TaxTMI 
TaxTMI 
TaxTMI 
2014 (5) TMI 777
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....ion of law suggested by the Revenue and framed by us is somewhat inaccurate, the central controversy is whether the respondent-assessee, who was an exporter, carried out manufacturing process. The respondent-assessee was 100% Export Oriented Unit (hereinafter referred to as 'the EOU'). It imported metal scrap and after segregating such metal scrap, produced various articles including graded brass metal, metal wires, etc. and reexported the same. The entire process was explained by the assessee before the Revenue Authorities. The Tribunal relied on the decision in the case of Assistant Commissioner of Incometax v. Metal Recycling Industries, rendered in ITA No.375/R/2006 and C/o.No.39/R/2006. Both the sides had agreed before the Tribunal that this decision would cover the said case also, as can be seen from the following observations of the Tribunal: "5. At the time of hearing both the parties pointed out that the issues involved in assessee's appeals and departmental appeals are the same as in the case of the Asstt. Commissioner of Income Tax Circle-2, V/s Metal Recycling Industries, in ITA No.375/R/2006 and C/o., No.39/R/2006 for AY 2003-04. Both the parties also subm....
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.... lengths. This process is done manually or most of the times mechanically to remove jackets, upper layer and paper and for making them suitable for feeding in different cable cutting machines and stripping machines. After a process various strips in the cables are removed, the sorted cable scraps put in to cable cutting machine for cutting and stripping. Out of this process, several types of copper wire are generated. This process also generates several types of impurities such as plastic, dust and other metals. Clean copper material emerges out of this process, which is different and distinct from the cable wire scrap. The pure copper obtained from this process is then bailed in bailing machine. This makes this metal in different sizes and weights as required. Then this material is packed and exported. a) Mix Metal Scrap Mix metal scrap is imported from various countries. This scrap is consisting of several substances such as stones, rubber, steel, metal-ferrous as well as non-ferrous etc. It is generally the scrap generated from dismantling of buildings or other structures and plants etc. after importing them several processes are being carried out manually and mechanically thr....
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....ts for getting EOU status was that a person should be engaged in manufacturing or production. Anybody not doing manufacturing is not granted EOU status. During the course of hearing the ld.AR drawn out attention to section 10AA in IT Act granting tax benefits to SEZ (Special Economic Zone) units and the definition of manufacture was same as section 2(r) of SEZ Act, 2005. That definition was very wide and included the process of cutting, repair; assemble etc, within the meaning of manufacture. As per section 10B has to be understood as per Income Tax Act. We find that the word "Manufacturing" is also defined in DGFT and similarly, about the definition of manufacturing in SEZ Act, 2005. We find that the definition used in section 10B has to be read altogether and what shown in the definition of manufacturing in Custom Act cannot be same while examining the claim of the assessee u/s. 10B of the Act. 23. We have examined the basic requirement of word "Manufacturing and Production". The assessee has used three types of raw material viz. mixed cable scrap, mixed metal scrap and old/used transformers. An electric cable is a product which contains a plastic cover, a protecting access shee....
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....pellant is doing which is melting the final scrap material obtained from any of these processes and foundry to make ingots. We find that this activity there is no doubt that it amounts to production. Although the AO has denied the entire claim, it is submitted by the learned AR of the assessee that in some other cases, the AO has considered the activity of making ingots as manufacturing." 12. The term "manufacture" was not defined in the Act till the year 2009. Currently under section 2(29BA) introduced with effect from 1.4.2009, the term "manufacture" is defined as under:- "2(29BA)"manufacture", with its grammatical variations, means a change in a nonliving physical object or article or thing,- (a) resulting in transformation of the object or article or thing into a new and distinct object or article or thing having a different name, character and use;or (b) bringing into existence of a new and distinct object or article or thing with a different chemical composition or integral structure;" 13. The Central Excise Act, 1944 contains definition of the term "manufacture" in section 2(f) as under:- "2(f) "manufacture" includes any processPage (i) incidental or ancillary to the ....
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....fferent article must emerge having a distinct name, character or use. Reference may be made in this respect to the decision of the Supreme Court in the case of M/s. Tungabhadra Industries Ltd., Kurnool vs. The Commercial Tax Officer, Kurnool reported in AIR 1961 SC 412. 17. In the present case, as pointed out by the counsel for the assessee, in case of mix cable scrap the material would be sorted and segregated in the factory in different diameters of various lengths. Thereafter, jackets and upper layers would be removed mechanically in order to make them suitable for feeding in different cable cutting machines and stripping machines. Thereafter various strips in the cables are removed and sorted cable scrap would be put in cable cutting machines for cutting and stripping. In the process, several types of copper wires would be generated. Impurities such as plastic, dust and other metals would be separated through this detailed process and clean copper material would be sold after baling them on the baling machines and packing for export sale. 18. Likewise, mix metal scrap would consist of several substances such as stones, rubber, steel, ferrous as well as nonferrous metals. This....
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....ufacture' or 'production'. Therefore, the word 'production' cannot derive its colour from the word 'manufacture'. Further, even according to the dictionary meaning of word 'production', the word 'produce' is defined as something which is brought forth or yielded either naturally or as a result of effort and work (see Webster's new international dictionary). It is important to note that the word 'new' is not used in the definition of the word 'produce'." 21. In the case of Income-tax officer vs. Arihant Tiles and Marbles P.Ltd. reported in [2010] 320 ITR 79 (SC) in the context of the assessee's claim for deduction under section 80IA of the Act on its activity of cutting and polishing marbles, the Apex Court held and observed as under:- "22. Applying the above tests laid down by this Court in Budharaja's case [1993] 204 ITR 412(SC) to the facts of the present cases, we are of the view that blocks converted into polished slabs and tiles after undergoing the process indicated above certainly results in emergence of a new and distinct commodity. The original block does not remain the marble block, it becomes a sla....