TaxTMI 
TaxTMI 
2014 (3) TMI 341
X X X X Extracts X X X X
X X X X Extracts X X X X
.... at source. 2. That appellant craves to add or amend any ground of appeal before the appeal is finally heard and disposed off." 2. The brief facts are that the assessee is a Cooperative Society and is engaged in manufacturing of sugar. Inspection u/s 133A of the Income Tax Act, 1961 ( hereinafter called 'the Act') was carried out at assessee's Sugar Mill on 29.12.2010 to verify the compliance of the provisions of the TDS/TCS under Chapter XVII of the Act. The AO found certain discrepancies which include that the assessee is selling Molasses and Bagasses generated during the manufacturing process to different persons without collect tax at source u/s 206C of the Act. In response to the query, as to how the provisions of TCS were not applicable on sale of these items, the person responsible (in short 'PR') vide his reply dated 09.03.2011 has sated that Molasses generated during manufacturing process could not be termed as 'scrap' for the purpose of section 206C since it is a by-product of the process of manufacture. Secondly, Molasses is different from scrap as it is a distinct product produced during the course of manu facture of sugar, it is marketabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or the assessment years in dispute. Now, aggrieved by the order of the Ld. CIT(A), the Revenue has filed the present appeal before this Bench. 4. At the time of hearing, the Ld. DR relied upon the order passed by the AO and stated that the Ld. first appellate authority has wrongly held that the Bagasse is not covered under the definition of scrap as per provisions of section 206C and assessee was not liable to collect tax at source. He also drew our attention towards definition of section 206C of the Act as well as the definition of Molasses and Bagasses as well as the scrap and requested that the appeal filed by the Revenue may be accepted and the impugned order of the ld. first appellate authority may be modified by restoring the order of the A.O. 5. On the contrary, the ld. counsel for the assessee controverted the arguments advanced by the ld. DR and stated that the ld. first appellate authority has decided the issue in dispute by respectfully following the various passed by the Hon'ble Apex Court as well as by the ITAT. Therefore, he prayed that the impugned order may be upheld by dismissing the appeal filed by the Revenue. 6. We have heard both the parties and peruse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... simple meaning laid down in the statute is against the principles of interpretation. The Ld. CIT(A) has considered the written submissions of the assessee thoroughly in which the assessee has contended that A.O. has given some reference regarding processing of petroleum products wherein various products emerge while processing of crude oil to petrol. These products are not considered as scrap. Similarly, in the case of production of sugar, molasses and bagasses emerge as distinct saleable products. Molasses and bagasses are therefore, not scrap as cited in the example of petroleum products by the AO. They are not 'waste' and 'scrap' and can also be used as such, thus, coming out of the meaning of scrap. 6.1. The Ld. first appellate authority after discussing in detail the written submissions of both the parties alongwith various case laws as well as Sugarcane Control order (1966) dated 16.07.1966 finally concluded in paras 12, 13, 13.1, 14, 15 & 16 as under: "12 In a manufacturing concern, raw material is converted into certain products. The product manufactured by the concern is usually termed the finished product of the concern, even though the sam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is sold for large values, e.g. in the iron and steel industry. 14. In the process of manufacture of sugar, molasses is left behind after the sugar has crystallized from the syrup. Molasses cannot be used directly. Till some time ago, disposal of molasses used to be a big problem, as observed by the Hon'ble Apex Court in the case of Atma Ram (Died) Thru LRs vs State of Haryana (2008)2 SCC 568. Hence, it was certainly waste and scrap earlier. However, with the development of technology, molasses are being produced in large quantities for producing alcohol and ethanol. However, with the development of technology, molasses are being produced in large quantities for producing alcohol and ethanol. However, in my opinion, merely molasses have found use for producing commercially valuable products, its nature as a waste or scrap will not change. Molasses is essentially a leftover from the process of manufacture of sugar. It cannot be used directly and needs to be processed for extracting alcohol or ethanol from it, or for putting it to any other use. In that sense, it is different from the output of various products from a petrochemical plan processing crude. Th....