TaxTMI 
TaxTMI 
2012 (7) TMI 531
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed in the business of manufacturing, processing, exporting and dealing in various commodities, more particularly, tea, coffee, jute, pepper, chillies, cardamom, turmeric and similar other spices, etc. The assessee, as per the claim is a 100% export oriented undertaking within the meaning of section 10B of the Income-Tax Act, 1961 (in short 'the Act') and claimed exemption under section 10B of the Act. The assessee buys tea from auctions held in Tea Board recognized Auction centres at Kolkata, Guwahati, Siliguri, Cochin, Coimbatore and Coonoor. The assessee conceded the factual position that it imports small quantity of tea of the type and quality not produced in India. It further conceded the factual position that it does not grow or manufacture any tea. According to the assessee, tea so bought in different auctions is processed with a view to remove all dust and foreign substances and thereafter it blends different varieties of tea to make it of 'uniform and consistent' quality throughout the year. Thereafter, it is packed in consumer packets of 50,100,250,500 or 1000 gms. etc. or packed in the form of tea bags of 1.94 gms or 2 gms etc., as the case may be. During ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es various kinds of tea from action houses, mix or b1end this mechanically, in automatic electrical operated blending drum and then prepares different packages of various sizes and weight according to customer's needs. In short, the input is tea and output is also of tea. The intervening process is known as "blending" or "mixing" mechanically and packaging the same according to specific commercial needs. In this case the out-put is hardly distinguishable from the input. No physical or chemical change takes place during the process of blending. In this case the definition of 'manufacturing" as given by the Hon'ble Apex Court in its signal decision in the case of collector of Central Excise v. Kutty Flush Door and Furniture Pvt. Ltd. (1988) 17 ECC 37) the Hon'ble Apex Court held that "manufacturing refers to production of articles for use from raw, semi-raw or prepared materials by giving these materials new forms, qualities, properties or combination whether by hand labour or machinery" It may be worthwhile to note that manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment labour and manipulati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llowing observation. "Delay condoned; the special leave petitions are dismissed on merit". 'In this regard the Hon'ble Calcutta High Court while quoting the decision of the Hon'ble Apex Court in the case of Kunhayammed v. State of Kerala 245 ITR 360 observed as under: To sum up, our conclusions are: (iv) An order refusing special leave to appeal maybe a non-speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the court was not inclined to exercise its discretion so as to allow the appeal being filed. (v) If the order refusing leave to appeal is a speaking order, i.e. gives reasons for refusing the grant of leave then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within tile meaning of article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....id green card which is valid upto 31.11.2006, is enclosed at assessee's paper book pages 122-123 and which were also filed before the lower authorities during the relevant proceedings. The assessee company is also registered with the Central Excise authorities in terms of registration certificate no. AABCN 7502RXN001 dated 03.07.2003 issued by the Assistant Commissioner of Customs 100% EOU Customs House, Kolkata under the Central Excise Rules, 1944. This copy of registration certificate issued by the Central Excise authorities is filed in assessee's paper book at page 124, which was also filed before AO as well as before CIT(A). The assessee company entered into an agreement with Trot Private Ltd. having their registered office at 19/4A, Munshiganj Road, Tollygunge, Kolkata -700023 for carrying out, on contract basis, various manufacturing, processing, blending, packing including loading and unloading activities for and on behalf of the assessee company. This agreement was initially entered into on 15.05.1996 for 10 years and later revised on 15th May, 2006. The above-said Trot Pvt. Ltd. had provided their own premises with shop floor and warehouse etc. and in turn, the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or carrying out various activities at its factory premises i.e., unloading, blending, filling in paper sacks, marking of paper sacks, weighment, stacking and container stuffing etc. in relation to the tea purchased by it from various auction centers in India and also imported by it for export purposes. The ld. Counsel for the assessee stated that some export orders require the pre-packing inspection and analysis of the blended tea conforming to the specifications set out in the respective export orders. Such inspection and certification, in the instant case, was carried out by Cargo Inspectors & Superintendence Co. Pvt. Ltd., SGS International Certification Services S.A. etc. through their respective representatives. He stated that before packaging the blended tea, the above-stated agencies used to carry out inspection/ supervision by drawing samples so as to ensure that the packaged tea is free from foreign smell, impurities, free from being mouldi, musty or acidic and is also fit for human consumption and conforms to the specifications as to quality controls as set out in the respective export orders. 6. The ld. Counsel for the assessee explained the process involved in export....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s which automatically manufacture the tea bags. The quantity of tea that has to go in each bag is measured using sophisticated and automatic volumetric measurement systems in the tea bagging machines. The two major types of tea bags are single chamber and double chamber. The tea bags are then packed into a carton. The ld. Counsel also explained the process of packing in pouches. The pouches are produced in an FFS machine which fills and seals the tea in laminated pouches and the quantity required to be packed in each pouch is measured through electro-mechanical weighing system which is in-built in the machine itself. Some pouches are directly packed into CFC boxes and others are packed in cartons. These cartons are then ready for export. The ld. Counsel for the assessee explained the entire process of manufacturing and blending of different teas. 7. The ld. Counsel for the assessee drew our attention to assessee's paper book-IV at page 387 where percentage of value addition is given. The same reads as under: Details of Sales from 100% EOU during Financial Year 2003-04 (AY 2004-05) Rupee Value Percentage Non-consumer/ Commercial Packing- Bulk Tea 24,2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hell, Hibiscus, Corints, Blackberry, Lemon Grass, Blue Mellow 100% 9 Harris Forest Fruit Forest Fruit Hibiscus, Elder berries, Apple, Mint, Rose Hip Shell, Black Current 100% 10 Harris Fruity Roman Orange Apple, Rose Hip Shell, Hibiscus, Orange Peel, Saff Flower 100% 11 Harris Lemon Grass Lemon Grass Cornflower, Lemon Grass, Orange Peel, Rose Petal 85% 12 Hemkop Ortte (Mixed Herbs) Passion Herb, Lavender Flowe, Lemon Grass, Peppermint 100% 13 Willys Ortte (Mixed Herbs) Passion Herb, Lavender Flowe, Lemon Grass, Peppermint 100% 14 Willys Tea Gamla Soder Passion Fruit Roast Cattle, Corn Flower, Lemon Grass 65% 15 Harris Fruity Orange Orange Apple, Rose Hip Shell, Hibiscus, Orange Peel, Saff Flower 100% 16 Jay Cinnamon Apple Cinnamom Apple Pomace, Cinnamom, Chicory Roots, Chamomile 100% 17 Jay Chamomile Ginseng Peach Peach Charnimile, Chicory Root Roaster, Peach Herb 100% 8. Thereafter, the ld. Counsel for the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r to the one provided under section 10A of the Act to industrial undertakings operating under the Free Trade Zones (FTZ). It was accordingly further clarified that the expression 'manufacture' for the purposes of both sections 10A & 10B of the said Act would include any processing or assembling or recording of programme on disc, tape, perforated media or other information storage device. He further explained that in order to provide economic flexibility to 100% EOU and allow them to dispose of their export rejects and by-products, the Finance Act, 1994 further allowed them to sell 25% of their product in the domestic market. In effect, such units were allowed to claim exemption for 5 years, even in respect of profits from the 25% domestic sales allowed to them. It was further clarified that the 100% EOU must export at least 75% of their turnover. Further, he clarified that with a view to rationalize the concession and to phase these out by the end of the assessment year 2009-10, the provisions of sections 10A & l0B were substituted by new provisions by the Finance Act, 2000. CBDT vide Circular No 794 dated 9. 8. 2000 (2000) 245 ITR (St) 21, 34-35 vide paragraph 15.3 explain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ies supported by integrated infrastructure for export production, expeditious and single window approval mechanism and a package of incentives to attract foreign and domestic investments for promoting export led growth. At the material time there were 11 functioning Economic Zones. The policy relating to Special Economic Zones was contained in the Foreign Trade Policy. Incentives and other facilities offered to other Zone Developer and Units were implemented through various notifications and circulars issued by the concerned Ministry/Departments. In order to give a long term and stable policy framework with minimum regulatory regime and to provide expeditious and single window clearance mechanism, a Central Act for Special Economic Zones was found necessary in line with the international practice. With this end in view, the Special Economic Zones Act 2005 was passed by the Parliament in May, 2005 and was brought into effect w. e. f. 23.06.2005. He stated that the definition of Special Economic Zones Act, 2005, as given section 2(r) defines the expression 'manufacture' as under: "manufacture means to make, produce, fabricate, assemble, process or bring into existenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....10B of the Act. He also analysed the definition of manufacture based on SEZ scheme, export import (EXIM) policy and foreign trade policy. According to him, SEZ policy was first announced in April, 2000 and SEZs in India functioned under the provisions of export import (EXIM) policy/foreign trade policy (from 01.11.2000 to 09.02.2006). He also explained the EXIM policy as envisaged in Export Import Policy/Hand Book of Procedures, Volume 1, 2002 to 2007. He mainly relied on the definition of EXIM policy and SEZ definition of manufacture. He stated that the definition under SEZ Act the term 'manufacture' as defined vide section 2(r) of the SEZ Act is incorporated in section 10AA of the Act w.e.f. 10.02.2006 and according to Ld. Counsel, the same is held to be retrospective and clarificatory. According to Ld. Counsel, analyzing the section 10AA of the Act, which was introduced subsequent to the passing of SEZ Act, the provisions of newly inserted section 10AA defining the term 'manufacturing' laid out in specific and clear term that blending was a manufacturing activity and according to him this new clarificatory definition of manufacturing allows benefit even under sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Finance Act, 2001 w.e.f. 01.04.2001. According to Ld. CIT DR, this definition of 'manufacture' was in force from 01.04.1989 to 31.03.2001 but when section 10A and 10B of the Act were amended by the Finance Act, 2001 w.e.f. 01.04.2001 there was no definition at all either in section 10A or section 10B of the Act. According to him, that means during the period from 01.04.2001 to 31.03.2003, there was no definition of 'manufacture' or 'process' in section 10A or 10B of the Act and, therefore, the term 'manufacture' was to be inferred on the basis of common parlance meaning. He stated that section 10A and 10B of the Act were further amended by the Finance Act, 2003 w.e.f. 01.04.2004 and the definition 'manufacture' was inserted as under: "Explanation - 4. For the purposes of this section, 'manufacture or produce' shall include the cutting and polishing of precious and semi precious stones." Ld. CIT DR heavily relied on the decision of Hon'ble Supreme Court in the case of CIT v. Tara Agencies 292 ITR 444 (SC) and referred to the para wherein it is held as under: "That the activity of the assessee did not amount t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....weigher were used even then the blending of tea was held as "process" only which is very much clear from the decision in Tara Agencies (supra). He referred to the observations made in Tara Agencies, supra, which is reproduced as under: "It is further contended that the packing of tea is done manually and also by machines. Electrical packing and weighing is also carried out." In view of the above, he argued that the plea of the A/R regarding sophisticated mechanical process would not be of any help to prove his case because the input & output will remain same i.e. tea even by using sophisticated machinery also and no new different and distinct commercially known article or thing brought into existence of new name, character or use. 14. The Ld. CIT, DR further argued that the decision of Hon'ble Calcutta High Court in the case of Brook Bond (supra) further gets support from the above referred case of Tara Agencies (supra) wherein it was held by Hon'ble Supreme Court that even after using the sophisticated machines, electrical packing, weighing etc., the activity of tea blending was held as process and not manufacture because for "manufacture" something more was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....processor as no word process has been inserted in sections 10A and 10B of the Act following the above ratio laid down by Hon'ble Supreme Court in the case of Tara Agencies (supra) and also following the rule of interpretation of taxing statute. Ld. CIT DR also relied on various case laws of Hon'ble Supreme Court, High Courts and ITAT. 16. We have heard rival submissions and gone through facts and circumstances of the case. We find from the facts of the case that the assessee company buys tea of different grades in bulk from various persons and particularly, from recognized auction centres in India and thereafter blend the same in appropriate proportions in accordance with the technical advice received from experts, package the same in specialized paper bags with screen printed specifications, as advised in the respective export orders and thereafter export such packaged tea on CIF basis to countries overseas. The export order is supported by Letters of Credit (L/C), as received by the assessee company from the overseas buyers for export of tea, which contains specifications of tea to be exported. Such specifications are analysed by tea experts including directors of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....materials including metals, particles from the packaging materials, jute strings, etc. Teas of different qualities/grades as selected are fed into the blending drum on the basis of blend sheets prepared by the experts and then the contractor, in the present case, Trot Pvt. Ltd. gets the teas blended in the automatic electrically operated blending drums. After completion of each blend, representatives of the inspection agencies draw samples blend-wise and they make the composite sample and seal with their markings. One such sample of tea from each blend was tasted on leaf, liquor, infusion and grades against buyer's specifications and also for submission to an independent laboratory for analysis. Then, they analyses the total ash, acid insoluble ash, water soluble ash, water extract, crude fibre and alkalinity of the tea, moisture and submit their report. In the case of bulk order, the tea is packed in packs of 20 kgs. or more and dispatched for export. The blended tea is also filled into paper sacks and these paper sacks are made of craft paper and have a metalized polyester inner ply. For tea bags, the hoppers with blended tea are connected to the tea bagging machines. The fil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng of the different brands of tea, because these brands of tea experienced, as a result of mixing, a qualitative change, in that the tea mixture which came into existence was of a different quality and flavour from the different brands of tea which went into the mixture; and it was so notwithstanding the fact that the mixing/blending of different brands of tea was done either by applying mechanical force or through manual application of energy. Hon'ble Apex Court used the word 'producing' in relation to the tea mixture, which was produced through the process of blending; Further, in CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 (SC), Hon'ble Supreme Court further observed that the word "production is much wider' than the word manufacture'. It was said (page 423): "The word "production" has a wide connotation than the word 'manufacture'. While every manufacture can be characterized as production, every production need not amount to manufacture.... The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g of the word 'process": "to subject to some special process or treatment, to subject .(especially raw material) to a process of manufacture, development of preparation for the market etc.; to convert into marketable form as livestock by slaughtering, grain by milling, cotton by spinning, milk by pasteurizing fruits and vegetables by sorting and repacking." Where therefore any commodity is subjected to a process or treatment with a view to its "development or preparation for the market", as, for example, by sorting and repacking fruits and vegetables, it would amount to processing of the commodity within the meaning of Section 8(3)(b) and Rule 13. The nature and extent of processing may vary from case to case; in one case the processing may be slight and in another it may be extensive; but with each process suffered, the commodity would, experience a change. Wherever a commodity undergoes a change as a result of some operation performed on it or in regard to it, 'such operation would amount to processing of the commodity. The nature and extent of the change is not material. It may be that camphor powder may just be compressed into camphor cubes by application of mecha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to deduct from their turnover under section 8(a), so as to preclude the value of the tea purchased by them. The relevant observations made by the Hon'ble Supreme Court in this respective are quoted and set out herein below for ready reference: "7. The Revenue however relied on the decision of the Bombay High Court in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay (10 STC 500 (Born HC). The assessee in this case were registered dealers in tea under the Bombay Sales Tax Act, 1953 and they purchased in bulk diverse brands of tea and without the appl1at,on of any mechanical or chemical process blended these brands of different qualities according to a certain formula evolved by them and sold the tea mixture in the market. The question arose before the Sales Tax Authorities whether the different brands of tea purchased and blended by the assesses for the purpose of producing the tea mixture could be said to have been 'processed' after the purchase within the meaning of the proviso to Section 8(a), so as to preclude the assessees from being entitled to deduct from their turnover under Section 8(a), the value of the tea purchased by them. The High Court of Bomba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atever be the means employed for the purpose of carrying out the operation, it is the effect of the operation on the commodity that is material for the purpose of determining whether the operation constitutes 'processing'. We are clearly of view that the blending of ore in the course of loading through the mechanical ore handling plant amounted to 'processing' of ore within the meaning of Section 8(3)(b) and Rule 13 and the mechanical ore handling plant fell within the description of "machinery, plant, equipment" used in the processing of ore for sale......." In deciding the said question, the Hon'ble Supreme Court after considering the judgment of the Hon'ble Bombay High Court in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay [1959] 10 STC 500 (Bom), inter alia, observed as follows: (i) When different brands of tea were mixed by the assessee as in Nilgirl Ceylon Tea Supplying Co.'s case [1959] 10 STC 500 (Bom) for the purpose of producing a tea mixture of a different kind and quality according to a formula evolved by them, there was plainly and indubitably processing for the different brands of tea, because these brands of tea experienc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ned to mean 'mixed' so as to be 'inseparable and indistinguishable' [Re: Kilgoran Hotels Ltd. & Samek. 65 D.L.R (2d) 534). In the New Shorter Oxford English Dictionary [1993], the word 'blend' has been defined to mean 'a mixture formed by blending various sorts of grades (of spirits, tea, tobacco, wool etc.)' so as to produce a certain, quality; produced by so mixing intimately or harmoniously so that they are inseparable and their individuality is obscured. 23. In the case of Brooke Bond India Ltd. v. Union of India [1984] Tax LR 2593 (Cal), in considering the leviability of excise duty over the tea manufactured in gardens and produced by the assessee, viz., package tea, it was held by the Hon'ble Calcutta High Court that package tea is produced out of tea already manufactured in the garden. The process by which tea is packed after manufacture and comes into the category of package tea will be deemed to have been considered by the Legislature to amount, by itself, to a production or manufacture, which makes the article excisable to duty. While considering the expression "manufacture", it was held that package tea is the manufactured 'good....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n Brooke Bond Lipton India Ltd. v. State of Karnataka [1998] 109 STC 535 (Kar) & in Lipton India. Ltd. & Anr. v. State of Karnataka & Ors. [1998] 109 STC 235(Kar), it was observed that when the original garden teas of different flavour, taste and colour are blended in defined proportions, and is filled and sealed in packed cartons, it is this packet of blended tea, which is the final product, and which is marketed and exported. The said process of blending & packaging leads to "value addition" to the original garden teas. The Court observed that it was quite permissible to take it as a possible view that the packaged blended tea produced in an industrial unit is a manufactured product, the contributing inputs being garden teas of various colour and flavour and the packing materials. It may also be noted that against the said judgment delivered by Hon'ble Karnataka High Court, a Special Leave Petition was filed by the Revenue before Hon'ble Supreme Court; but the same was dismissed by the Apex Court with the observations "the Special Leave Petitions are dismissed on merits", as reported in [1998] 111 STC (statute). 25 Hon'ble Calcutta High Court in Brooke Bond India L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hanical weighers are not available in the present case of Brooke Bond India Ltd.: d. The assessee cannot be held to be a manufacturer or producer in the facts available. 26. In Appeejay Pvt. Ltd. v. CIT [1994] 206 ITR 367 (Cal), Hon'ble Calcutta High Court were dealing with the case of an assessee company which was engaged in the business of buying different types of tea from the market, blend them in different proportions and sell the tea so blended in the market. The assessee company claimed deduction under section 80J of the said Act contending inter alia that it was engaged in the manufacture or production of articles within the meaning of section 80J(4)(iii) of the Act. The tax authorities had rejected, the aforesaid contention of the assessee. Hon'ble Calcutta High Court held at page 379 of the reports that the words manufacture' and 'production' applied in a case which brings into existence something different from its components. The court noted that in the case of the assessee company, Appeejay Pvt. Ltd., the input of the assessee's business was tea, and its output in the form of end products sold by it, was also tea. Their Lordships als....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee, should be preferred. 28. In CIT v. Sesa Goa Ltd. [2004] 271 ITR 331 (SC) - (judgment delivered on 17. 11.2004, that is to say, long after the judgment of the Hon'ble Calcutta High Court in Brooke Bond India's case delivered on 20.2.2004 and reported in 269 ITR 232), Hon'ble Supreme Court again considered the wider connotation of the word 'production' as compared to the meaning of the word 'manufacture in the context of section 2A(2)(b)(iii) of the Income Tax Act, 1961. The apex court held following its earlier decisions in Chrestian Mica Industries Ltd. v. State of Bihar [1961] 12 STC 150 (SC) as well as in CIT v. N C. Buddharaja & Co. [1993] 204 ITR 412, 423 (SC) that extraction and processing of iron ore amounted to 'production' within the meaning of section 32A(2)(b)(iii) of the said Act. At page 334 of the reports, the Hon'ble Supreme Court inter alia observed as under: "It is, therefore, not necessary, as has been sought to be contended by the learned Counsel for the Revenue, that the mined ores must be commercially new product...." 29. In CIT v. Jansons & Co. [2006] 283 ITR 181 (All), their lordships of the Hon'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ined in Section 2(r) of the 2005 Act was incorporated in Section 10AA with effect from February 10, 2006. Admittedly, this definition covers blending also. Therefore, blending and packing of tea done by the assessee qualifies for exemption under Section 10AA from February 10, 2006 onwards. Admittedly, Section 10A also provides for exemption in respect of goods manufactured or produced and sold by units in the free trade zone. The exemption clause had to be considered with reference to the object with which it was enacted. In the EXIM policy 'manufacture' was given a very wide definition to take in even processing involving conversion of something to another with distinct name, character and use. Since the purpose of exemption under Section 10A was to give effect to the EXIM Policy of the Government, the definition of 'manufacture' contained in the EXIM Policy was applicable for the purpose of the provision. 'Manufacture' as defined under the EXIM Policy had a wide and liberal meaning covering tea blending as well and so much so, blending and packing of tea qualifies for exemption under section 10A. Besides this, the assessee-industry in the special economic ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le Kerala High Court also considered the judgment in the decision of Supreme Court in Tara Agencies, (supra) relied on by the Sr. Standing Counsel for the revenue, wherein Hon'ble Supreme Court clearly held that blending of tea does not amount to 'manufacture' or 'production' of an article, but is only processing. Hon'ble High Court allowing the appeal of the assessee held that the assessee was exclusively engaged in blending and packing of tea for export and was not manufacturing or producing any other article or thing. It was recognised as a 100% EOU division and the Department had no case that the assessee's unit engaged in export of tea bags and tea packets was not a 100% EOU. If exemption was denied on the ground that products exported were not produced or manufactured in the industrial unit of the assessee's 100% EOU, it would defeat the very object of section 10B of the Act. Further, industrial units engaged in the very same activity, i.e., blending, packing and export of tea in the special economic zones and free trade zones, would continue to enjoy tax exemption under section 10A of the Act and section 10AA of the Act respectively. The asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l economic zones and free trade zones, will continue to enjoy tax exemption under section 10A and section 10AA respectively. The still worse position is that the appellant would be denied of export exemption available under section 80HHC even to a merchant exporter. In our view, the decision of the Supreme Court in Tara Agencies' case [2007] 292 ITR 444 (SC) is not applicable for the purpose of considering exemption for industries in the export processing zones, free trade zones and to 100 per cent. export oriented units covered by sections 10, 10AA and 10B of the Income-tax Act. Therefore, following the judgment of this court abovereferred to we hold that the assessee is entitled to exemption on the profit derived by its 100 per cent. export oriented unit engaged in blending, packing and export of tea bags and tea packets. Consequently, we allow the appeals by reversing the orders of the Tribunal and by restoring the orders of the first appellate authority declaring the appellant's entitlement for exemption." 32. The provisions of section 10AA of the Act was inserted on the statute book by the Special Economic Zones Act, 2005 w.e.f. l0.02.2006. Even prior to the enactme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anufacture of flavoured tea shall conform to the standards of tea. The flavoured tea manufacturers shall register themselves with the Tea Board before making flavour tea In The Tea (Distribution & Export) Control Order, 1957 issued by the Government of India, Ministry of Commerce & Industry (Department of Commerce) the expressions "flavour tea", "green tea", "instant tea", "packet tea", "quick brewing black tea", "tea" and "tea bag" have been separately defined as distinct product. In Tea (Marketing) Control Order, 2003 issued by the Central Government, in exercise of the powers conferred by section 30(5)(3) of The Tea Act, 1953, the expressions "manufacturer", "Buyer", "Packet Tea", "Tea Bag", "Green Tea", "Quick Brewing Black Tea", "Instant Tea" and "Made Tea" have also been distinctly and separately defined. Clause (29BA) was inserted in section 2 of the Income Tax Act, 1961 by the Finance (No.2) Act, 2009 w.e.f. 01.04.2009 to define the expression "manufacture" as under: "manufacture", with its grammatical variations, means a change in a non-living physical object or article or thing, - (a) resulting in transformation of the object or article or thing into a n....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... consideration under sections 10A and/ or 10B of the said Act is manufacture / production of tea ; the object being grant of benefits of tax exemption to exporters carrying out their operations in FTZ, EOU, EPZ & SEZ areas in accordance with the Exim Policy declared by the Government of India in Parliament and in the light of allied and governing laws; in the light of allied laws e.g. The Tea Act, 1953, The Prevention of Food Adulteration Act, 1953 read with Prevention of Food Adulteration Rules, 1955. The Tea (Marketing) Control Order, 2003, The tea (Distribution & Export) Control Order, 2005 as well as the Rules and Regulations framed by the Tea Board and also Calcutta Tea Traders Association from time to time as discussed above. 35. We find from the above facts and circumstances and case laws relied on by both the sides that the assessee was exclusively engaged in blending, packaging and export of tea bags, tea packets and bulk tea packs. The assessee's division enjoys recognition as a 100% EOU, which is granted by the Development Commissioner, Ministry of Commerce & Industry, Govt. of India. The assessee claimed exemption u/s. 10B of the Act for AYs 2000-01 onwards, whic....