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TMI Blog1976 (7) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... n or manufacture of iron and steel (metal) as found in item (1) of the Fifth Schedule to the Income-tax Act, 1961, and the assessee was entitled to higher rate of development rebate ? " The Tribunal by a common order dealing with the appeals relating to the above assessment orders upheld the contention of the assessee that he was entitled to the higher rate of development rebate. The question has to be answered by interpreting section 33(1)(b)(B)(i)(a) and item (1) in the Fifth Schedule to the Income-tax Act, 1961, for short " the Act ". We shall extract section 33(1)(a), (b)(B)(i)(a) : " 33. (1)(a) In respect of a new ship or new machinery or plant (other than office appliances or road transport vehicles) which is owned by the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the view taken in the judgment disposing of ITR Nos. 74 to 76 of 1973 [Commissioner of Income-tax v. Mittal Steel Re-Rolling and Allied Industries (P.) Ltd. [1977] 108 ITR 207 (Ker)] requires reconsideration. We, therefore, passed an order of reference, the relevant portion of which is in these terms: " Counsel emphasised that in order that a thing can be said to have been produced or manufactured the manufacture or production must, for the first time, bring into existence a thing or article. The fact that M. S. rods as well as the steel sections were produced from iron metal showed that there was no production or manufacture of iron or steel but only a conversion of iron in one form into another form. The machinery utilise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough furnaces and heated. They are put to ' roughing machine ' where they are lengthened by about three times and the girth is also reduced by nearly half. Thereafter they are put through ' finishing mills ' where they are further lengthened and the girth is still reduced to 10 to 20 mm. The resultant product is known as ' M. S. rods ' or ' steel sections ' and these are the commodities which are sold by the assessee." A glance at the relevant section makes the following points clear. The machinery with reference to which the development rebate could be claimed must be owned by the assessee and such machinery must have been wholly used for the purpose of the business carried on by him. The machinery should have been installed in the previ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said conversion does not involve any process of manufacture, but the scrap is made into a better marketable commodity. Before the High Court this contention was not pressed. That apart, it is clear that scrap iron ingots undergo a vital change in the process of manufacture and are converted into a different commodity, viz., rolled steel sections. During the process the scrap iron loses its identity and becomes a new marketable commodity. The process is certainly one of manufacture." But, it is contended by counsel on behalf of the revenue that the finished articles, M. S. rods and steel sections, produced by the assessee cannot be termed " iron and steel (metal) ". M. S. rods and steel sections are different commercial commodities from ste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttractive and acceptable forms. They did not in the process lose their character as iron and steel. The dealer sold ' iron and steel ' in the shape of bars, flats and plates and the customer purchased ' iron and steel ' in that shape. We, therefore, hold that the bars, flats and plates sold by the assessee are iron and steel exempted under the notification." It was contended by counsel for the revenue that the entry in the notification that was interpreted by the Supreme Court did not contain the word " metal ". According to the counsel, " iron and steel " mentioned in. the entry in the notification are quite different from " iron and steel (metal) " mentioned in item (1) in the Fifth Schedule to the Act. We are unable to accept this conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unjab [1967] 20 STC 430 (SC) which we have already referred to) is " iron and steel ", and item (1) of the Fifth Schedule is, therefore, attracted. To do justice to the counsel for the revenue we must also refer to the decision in Commissioner of Sales Tax v. Harbilas Rai & Sons [1968] 21 STC 17 (SC) relied on by him. In that case, notwithstanding the fact that the assessees bought bristles plucked by kanjars from pigs, boiled them, washed them with soap and other chemicals, sorted them out according to their sizes and colours, tied them in separate bundles of different sizes and despatched them to foreign countries for sale, it was held that the sale did not involve a manufacturing process. We may notice that the passage we have quoted fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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