Oil refining treated as processing, not manufacture, because the essential character of the raw material remained unchanged.

Refining of edible and non-edible oils through degumming, neutralisation, bleaching and deodorization was held to be processing rather than manufacture or production because the raw material did not undergo a change in its essential nature. The decisive test applied was whether the essential character of the oil was transformed; as that test was not met, the activity did not satisfy the basic requirement for investment allowance. On that basis, the assessee was not entitled to the allowance and the departmental appeal succeeded.

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Issues: Whether the assessee's refining activity amounted to manufacture or production of an article or thing so as to qualify for investment allowance.

Analysis: The assessee carried on refining of edible and non-edible oils through processes such as degumming, neutralisation, bleaching and deodorization. The decisive test applied was whether the raw material underwent a change in its essential nature. Since the refining process did not alter the essential character of the oil, the activity was treated as processing rather than manufacture or production. On that basis, the assessee did not satisfy the basic requirement for investment allowance.

Conclusion: The assessee was not entitled to investment allowance and the departmental appeal succeeded.

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