TaxTMI 
TaxTMI 
2020 (3) TMI 130
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....venue. In effect, the learned Tribunal held that the activity of making poultry feed, as carried on by the Assessee, was not a mere process of mixing, but that of manufacture. It was held that the Assessee was itself carrying on the complete activity, id est, from mixing, grinding till pollicisation of all the ingredients and that the raw materials once consumed thus, could not be reconverted into the same position, and that its utility got changed.In such view of the matter, the Learned Tribunal held that the action of the Assessing Officer of disallowing the deduction claimed by the Assessee under Section 80-IB (5) was not justified. 3. This court, while admitting the appeal, had framed the following substantial question of law: - "Whether the conclusion arrived at by the Tribunal that production of poultry feeds constitutes manufacture is perverse or not?" 4. To appreciate why deduction was sought by the Assessee, we need to look at the relevant clauses of Sections 80-IB and 80-IE of the said Act. Section 80-IB provides, inter alia, as follows: - "(1) Where the gross total income of an assessee includes any profits and gains derived from any business refe....
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....duce articles or things or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994 and ending on the 11[31st day of March, 2004]; (ii) hundred per cent of the profits and gains derived from an industrial undertaking located in a backward district of category 'B' for three assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains of an industrial undertaking: Provided that the total period of deduction does not exceed eight consecutive assessment years (or where the assessee is a co-operative society, twelve consecutive assessment years): Provided further that the industrial undertaking begins to manufacture or produce articles or things or to operate its cold storage plant or plants at any time during the period beginning on the 1st day of October, 1994 and ending on the 11[31st day of March, 2004]." 5. The word "manufacture" has been defined with effect from April 1, 2009, by Section 2(29-BA) as follows: - "2(29BA) "manufacture" with its grammatical variations, means a....
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....r PP bags. (xviii) Dispatching the poultry feed. 7. As is apparent from the above, the method of producing the poultry feed requires grinding, mixing, roasting and blending, in proper proportions and ratio by usage of labour, machinery and pulverizer that is to say, through mills and/or small factories where these inputs are roasted, ground, mixed and blended. However, it is also not disputed that the chemical composition of none of the inputs is altered or any new compound generated by this - even though the finished product, being poultry feed, has a utility separate and distinct from the rice bran, or oil or bone meal or any of the inputs before they were combined to make the new product, poultry feed. By way of an example, it is impractical to expect chickens to feast on Di calcium phosphate or even raw maize gluten whereas they naturally eat the pellet sized poultry feed produced by the Assessee. 8. In the above factual conspectus, the appellant Revenue tried to impress upon us that this could never be anything more than a process of "mixing" and never "manufacture", since the mechanism of manufacture required that a new product - id est, a product with a differ....
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....rocessing and does not amount to manufacture as a production of new substance does not mean merely to produce some change in the substance. There is no change in the basic component except a physical change in the structure and shape in the form of pellet as no new substance comes into existence." 10. On the other hand, the learned advocate for the Assessee first brings to the notice of the Court that this is not the first year in which deduction was sought on the ground that what the Assessee was doing by producing poultry feed was manufacture - the record shows that it had been claiming deduction under Section 80-IB of the said Act from Assessment Year 2001-02 onwards and it has regularly been assessed to tax the income tax authorities and allowed such deduction when assessment was done under section 143(3) of the said Act, but without there being any incriminating material the Assessing Officer has disapproved the claim of the Assessee under Section 153A assessment. If deduction had been allowed holding the activity of the Assessee as being 'manufacture', when the same activity is carried on, without there being a change in the law or pronouncement making the activity somethi....
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....r combinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to a manufacturing activity." 11.3. Income Tax Officer-v-Arihant Tiles and Marbles P. Ltd reported in (2010) 320 ITR 79 (SC) where the Hon'ble Supreme Court was pleased to hold, by a bench comprising three Hon'ble Judges, that where there are various stages through which the marble blocks have to go through before they become polished slabs and tiles, there is certainly an activity which will come in the category of "manufacture". 11.4. Commercial Tax Officer-v-Jalani Enterprises reported in 2011 (266) ELT 294 (SC) was relied upon by the Assessee for the limited point of establishing that when ingredients were 'grinded' (sic for 'ground') and mixed, and a new product separately known to the commercial world comes into existence, then the individual ingredients lose their own identity and character, and therefore this amounts to manufacture even though the chemical composition is not altered. The exact words in this case, which was determination of which entry would be applicable for levying sales tax on Jaljeera, are as follo....
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....hs above. 13. As apparent from the facts on record as in paragraphs 6 and 7 of this judgment, where I have set out and dwelt at length on the stages of the process involved, and the end product and its separate commercial utility and identity from that of the original ingredients, it is clear that poultry feed is not merely rice bran or maize or vitamins or minerals but a mixture of all in calculated proportions through a process involving mills and manufacturing by the use of machinery which run on electricity and where the end product being the pellet is wholly different from each of the ingredients and results in a product which is commercially different and distinct as a commodity so that it cannot be considered as any of the original commodities which were used as ingredients. 14. As a result, the question of law framed by this Court as in paragraph 3 of this judgment is answered against the revenue and it is held that the conclusion of the learned tribunal that production of poultry feeds constitutes manufacture is not perverse. Consequentially, appeal of the Revenue is dismissed and the order of the learned tribunal is confirmed. The Revenue shall bear the costs of the....