TaxTMI 
TaxTMI 
2007 (10) TMI 521
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....owever rejected the plea on the issue that the process carried on by the assessee for its product does not constitute 'manufacture' within the meaning of Section 80-IB of the Act. He further held that setting up of the second unit is only an expansion or reconstruction of the existing unit. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income tax (Appeals). 3. In the proceedings before the Commissioner of Income tax (Appeals), the assessee explained the process of blending as follows : The assessee purchased rectified spirit or extra neutral alcohol (ENA) made of grain or grapes or malt to which it added demineralised water in required proportion to reduce the strength of the ENA to make various products like whiskey, brandy, rum, etc. Apart from that, other ingredients like caramel, sugar etc., were also added as per blending formulations. This blend was subject to filtration for required time, blend inspection and then bottling in empty bottles. The finished products were packed and sold. 4. The Commissioner of Income tax (Appeals) considered the fact that the alcoholic strength of ENA which was around 95% v/v was reduced to....
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....the said provision is available only where the assessee engages in the manufacture or production of an article or thing, not being an article or thing as specified in the list in the 11th Schedule or operates one or more cold storage plant or plants in any part of India. The proviso to sub-clause (iii) of sub-section (2) of Section 80-IB of the Act shows that the condition with reference to the list in the 11th Schedule does not apply at all to the case of an industry being a small scale undertaking or an undertaking referred to in sub-section (4). The industry run by the assessee is admittedly a small scale industry, reference to 11th Schedule for the purpose of consideration of the claim under Section 80-IB of the Act does not arise. 8. As regards the second issue as to whether the assessee had engaged itself in the manufacturing or producing of an article or thing by the act of blending, it is seen that the assessee does not just add water and sells the final product. It is an admitted fact that quite apart from water, the assessee had to add several items to make it fit for human consumption. This is elaborately discussed in the order of the Commissioner of Income-tax (....
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....or the Revenue submitted that what had been undertaken by the assessee was only part of the manufacture and that every process would not amount to manufacturing. The process undertaken did not result in a totally different commodity and the input remained the same even after processing and consequently, there is no justification in granting the benefit. 10. The Tribunal referred to the decision of the Supreme Court in the case of Aspinwall & Co. Ltd. v. CIT, 2001 (133) E.L.T. 18 (S.C.) = (2001) 251 ITR 323, with regard to the concept of what would amount to manufacture. It referred to the decision in the case of Deputy Commissioner of Sales Tax v. PIO Food Packers reported in 46 STC 63 (SC) wherein it was observed that the test for determination whether manufacture can be said to have taken place is whether the commodity which is subject to the process of manufacture can no longer be regarded as the original commodity, but it is recognised in the trade as a new and distinct commodity. It was observed at page 65 in the decision reported in 1980 (6) E.L.T. 343 (S.C.) = 46 STC 63 (SC) (Deputy Commissioner of Sales Tax v. PIO Food Packers) as follows : "Commonly, manufacture....
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....mbinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to a manufacturing activity." The Apex Court pointed out to the various processes and held that conversion of the raw berry into coffee seeds was a manufacturing activity; that coffee bean had an independent identity from the raw material i.e., berry from which they were produced. Considering the various process involved, the Supreme Court held that the assessee was entitled to investment allowance under Section 32A. The Apex Court held that "if a commercially different article or commodity results after processing, then it would be a manufacturing activity. 13. While dealing with the question as to whether the processes of bleaching, dyeing, printing, sizing, shrink proofing, water proofing rubberising or organic processing carried on in respect of cotton or man-made grey fabric amounted to 'manufacture' within the meaning of Section 2(f) of the Central Excises and Salt Act, 1944, the Apex Court, in the decision reported in 1988 (38) E.L.T. 535 (S.C.) = 179 ITR 317 (Ujagar Prints v. Union of India), held that the generally accepted....