TaxTMI 
TaxTMI 
2017 (8) TMI 197
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....ct, 1961 (hereinafter referred to as the 'Act'). Admissibility of benefit under the aforesaid provision depends upon the question as to whether bottling of LPG is an activity which amounts to 'production' or 'manufacturing' for the purposes of the aforesaid provisions of the Act. 2) The Assessing Officers (AOs) had disallowed the deduction claimed by the assessees holding that they did not engage in the production or manufacture activity because of the reason that LPG was produced and manufactured in refineries and thereafter there was no change in the chemical composition or other properties of the Gas in the activity of filling the cylinder. This view was affirmed by Commissioner of Income Tax (Appeals). The Income Tax Appellate Tribunal (ITAT), however, upset the aforesaid view of the AOs after finding that LPG produced in the refineries cannot be directly supplied to households without bottling of the LPG into the Cylinders and insofar as LPG bottling is concerned, it is a complex activity which can only be carried out by experts. In this light, it was noted that the process involved LPG suction, vapour distribution, de-classification, compression of LPG vapour, external and....
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....ctivities carried out in the Bottling Plants; and (c) detailed submission on the issue of eligibility and allowability of such case. 6) Insofar as process of LPG manufacturing is concerned, the AO noted that the assessee had narrated the same in the following form: "LPG (Liquefied Petroleum Gas), which is used as a fuel for domestic purposes as well as in commercial and industrial establishments is obtained by refining of crude in the crude distillation units and Catalytic Crackers of the refinery. It generally consists of butane, propane and butane and propane mixtures. In the refinery, the plant is fed with natural gas and crude oil. The feed gas and the gas undergoes a chilling up to a temperature of 22 degree centigrade and 37 degree centigrade. In the first stage, when it is chilled to 22 degree centigrade, the liquefied hydrocarbon formed is separated out and the vapour is further chilled to 37 degree centigrade. The liquefied hydrocarbons from both stages are then fractionated in two stages. The heavier fractionation is obtained from the bottom of first fractionators, the top product from the second column is LPG, which is sent for bottling." ....
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....ure. The AO, thereafter, dealt with the contention of the assessee predicated on Section 10A of the Act wherein explanation (iii) mentions that manufacture includes assembling as well and, therefore, assessee's case was covered by the definition of 'manufacture' under Section 10A of the Act. This contention was, however, rejected by the AO by pointing out that the definition of 'manufacture' as given in the explanation (iii) to Section 10A of the Act is for limited purposes in the context of newly established industrial undertakings in free trade zone and the very explanation starts with the phrase 'for the purposes of this section'. The AO further noticed that the word 'manufacture' is not defined in the Act. He, therefore, proceeded to turn to the legal and general definitions available elsewhere and referred to corpus juris secundum and also certain cases of this Court dealing with the issue. On that basis, the AO concluded that 'manufacture' can said to be a process or activity which brings into existence a new identifiable and distinctive goods and the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognis....
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....essel until it is required as gas by the consumer. In the vapour phase, LPG exists as a heavier gas and on liquefaction, its volume reduces considerably (See "A Background to Liquefied Petroleum Gases, Their Sources and Safe Handling, and Safe Use as Fuels", Advanced Petrochemicals, Dr. G.N. Sarkar.) 11) Learned counsel submitted that Sections 80HH, 80-I and 80-IA of the Act use the expression 'manufacture' or 'production', therefore, whenever industrial undertaking is either manufacturing or producing an article, it will be entitled to the benefit of the aforesaid provisions, subject to satisfying other conditions laid down in those Sections. His argument was that the activities undertaken by the assessees in their bottling plant results in the production of a new commercial product which is made suitable for domestic use, which would otherwise not be possible without undergoing such processes. Gas produced by refineries is not usable as such by the consumer for domestic use. It requires several complex processes to bottle the gas in cylinders to make it usable by domestic consumers. After LPG is bottled in cylinders the product obtains a different name, character and use which....
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....xi) Carbon black; (xii) Polymer chips. (Emphasis Supplied)" It was contended that from the above, it is clear that an undertaking engaged in bottling of gas is considered to be involved in manufacture or production for the purpose of deductions under the Act and this view has been taken by the Central Government itself. 12) Learned counsel argued that the findings of the Tribunal, as upheld by the High Court, were not assailed by the Department and, therefore, there was no question of law involved. He also referred to the few judgments of different High Courts which have taken the view that LPG bottling would amount to manufacture and pointed out that in those cases, no appeal was preferred by the Department. Learned counsel also endeavoured to distinguish the judgment of the Gujarat High Court in Kosan Gas Company's case as well as the judgments of this Court which have been relied upon by the learned counsel for the Revenue and submitted that those judgments have no applicability. He, thus, pleaded that the appeals of the appellant/Revenue deserve to be dismissed. 13) Mr. Parijat Sinha, who appeared for some other assessees, argued almost on the same li....
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....they become polished slabs and tiles, such activity would certainly be treated as 'production' for the purpose of Section 80-IA of the Act. In this context, relevant discussion contained in Arihant Tiles case needs to be reproduced, which is as under: "16. In the present case, we have extracted in detail the process undertaken by each of the respondents before us. In the present case, we are not concerned only with cutting of marble blocks into slabs. In the present case we are also concerned with the activity of polishing and ultimate conversion of blocks into polished slabs and tiles. What we find from the process indicated hereinabove is that there are various stages through which the blocks have to go through before they become polished slabs and tiles. In the circumstances, we are of the view that on the facts of the cases in hand, there is certainly an activity which will come in the category of "manufacture" or "production" under Section 80-IA of the Income Tax Act. 17. As stated hereinabove, the judgment of this Court in Aman Marble Industries (P) Ltd. [(2005) 1 SCC 279 : (2003) 157 ELT 393] was not required to construe the word "production" in addition to....
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....Goa case [(2004) 13 SCC 548 : (2004) 271 ITR 331] and applying it to the activities undertaken by the respondents herein, reproduced hereinabove, it is clear that the said activities would come within the meaning of the word "production"." 16) Keeping the aforesaid distinction in mind, let us take note of the process of LPG bottling that is undertaken by the assessees herein and about which there is no dispute. It has come on record that specific activities at assessees' plant include receiving bulk LPG vapour from the oil refinery, unloading the LPG vapour, compression of the LPG vapour, loading of the LPG in liquefied form into bullets, followed by cylinder filling operations. The stages of these activities are as under: (a) Bulk LPG is received in the bottling plant through road tankers/rail wagons; (b) The LPG is unloaded into spheres/bullets through LPG compressors which use variable levels of pressure for suction, unloading and vapour recovery; (c) Refilling/bottling of LPG in cylinders by compressing the same into liquid form; and (d) Capping, fixing of seals and safety valves prior to storage and loading of filled cylinders. 17) Thu....
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....ghted by learned counsels for the assessees was that identical issue whether bottling of gas into cylinder amounts to production for claim of deduction under the Act has been considered by various High Courts and decided in the affirmative but those decisions were not challenged by the Department. The cases specifically referred were M/s. Puttur Petro Products Pvt. Ltd. v. The Assistant Commissioner of Income Tax, Mangalore (2014) 361 ITR 290 and Central U.P. Gas Ltd. v. Deputy Commissioner of Income Tax, Kanpur (Income Tax Appeal No. 224 of 2014 decided by High Court of Allahabad and reported in MANU/UP/2895/2016). 19) From the submissions made by learned counsel for the Revenue, who banked on the reasoning given by the AO, it can be gathered that the entire thrust of the AO was that the process involved in filling up the gas into cylinders does not amount to 'manufacture' inasmuch as the said process does not bring into existence a new identifiable and distinctive goods. In the first instance, no distinction was drawn between manufacture and production and the matter was not looked into from the angle as to whether the aforesaid process would amount to production or not. Other....