Export deduction for granite turns on whether the goods were processed, cut and polished dimensional blocks, not rough stone.

Entitlement to deduction under section 80HHC for granite exports depended on whether the goods exported were processed granite, namely cut and polished dimensional blocks, rather than rough granite. The Tribunal referred to the statutory scheme, the Twelfth Schedule and CBDT circulars distinguishing processed granite from rough granite, and noted that such clarificatory circulars bind the authorities and operate retrospectively. Because the record did not clearly establish the exact nature of the exports or the effect of the polishing unit's closure, the matter was remitted to the Assessing Officer for fresh factual verification and application of the governing legal principles after hearing the assessee.

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Issues: Whether the assessee was entitled to deduction under section 80HHC on export of granite and whether the matter required factual verification as to whether the granite had been cut into dimensional blocks and polished before export.

Analysis: The Tribunal noted that the entitlement to deduction depended on the nature and quality of the granite exported and on whether the exported goods were processed granite in the form of cut and polished dimensional blocks. The Tribunal referred to the statutory scheme, the Twelfth Schedule, and the CBDT circulars which treated processed granite differently from rough granite, and also noted the judicial view that such clarificatory circulars operate retrospectively and bind the authorities. However, the record before the Tribunal did not clearly establish the exact nature of the exported granite or the factual effect of the closure of the polishing unit.

Conclusion: The issue was remitted to the Assessing Officer for fresh consideration after verifying the relevant facts and applying the applicable legal principles, with an opportunity of hearing to the assessee.

Final Conclusion: The assessee obtained a remand for factual adjudication on eligibility for deduction, and the matter was not finally decided on merits by the Tribunal.

Ratio Decidendi: Eligibility for export deduction in respect of granite depends on whether the exported product is processed granite satisfying the statutory and circular-based conditions, and where the factual record is incomplete, the matter should be remanded for verification.

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