Industrial company status denied where export preparation of chillies was not processing in the statutory sense.

Routine sorting, grading, clipping and stemming of chillies for export did not amount to processing of goods for industrial company status under section 2(6)(c) of the Finance (No. 2) Act, 1971. The Madras High Court held that the activities did not produce any legally relevant industrial transformation and distinguished the wider excise-law concept of manufacture. Applying its earlier view, the Court reaffirmed that a company must be mainly engaged in manufacture or processing in the statutory sense; on these facts, it was not an industrial company and the Tribunal's view was upheld against the assessee.

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Issues: Whether the assessee was an industrial company engaged in the manufacture or processing of goods for the purposes of taxation.

Analysis: The assessee's activities consisted of sorting, grading, clipping and stemming chillies for export. The applicable definition of "industrial company" under section 2(6)(c) of the Finance (No. 2) Act, 1971 required the company to be mainly engaged in manufacture or processing of goods. The Court found no reason to depart from its earlier view that these activities did not amount to processing in the relevant sense, and distinguished the wider concept of manufacture discussed in the excise context. On the facts, the activities did not result in any relevant industrial transformation.

Conclusion: The assessee was not an industrial company; the Tribunal's view was correct and the reference was answered against the assessee.

Final Conclusion: The legal position reaffirmed that routine preparation of goods for export, without a transformative industrial process, does not satisfy the statutory requirement of processing for industrial company status.

Ratio Decidendi: Routine sorting, grading and preparation of goods for export do not constitute processing for the purpose of industrial company status unless they bring about a legally relevant industrial transformation.

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