view was affirmed by the Commissioner of Income-tax (Appeals). The Income-tax Appellate Tribunal (ITAT), however, upset the aforesaid view of the Assessing Officers after finding that LPG produced in the refineries cannot be directly supplied to households without bottling of the LPG into the cylinders and insofar as LPG bottling is concerned, it is a complex activity which can only be carried out by experts. In this light, it was noted that the process involved LPG suction, vapour distribution, de- classification, compression of LPG vapour, external and internal cleaning, hydro pressure testing refilling, sealing, quality control etc. and hence the activity would be a manufacturing activity . In this hue, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowability of such case. 6. Insofar as process of LPG manufacturing is concerned, the Assessing Officer noted that the assessee had narrated the same in the following form: LPG (Liquefied Petroleum Gas), which is used as a fuel for domestic purposes as well as in commercial and industrial establishments is obtained by refining of crude in the crude distillation units and Catalytic Crackers of the refinery. It generally consists of butane, propane and butane and propane mixtures. In the refinery, the plant is fed with natural gas and crude oil. The feed gas and the gas under goes a chilling up to a temperature of 22 degree centigrade and 37 degree centigrade. In the first stage, when it is chilled to 22 degree centigrade, the liquefied hydrocarbon formed is separated out and the vapour is further chilled to 37 degree centigrade. The liquefied hydrocarbons from both stages are then fractionated in two stages. The heavier fractionation is obtained from the bottom of first fractionators, the top product from the second column is LPG, which is sent for bottling. 7. Response of the assessee to the question pertaining to activities carried out in the bottling plants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct wherein Explanation (Hi) mentions that manufacture includes assembling as well and, therefore, the assessee's case was covered by the definition of manufacture under section 10A of the Act. This contention was, however, rejected by the Assessing Officer by pointing out that the definition of manufacture as given in the Explanation (iii) to section 10A of the Act is for limited purposes in the context of newly established industrial undertakings in free trade zone and the very explanation starts with the phrase for the purposes of this section . The Assessing Officer further noticed that the word manufacture is not defined in the Act. He, therefore, proceeded to turn to the legal and general definitions available elsewhere and referred to corpus jurissecundum and also certain cases of this court dealing with the issue. On that basis, the Assessing Officer concluded that manufacture can be said to be a process or activity which brings into existence a new identifiable and distinctive goods and the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, LPG exists as a heavier gas and on liquefaction, its volume reduces considerably***. 11. Learned counsel submitted that sections 80HH, 80-1 and 80-IA of the Act use the expression manufacture or production , therefore, whenever industrial undertaking is either manufacturing or producing an article, it will be entitled to the benefit of the aforesaid provisions, subject to satisfying other conditions laid down in those sections. His argument was that the activities undertaken by the assessees in their bottling plant results in the production of a new commercial product which is made suitable for domestic use, which would otherwise not be possible without undergoing such processes. Gas produced by refineries is not usable as such by the consumer for domestic use. It requires several complex processes to bottle the gas in cylinders to make it usable by domestic consumers. After LPG is bottled in cylinders the product obtains a different name, character and use which is different from its original components. A domestic consumer identifies bottled LPG as a product different from the LPG produced in the refinery or from the empty cylinder. Even otherwise, the word production ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been taken by the Central Government itself. 12. Learned counsel argued that the findings of the Tribunal, as upheld by the High Court, were not assailed by the Department and, therefore, there was no question of law involved. He also referred to the few judgments of different High Courts which have taken the view that LPG bottling would amount to manufacture and pointed out that in those cases, no appeal was preferred by the Department. Learned counsel also endeavoured to distinguish the judgment of the Gujarat High Court in Kosan Gas Company's case as well as the judgments of this court which have been relied upon by / the learned counsel for the Revenue and submitted that those judgments have no applicability. He, thus, pleaded that the appeals of the appellant/ Revenue deserve to be dismissed. 13. Mr. ParijatSinha, who appeared for some other assessees, argued almost on the same lines. 14. We have given adequate consideration to the respective submissions of both the parties, which they deserve. As is clear from the facts and arguments noted above, the question of law which is involved (already mentioned) is: Whether bottling of LPG, as undertaken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in detail the process under taken by each of the respondents before us. In the present case, we are not concerned only with cutting of marble blocks into slabs. In the present case we are also concerned with the activity of polishing and ultimate conversion of blocks into polished slabs and tiles. What we find from the process indicated hereinabove is that there are various stages through which the blocks have to go through before they become polished slabs and tiles. In the circumstances, we are of the view that on the facts of the cases in hand, there is certainly an activity which will come in the category of 'manufacture' or 'production' under section 80-1A of the Income-tax Act. As stated hereinabove, the judgment of this court in Aman Marble Industries (P.) Ltd. v. Collector of Central Excise [2005] 1 SCC 279; [2003] 157 ELT 393 (SC) was not required to construe the word 'production' in addition to the word 'manufacture'. One has to examine the scheme of the Act also while deciding the question as to whether the activity constitutes manufacture or production. Therefore, looking to the nature of the activity stepwise, we are of the view that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16. Keeping the aforesaid distinction in mind, let us take note of the process of LPG bottling that is undertaken by the assessees herein and about which there is no dispute. It has come on record that specific activities at the assessees plant include receiving bulk LPG vapour from the oil refinery, unloading the LPG vapour, compression of the LPG vapour, loading of the LPG in liquefied form into bullets, followed by cylinder filling operations. The stages of these activities are as under: (a) Bulk LPG is received in the bottling plant through road tankers/ rail wagons; (b) The LPG is unloaded into spheres/bullets through LPG compressors which use variable levels of pressure for suction, unloading and vapourrecovery; (c) Refilling/bottling of LPG in cylinders by compressing the same into liquid form; and (d) Capping, fixing of seals and safety valves prior to storage and loading of filled cylinders. 17. Thus, after the bottling activities at the assessees' plants, LPG is stored in cylinders in liquefied form under pressure. When the cylinder valve is opened and the gas is withdrawn from the cylinder, the pressure falls and the liquid boils to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he affirmative but those decisions were not challenged by the Department. The cases specifically referred were Puttur Petro Products Pvt. Ltd. v. Asst. CIT* and Central U.P. Gas Ltd. v. Deputy CIT**. 19. From the submissions made by learned counsel for the Revenue, who banked on the reasoning given by the Assessing Officer, it can be gathered that the entire thrust of the Assessing Officer was that the process involved in filling up the gas into cylinders does not amount to manufacture inasmuch as the said process does not bring into existence a new identifiable and distinctive goods. In the first instance, no distinction was drawn between manufacture and production and the matter was not looked into from the angle as to whether the aforesaid process would amount to production or not. Other reason which prevailed with the Assessing Officer and which was also the argument of the learned counsel for the Revenue was that, on identical facts, the Gujarat High Court had held that refilling the LPG after purchasing from M/s. HPCL into small cylinders would not amount to manufacture. That was a case which was decided in the context of the Gujarat Sales tax Act, 1969. The court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s HPCL, wherein the appellant compresses the Liquid Oxygen into oxygen gas in Gas cylinders by following a complex process and thus, it also tantamount to 'Production'. In fact, it would be appreciated from the submissions of the appellant that the appellant's activity involves the following process: Process Description: Oxygen gas bottling plant comprises of five main components. They are: a) A cryogenic vacuum insulated vessel called Vacuum Insulated Static Tank (VIST) b) A cryogenic pump for pumping liquid oxygen from the tank to cylinders through heat exchanger (Vaporizer) c) A Liquid Oxygen Vaporizer d) A manifold for filling cylinders with Oxygen gas e) Industrial and oxygen cylinders for filling and storing compressed gas Liquid Oxygen (LOX) is brought by cryogenic tankers and unloaded into the VIST (a) The stored liquid Oxygen in the tank is sucked by the cryogenic pump (b) And delivered to the Vaporizer (c) The Liquid Oxygen in the Vaporizer becomes Oxygen gas due to exchange of heat between the Vaporizer and the ambient air. The outgoing product of the Vaporizer is Oxygen gas that goes through the manifold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original orders and more specifically in the last para of the original orders and vide order dated 10.09.2018 incorporated the following observations in its finding: 3. After the receipt of the aforesaid application from the appellant, the appellate records of the Appellant were called for and examined. On such examination it is seen that the undersigned inadvertently omitted certain observations in the last para of decision/appeal order. Since there are mistakes apparent from records in the original appeal order, the same are being rectified as hereunder: In the original appeal order the last para of the Appeal Order read as under: It is to be noted that the above process of the appellant, is akin to the activity which the Hon'ble Supreme Court had appreciated in Para 6,7 16 of the above judgment and held the same to be Production. In Fact, I further find that the Liquid Oxygen perse be cannot be directly supplied to the consumer for use because of various reasons of handling, storage and safety. I further find that in the case of the appellant, the appellant had made a reference to the Ministry of Micro, Small and Medium Enterprises, Bamunimaidan, Guwah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial and the finished products have different compositions and while the raw material is in the gaseous state, one of the finished products is in gaseous state and the other is in liquid state. Both the above processes of the appellant, viz, compressing Oxygen gas in to cylinders and compressing Natural Gas in to pipeline, are akin to the activity which the Hon'ble Supreme Court had appreciated in Paras 6, 7 16 of the above Judgment and held the same to be Production. In fact, I further find that the Liquid Oxygen per se be cannot be directly supplied to the consumer for use because of various reasons of handling, storage and safety. Similarly, Raw Natural Gas at low pressure cannot be used commercially and is flared/burnt. Whereas High Pressure Natural Gas is suitable for transport through pipelines for supply to power plants to generate electricity and in fertilizer plants, domestic consumers, etc. Natural Gas Liquid (NGL) is added to crude oil to improve its quality. It may be relevant to point out the similarities of the present appeal with the Hon'ble Apex Court Supra: a) There is no dispute that Liquid Oxygen and low pressure Natural Gas cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80IE of the Act. I have also gone through the observation of the Assessing Officer that Goods falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), produced by petroleum oil and gas refineries are excluded U/S 80 IE and hence Duliajan unit of the appellant is not eligible for deductions U/S 80-IE of the Income Tax Act, 1961. While there is no dispute that Processed High Pressure Natural Gas and Natural Gas Liquid are under Chapter 27 of the Central Excise tariff Act, they are not produced by petroleum oil and gas refineries in the instant case and therefore, the exclusion clause of Sec 80IE is not applicable. The grounds of appeal under 3, 4 and 5 are allowed. 13. From perusal of the above finding of ld. CIT(A) given in the order u/s 250 of the Act as well as u/s 154 of the Act allowing the assessee s claim for deduction u/s 80IC/80IE of the Act for the units located at Sivasagar, North Lakhimpur and Duliajan, we note that ld. CIT(A) has followed the ratio laid down by the Hon'ble Apex Court in the case of Hindustan Petroleum Corpn. Ltd. (supra) and has analysed the details and the process carried out by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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