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TMI Blog1983 (7) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... n given to the assessee's activity as mere packing is an oversimplification. The assessee entered into an agreement with HMM Ltd. for packing malted milk food with the brand name 'Horlicks'. This agreement dated 29-1-1981 contemplates supply of malted milk food in bulk in drums besides bottles, caps, labels, cartons and other packing materials separately. The assessee had only to have his own material for adhesive gum, lined paper tape, talcum power, fevicol, etc. It was for the assessee to pack them in the manner required and supply the same to HMM Ltd. for marketing in the area. It was the assessee who was to be liable under the Central and State law relating to the Factories Act, 1948, the Adulteration Act, the Weights and Measures Act, etc. The assessee had to ensure minimum yield as to the number of bottles per drum supplied. There was a rigid procedure formulae, specifications, standards, and other instructions which were listed in the schedule to the agreement. Such regulations related to ensuring of (1) hygienic conditions by way of cleanliness for the premises and personnel by fumigation, wet cleaning, etc., periodically as specified, and (2) precise control by way of rand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited by the Commissioner (Appeals). He also took us over the decisions on 'manufacture' under central excise, sales tax and income-tax law and cited a number of activities which were shown to be not amounting to 'manufacture'. He sought to distinguish the citations given by the learned counsel for the assessee. 5. The learned counsel for the assessee pointed out that even finishing was considered to amount to manufacture in some cases. He also pointed out that the fact that the assessee did manufacture on behalf of somebody did not disentitle the assessee. He strongly relied upon the decision of this Tribunal in the case of First Leasing Co. of India Ltd. v. ITO [1983] 3 ITD 808 (Mad.) wherein this Tribunal pointed out that investment allowance is granted on the machinery and that it would be allowable even if such machinery had been used by another. The assessee's facts are stronger as the assessee owns the machinery and uses it itself. He further pointed out that the learned departmental representative was not justified in assuming that the value added by packing was limited to the packing charges received by the assessee. The entire cost of the packing materials should also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e itself does not define 'manufacture'. The Courts have pointed out that the word 'manufacture' has various shades of meaning and ordinarily involves application of some labour resulting in a final product which is commercially different from the article to which the labour was applied. An article is said to be commercially different if it has 'distinct character, name and use after the process to which it is subjected'. Sometimes, the article may remain the same, but it is commercially different as, for example, printed or dyed cloth from the cloth before it was printed or dyed. If a new form or quality is given to a preexisting article on application of hand labour or machinery, it may well amount to manufacture. A mere assembling of various parts to form a whole may constitute manufacture. Sometimes, a different quality may be ensured by mere process of goods. But, processing does not always mean that there is manufacture. While manufacture involves processing, processing by itself may not tantamount to manufacture. These are propositions on which there is really no dispute between the parties. These propositions emerge in a number of decisions of the Courts in matters of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances that change in form of prepared food from the raw materials did not make the hotel a manufacturer. The other cases rested on their own facts and the definition under the law under which they were considered. As for glucose case strongly relied upon by the revenue, it was pointed out that it was a case of repacking and not original packing as in the assessee's case. This alone, it was claimed, would justify distinction. Further, it was a case where glucose was available in bulk commercially even otherwise. Furthermore, it was contended that both glucose and preparations thereof, came under the same entry, viz., tariff item 1E under the Central Excises and Salt Act, 1944, and that decided the issue. 11. The revenue had also strongly relied upon the DCM case where cutpieces were considered to be not commercially different from the textiles manufactured by the company. It was claimed that the assessee's case is different as, again, textiles were available for sale before being cut as well. It was pointed out that the Orissa High Court in State of Orissa v. Patel Saw Mill [1976] 37 STC 392, distinguished this case while pointing out that logs cut into pieces would cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... labourers operate the machinery. There could be manufacture only by labour or only by machinery. Here there are both. Central excise authorities consider the stage of production to be complete only after packing. In fact, the revenue would have had no misgivings about the granting of investment allowance in case the machinery had been set up and the entire process including packing was completed at Nabha where Horlicks powder is manufactured and put in drums. Could it be different merely because a part of the operation is carried on at Hyderabad ? No doubt, if the operation is so insignificant or by itself does not constitute manufacture, the assessee would be helpless. We are unable to agree that the value added at Hyderabad has to be judged merely with reference to the remuneration per bottle fixed for the assessee. Packing involves the addition of entire value of bottles, caps, labels, etc., as it is commercially marketable only after all these steps have been completed. This is the view of the central excise authorities considering when fixing the cost of the excisable article as including the packaging. There cannot be a different view for income-tax purposes even when packag ..... X X X X Extracts X X X X X X X X Extracts X X X X
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