TaxTMI 
TaxTMI 
2006 (6) TMI 60
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....y a labour contractor and not an industrial undertaking eligible for the benefit of Section 80 HH and 80 I of the Act. 4. Aggrieved by the assessment order, the assessee filed appeals before the Commissioner of Income-tax (Appeals), who held that there is no need for the assessee to be a manufacturer in his own right and even a job worker, or a person who uses the customer's raw material would qualify for being termed as an industrial undertaking, supported by the decision of this Court in C. Kadarkarai v. CWT [1989] 176 ITR 121. The Commissioner of Income-tax (Appeals), by order dated February 2, 1993, regarding the assessing officer's view that the assessee was a unit created by the splitting up of the business of Sri Kaleeswari Fire Works, held that there is nothing on record to indicate such a presumption. 5. Aggrieved by the order dated February 2, 1993 of the Commissioner of Income-tax (Appeals), the Revenue took out further ....
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....tle the assessee to claim the benefit of Section 80HH and 80-I, as the asseesee by itself has produced the new product, viz., crackers, out of the raw materials furnished by Sri Kaleeswari Fire Works and thus, satisfies the ingredients of the terms "manufacture" and "industrial undertaking", for having engaged 200 labourers. 10. In the light of the above rival contentions and in order to decide the questions raised, we are obliged to render a finding on the following points : (i) Whether the assessee is a manufacturer; (ii) Whether the assessee satisfies the ingredients of an industrial undertaking to claim the benefit of Sections 80 HH and 80-I; (iii) Whether the assessee loses the character of manufacturer merely because it has engaged coolies under a labour contract to produce the end product, viz., crackers and for having obtained raw materials from Sri Kaleeswari Fire Works, who pays the duty; and finally (iv) Whether the payment of duty by Sri Kaleeswari Fire Works will disentitle the assessee to claim the benefit of Sections 80HH and 80-I of the Act. 11. Before proceeding further, it is....
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....rs next following the 31st day of March, 1981, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking; (iv) in a case where the industrial undertaking manufactures or produces articles or things, the undertaking employes ten or more workers in a manufacturing process carried on with the aid of power, or employes twenty or more workers in the manufacturing process carried on without the aid of power : Provided that the condition in clause (i) shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section: Provided further that the condition in clause (iii) shall, in relation to a small-scale industrial undertaking, apply as if the wo....
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....sp; ascertain whether an activity amounts to manufacture or production of an article or thing have been laid down and reiterated by various decisions of the apex court and this High Court. Broadly, the requirement is that the raw material must be, in the first instance, subjected to a process of such a nature that it cannot be termed to be the same as the end-product after the raw material undergoes the process of manufacture. In other words, the goods purchased as raw material should go in as inputs in the process of manufacture and the result must be manufacture of other goods. The article produced must be regarded by the trade as a new and distinct article having an identity of it sown, an independent market after the commodity is subjected to the process of manufacture. The nature and extent of the process would vary from case to case, and in a given case, there may be only one stage of processing, while in another case, there may be several stages of processi....
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....s would amount to manufacture. Whether in a particular case manufacture has resulted by process or not would depend on the facts and circumstances of the particular case. 30. A Constitution Bench of this Court in Ujagar Prints and Anr. v. Union of India ; AIR 1989 SC 516 ; [1989] 179 ITR 317___ followed the earlier decision in Empire Industries Ltd. v. Union of India (supra). While following the earlier judgment it was held that if there should come into existence a new article with distinct character and use as a result of the process, the essential condition justifying manufacture of good is satisfied. 31. This Court in Commissioner of Sales Tax, v. Jagannath Cotton Co. [1995] 5 SCC 527 ; [995] 99 STC 83_____mentioned that manufacture in its ordinary connotation, signifies emergence of new and different goods as understood in relevant commercial circles." (emphasis supplied) 15. Applying the above ratio, we do not have any hesita....
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....nbsp; given liberal interpretation. In CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412, the Apex Court has held that while deciding on the entitlement of the benefit under Section 80HH and 80-I, which being a beneficient object, a liberal interpretation, of course without doing any violation to the plain language, is to be given and thus, held that the assessee was an industrial undertaking eligible to claim the benefit of Sections 80 HH and 80-I of the Act. 18. In the instant case, it is not in dispute that the assessee has only been supplied with the raw materials from Sri Kaleeswari Fire Works and of course, he has engaged coolies, viz., 200 labourers to produce the end product of crackers, thus satisfies the test of manufacturer by producing the new material, namely, crackers and also satisfies the test of industrial undertaking, as the assessee has involved in systematic activity, organised by co-operation between&n....