TaxTMI 
TaxTMI 
TaxTMI 
2018 (8) TMI 1420
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.... manufacture. 2. The claim was allowed by the Assessing Officer (A.O.), but later reopened on the ground of escapement of income from assessment, under Section 148. Notices were issued and assessment was completed declining the additional depreciation claimed under Section 32(1)(iia). The A.O. found that RMC is obtained by mere mixing and there is no manufacture involved. The additional depreciation under Section 32(1)(iia) was only applicable to plant and machinery installed by an assessee, engaged in the business of manufacture or production of any article or a thing. The first appellate authority found that RMC is a product of manufacture. But, however, the vehicles are not eligible for the benefit under Section 32(1)(iia) for reason of not answering the description of plant and machinery and are only used for the purpose of transportation of RMC. 3. Before the Tribunal, there was a difference of opinion between the Judicial Member and the Accountant Member (for short 'JM' & 'AM' respectively); which was referred to a third member, again a JM, the Vice-President (VP), who concurred with the AM. At the first instance, the JM found that RMC is a product of manufa....
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....eld that a dam or a building would not be an 'article' or 'thing', produced or manufactured. It is argued that the subject vehicles are involved in the process of manufacture, since the product cannot otherwise be transferred to the site. RMC has to be transferred to the construction site, in a state of agitation maintaining its semi-fluid form, to be poured into the structure, without permitting it to set and harden. This would qualify the vehicles to be plant and machinery involved in a manufacturing activity. 6. It is further argued that the second proviso excluding certain plant and machinery from depreciation, specifically excludes road transport vehicles by clause (C). The definition of road transport vehicle is clearly distinguishable from a construction equipment vehicle defined under Section 2(ca) of the Central Motor Vehicles Rules, 1989. Hence though transport vehicles do not qualify as plant and machinery, being specifically excluded; the exclusionary clause postulates inclusion within the definition, certain vehicles, such as the subject ones, which have a direct bearing on the manufacturing activity. RMC cannot be transported to the site and used in t....
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....e manufacture or produce of articles. We have to notice that though there was an issue raised of the assessee not being an industrial undertaking, since the Revenue did not raise any arguments on that count, the Hon'ble Supreme Court proceeded on the basis that the assessee is an industrial undertaking coming within the definition as available under the Industrial Disputes Act, 1947. The question first specifically dealt with was, whether the construction of dam was a manufacture or not. Dilating upon the interpretations given to the terms 'manufacture and production', by courts, the time tested principle was reiterated in the following words: "The word 'production' has a wider connotation than the word 'manufacture'. While every manufacture can be characterised as production, every production need not amount to manufacture ." The decision in Dy. CST v. Pio Food Packers, (1980) 46 STC 63 was extracted. It was found that manufacture is the end result of one or more processes through which a commodity is made to pass and after several stages of process it experiences a change and can be no longer regarded commercially as the original commodity. Instead, it....
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....ufactured. A later amendment allowed the deduction to construction, manufacture or production of articles or things not specified in the Eleventh Schedule. Eleventh Schedule also contained only movables and did not include ships. A subsequent amendment specifically included ships and hence the provision retained the word 'construction', as aptly applicable to ship building was the finding. The scheme and context of the statute also supported the interpretation and hence it was held that even under Section 32A, construction of roads and buildings were not covered. 12. Even while respectfully bowing down to the dictum, we are of the opinion that there is a slight distinction in the present case. The assessee herein does not claim that its construction activity leads to a manufacture or production turning out an article or thing. The RMC used in the construction is a manufactured product is the specific contention taken by the assessee. We have to notice that in the case of N.C.Budharaja & Co. also, there was a contention that in the process of construction of dam, there were fixtures like gates, windows and door frames, which were made by the assessee themselves and hence ....
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....come derived from the construction activity or the profits or gains is irrelevant in computing the depreciation available under Section 32(1)(iia). The assessee does not also have a claim that the construction activity leads to a production or manufacture. The specific claim is that, one of the ingredients used in the construction being RMC, is manufactured by the assessee at its unit, which article or thing is captively consumed and also sold to third parties. The assessee claims depreciation, additionally permissible, @ 20% of the actual cost of plant and machinery procured, in the initial year of such purchase. The claim raised in the subject assessment year is with respect to the three vehicles purchased as capital assets in the previous year; an additional depreciation of 20% of the actual cost of such vehicles. 15. We come back to the question of whether the assessee principally engaged in construction activities can claim the benefit of an ancillary manufacturing activity. We are not able to countenance the argument of the Department that the principal activity of the petitioner being construction no additional depreciation can be permitted under Section 32(1)(iia) of the A....
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....ction, had been manufacturing RMC in plants set up at their site. The assessee claimed exemption from excise duty in so far as the notification having provided such exemption to concrete mix. The essential contention of the asseseees was that whether it be conventionally mixed at site or produced as RMC, necessarily the end product would be the same and qualify for such exemption. The Hon'ble Supreme Court found that conventional concrete mix & RMC were treated differently by the Department, the latter classified under sub-heading 38.23 while the former, entitled to exemption under sub-heading 68.07. Circular dated 12-08-1996 issued by the Central Board of Excise and Customs, was referred to, wherein it was explained as to how RMC is manufactured. The explanation included a detailed description of the plant and machinery used, the manner in which the aggregates are weighed, batched by electrical controls and limit switches, cement from site is carried to the batching plant by a screw conveyor operated with automatic weighing guages and water fed through flow meters after subjecting such water to chemical analysis. The mixture so obtained is loaded on a transit mixer mounted o....
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....ench had also relied on N.C.Budharaja & Co. , which we have distinguished. The Division Bench decision of the Delhi High Court does not help us to resolve the issue whether making of RMC is an activity qualifying as a manufacture or production. Considering the high degree of precision and stringent quality control observed in the selection and processing of ingredients as also the specific entry in the Central Excise Tariff First Schedule - 3824 50 10 : Concretes ready to use known as "Readymix Concrete (RMC)". We are of the opinion that though RMC does not have a shelf-life, the final mixture of stone, sand, cement and water in a semi-fluid state; transported to the construction site to be poured into the structure and allowed to set and harden into concrete is a thing or article manufactured. 22. We also notice that the Division Bench of the Delhi High Court had referred to another decision in CIT v. Minocha Brothers (P) Ltd., [(1986) 160 ITR 134], wherein the Division Bench had laid down the 'test of end product' for the purpose of determining the nature of activity of the assessee. The assessee therein was also a contractor engaged in building construction and in the p....