9911796707
|
Home
Issues Involved:
1. Whether the assessee company running a cold storage could be held to be an industrial company for purposes of section 2(7)(c) of the Finance Act, 1973, and the First Schedule thereto. Detailed Analysis: Issue 1: Definition of "Industrial Company" under Section 2(7)(c) of the Finance Act, 1973 The primary question was whether the assessee company, which operates a cold storage, qualifies as an "industrial company" under section 2(7)(c) of the Finance Act, 1973. This section defines an industrial company as one mainly engaged in the business of generation or distribution of electricity or any other form of power, construction of ships, manufacture or processing of goods, or mining. Arguments and Findings: - Assessee's Argument: The assessee contended that the cold storage plant is used for the preservation of commodities, which amounts to "processing" of goods. They argued that the preservation process, which involves regulating temperature to prevent decay, should be considered as processing. - Revenue's Argument: The Revenue argued that for an activity to be considered as processing, it must bring about some change in the nature or form of the goods, however slight. The mere preservation of goods without altering their state does not qualify as processing. Tribunal's Decision: The Tribunal, after examining the case law, concluded that a company running a cold storage cannot be considered mainly engaged in the processing of goods. It observed that the cold storage merely keeps the goods in the same condition without producing any new product, thus not meeting the criteria for processing. Supreme Court's Precedent: The judgment referenced the Supreme Court's decision in *Chowgule & Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124*. The Supreme Court had interpreted "processing" to mean any operation that brings about a change in the commodity's form or quality. In that case, blending different ores to produce ore of required specifications was considered processing because it changed the ore's chemical and physical composition. Application to Cold Storage: Applying the Supreme Court's test, the court found that keeping goods in a cold storage does not bring any change in their nature or form. The goods remain intact in the same condition as they were stored, thus not qualifying as processing. Comparison with Other Cases: - CIT v. Lakhtar Cotton Press Co. (Pvt.) Ltd.: The Gujarat High Court held that pressing loose cotton into bales was processing because it changed the cotton's form. - Addl. CIT v. Farrukhabad Cold Storage (P.) Ltd.: The Allahabad High Court had earlier held that storing goods in a cold storage amounts to processing. However, this decision did not consider the necessity of a change in the goods' nature or form. - CIT v. Radha Nagar Cold Storage (P.) Ltd.: The Calcutta High Court followed the same reasoning as the Allahabad High Court. Final Judgment: In light of the Supreme Court's ruling in *Chowgule & Co. Pvt. Ltd.*, the court concluded that the activity of running a cold storage does not involve processing of goods as it does not bring about any change in the goods stored. Therefore, the assessee company cannot be classified as an industrial company under section 2(7)(c) of the Finance Act, 1973. Conclusion: The court answered the referred question in the negative, ruling in favor of the Revenue and against the assessee. The assessee company running a cold storage is not considered an industrial company for the purposes of section 2(7)(c) of the Finance Act, 1973. Each party was left to bear its own costs.
|
