9911796707
TMI Blog2000 (2) TMI 227X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in holding that the assessee is not engaged in any manufacturing process and thereby disallowing the claim of the assessee under section 80-I of the Income-tax Act, 1961. Before the authorities below the assessee gave details of process involved in the manufacture of above sugar which are given as under : "The main raw material is sugar purchase mostly from sugar co-operative mills. The sugar is mixed with water and melted in the filter unit. The filtered melt is transferred to the rotary belt where semi finished goods in the form of seeds are added to the melt. The rotational processing in rotary pan results in crystallisation of the seeds which are then stored in crystalliser and then cured in centrifugal machine in which crystals are separated from the sugar liquid. Afterwards, the crystals are dried and graded on hopper and packed in bags for sale. The separated sugar liquid is recycled again the process above. During the grading the crystals of desired size are separated for sale as candy sugar and remaining crystals of uneven size are recycled in the process as semi-finished goods (seeds). The crystals of fine size are being sold as PG sugar. The purity of suga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of another although it has undergone a degree of processing it must be regarded as still retaining the original identity." Applying the test laid down by various Courts as mentioned above, the Assessing Officer held that making of sugar candy with the help of plant and machinery does not result into manufacture of a commodity which is different from one which is fed into the plant for melting washing and segregating different sizes and that the plant and machinery has been used by the assessee for the purpose of removing the impurities, cleaning and giving different sizes to the sugar and in the process original commodity continues to retain its substantial identity. Hence, according to the Assessing Officer there is no transformation into a new and different article. The Assessing Officer also relied upon the decision of the Vasantha & Co. v. State of Madras [1963] 14 STC 696 to 701 (Mad.). In that case, the assessee was dealer in sugar and the question before the Hon'ble Court was whether sugar candy is different from sugar and exempt from payment of sales tax. In that case, after considering various facts and circumstances of the case and the opinion of National Suga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial Mineral & Chemicals v. State of Maharashtra [1995] 12 MTJ 325, the learned CIT(A) held as under: "It is admitted position that manufacture can be said to have taken place if the process results in creation of commodity having different identity, character and use. But where the commodity retains continuing substantial identity through process stage, it cannot be said that it has been manufactured. The Courts have further held that the nature, extent of process may vary from case to case with each process suffered the original commodity experiences a change, but it is only when a change or series of changes take the commodity to the point where commercially it can no longer be regarded as original commodity, but instead recognised as new distinct articles then a manufacture can be said to take place. But where, there is no essential different identity between the original commodity and processed article, it is not possible to say that one commodity has been consumed in the manufacture of other, although it has undergone a degree of process yet still retaining the original identity. In nutshell, it is to be seen by considering various factors where the process used by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities below erred in making conflicting arguments in respect of the definition of manufacture under Bombay Sales-tax Act. At first instance, stressing that as the particular term is not defined under the Income-tax Act, the Department should be guided by the definition given under any other Act (Sales-tax) and thereafter observing that as the definition of the term 'manufacture' under the Bombay Sales-tax is very wide, there may be very absurd results and even the smallest change can come within the ambit of manufacture under Bombay Sales-tax Act. According to the learned counsel, the authorities below have made illogical application of the decision of Maharashtra Sales Tax Tribunal in the case of Industrial Mineral & Chemicals wherein it had been decided that the activity of conversion of the copper sulphate powder into crystals is not manufacture. However, the learned counsel submitted that there is observation in judgment itself that 'thus all these certificates do not apparently make any distinction between both the commodities" i.e. Copper Sulphate Powder and Copper Sulphate crystals. According to the learned counsel, this observation has been totally overlooked by the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture or production of article, The learned counsel placed reliance for the proposition that a statutory enactment must ordinarily be construed according to the plain natural meaning of its language and no words should be added. (g) Nishit Synthetics (P.) Ltd. v. ITO [1984] 7 ITD 486 (Ahd. 'A') - Converting flat yarn into twisted yarn under mechanical process with the aid of chemicals and the assessee is entitled to deduction under section 80-I. (h) Sixth ITO v. General's New Tread [1985] 13 ITD 460 (Bang. - Bench) (SB) - Machinery employed in retreading of tyres was entitled to claim under section 32A. (i) ITO v. Maddi Satyanarayana & Co. (P.) Ltd. [1984] 8 ITD 249 (Hyd.) - Redried tobacco which was end-product produced by assessee company was commercially different from fluecured tobacco purchased by it from farmers and hence the assessee was entitled to relief under section 80-I. Kiran Tobacco Products (P.) Ltd. v. First ITO [1991] 36 ITD 177 (Bang.) - Manufacturing Jarda from raw tobacco in a backward area - assessee is entitled to relief under section 32A. (k) Vora-Food Specialities (P.) Ltd. v. ITO [1995] 54 ITD 324 (Bom.- Bench 'D') - Process of converting potatoes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir size to obtain cleaned bristles is not manufacture. He submitted that though the assessee is engaged in a process, but it is not a manufacturing process. According to the learned D.R. manufacture implies a change, but every change is not manufacture. In support of this argument, he relied on the decision of the Supreme Court in the case of Union of India v. Delhi Cloth & General Mills Co. Ltd. AIR 1963 SC 791. The learned D.R. submitted that in the case of the assessee, there is no transformation of sugar into anything else and even after converting into candy sugar it remained sugar only. No new and different article has emerged. The character of candy sugar is just the same as was the character of sugar on which the process of cleaning and purification was applied. 8. To the contention of the learned counsel that after the sugar is processed a new product by name i.e. candy sugar comes into existence, the learned D.R. submitted that the word 'candy' in this case is only an adjective which qualifies the word sugar and only indicates that candy sugar is another form of sugar. Even otherwise the Hon'ble Supreme Court in the case of State of Orissa v. Titaghur Paper Mills Co. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961, as mentioned by the Assessing Officer in his letter placed at page 1 of the Revenue's paper book and as such the position has not been allowed to settle by the Department and the ratio of the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 and Bombay High Court in H.A. Shah & Co. v. CIT [1956] 30 ITR 618 will not apply to that effect. 9. As regards the reliance by the learned counsel on the letters from its customers like Ranbaxy Lab. etc. that the user is different, the learned D.R. submitted that it is the additional evidence and cannot be admitted unless an opportunity has been granted to the opposite party to rebut. He further submitted that the opinions of the different experts quoted by the learned counsel for the assessee were of no use to the assessee in view of the judgment of the Allahabad High Court in the case of CIT v. Smt. Prem Kumari [1984] 146 ITR 191/15 Taxman 375, according to which "experts give only the opinion and do not decide the issue'. Their comments are not binding on the Courts. He further relied upon the decision of Patna High Court in the case of Maharajadhiraj of Darbhanga v. CIT [1933] 1 ITR 206 p. 210 where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia v. Parle Products (P.) Ltd. AIR 1994 SC 106, Converting aluminium foils into paper back aluminium foils. 10. CST v. Damodar Padmanath Rao [1968] 22 STC 187 (Bom.), Mixing bettle leaves and bettle powder to form Pan Pattis 11. Industrial Mineral & Chemicals' case. Conversion of copper sulphate powder into copper sulphate crystal 12. 20 STC 261 (Ker.) Making Prawn pulp from Ray Prawns. 13. CST v. Bombay Traders [1976] 38 STC 286 (Bom.) Activity of frying and spicing of plain cashews to obtain fried cashew nuts. The learned D.R. concluded that in view of the above authorities, it can safely be said that the assessee was not carrying on any manufacturing process; that the end product i.e. candy sugar was not distinct from raw-material i.e. sugar and accordingly, the authorities below were justified in rejecting the assessee's claim under section 80-I. 10. We have considered the rival submissions and perused the facts on record. In order to qualify for deduction under section 80-I, the assessee must be an industrial undertaking and must 'manufacture' or 'produce' 'articles or things', as held by the Hon'ble Bombay High Court in the case of Sterling Foods (Goa). The three expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle has emerged. The character of candy sugar is just the same as was the character of sugar on which the process of cleaning and purification was applied. It may be seen that the emphasis is on transformation of the original commodity into something else. The emphasis is also on change in the character of original article and character does not mean the shape, colour and purity of a substance. When sugar is converted into candy sugar, there is no transformation, and there is no change in the character of sugar. It just remains sugar, though in a purer form. 11. The Hon'ble Supreme Court in the same para has held that word 'manufacture' used as a verb is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some change in a substance however minor in consequence the change may be. Further, the Hon'ble Supreme Court has clearly brought cut that manufacture means not only to produce some change in the substance but to bring into existence a new substance. In the case of the assessee the substance remains the same i.e. sugar, there may have been any change in its colour or size or purity but essentially it is the same substance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be held to possess the same identity as the original pineapple fruit.' The above observations of the Hon'ble Supreme Court make it clear that conversion of sugar into candy-sugar is not manufacture. Both the traders as well as the consumer would regard both sugar and candy sugar as sugar only. The only difference may be that sugar candy is a presentation of sugar in more convenient and, purer form. Even when the consumer is purchasing the candy sugar he does not consider it any different from the substance sugar. 13. In the case of Tungabhadra Industries Ltd. v. CTO [1960] 11 STC 827, the Hon'ble Supreme Court has decided that purification/refining of groundnut oil to obtain refined groundnut oil does not amount to manufacture. Since there is no change in the nature of the substance which remains groundnut oil even after purification. The important observations of the Hon'ble Supreme Court at page 831 are reproduced below: "When raw groundnut oil is converted into refined oil, there is no doubt processing, but this consists merely in removing from raw groundnut oil that constitute part of the raw oil which is not really oil The elements removed in the refining process consists ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty subjected to processing retains its original character and identity is as to whether the processed commodity is regarded in the trade by those who deal in it as distinct in identity from the original commodity or it is regarded, commercially and in the trade, the same as the original commodity. Applying the above test it was held that processed shrimps, prawns and lobsters are commercially regarded as the same commodity as raw shrimps, prawns and lobsters. When raw shrimps, prawns and lobsters are subjected to the process of cutting of heads and tails, peeling, deveining, cleaning and freezing, they do not cease to be shrimps, prawns and lobsters and become another distinct commodity. They are still known as shrimps, prawns and lobsters. There is no essential difference between raw shrimps, prawns and lobsters and processed shrimps, prawns and lobsters are ready for table while raw shrimps, prawns and lobsters are not, but still both are in commercial parlance, shrimps, prawns and lobsters. It is undoubtedly true that processed shrimps and lobsters are the result of subjecting raw shrimps, prawns and lobsters to a certain degree of processing and even the original character and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the activity involved is manufacturing. There is no finding by the Excise Department that the activity involved is manufacturing. Therefore, it does not call for any comments. Further, there is no rule that the process of obtaining an item which is exciseable under Excise Act will certainly amount to manufacturing, just as there is no rule that the process of obtaining an item which is not exciseable under excise law cannot amount to manufacture. 17. One of the arguments raised by the learned counsel was that in the earlier two assessment years the assessee had been allowed deduction under section 80-I for the same process and hence the deduction under section 80-I should be allowed in this year also. This argument cannot be accepted because the theory of res judicata does not apply to the Income-tax proceedings. We further find that in earlier assessments in years in which the assessee had been allowed deduction have been reopened under section 147 of the Income-tax Act and as such the position has not been allowed to be settled by the Department and the ratio of the Supreme Court in the case of Radhasoami Satsang and Bombay High Court in H.A. Shah & Co.'s case will not apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal by the assessee. For the same reasons, the reliance placed by the learned counsel on the expert opinions is of no assistance to the assessee. 20. In the light of our above discussion, we uphold the findings of the authorities below and dismiss the ground raised by the assessee. 21. As regards the additional deduction under section 80-1 of Rs. 97,750 agitated separately in Gr. No. (1A), we confirm the finding of the authorities below for the reasons given supra in the main ground. Since the assessee is not entitled to deduction under section 80-I because it is not carrying on any manufacturing process there is no question of allowing additional deduction under section 80-I. Accordingly, ground No. (1A) is also rejected. 22. The next grievance of the assessee is that the learned CIT(A) is not justified in not allowing secret commission of Rs. 4,93,490. The assessee had claimed an amount of Rs. 4,93,490 as expenditure on account of secret commission. The Assessing Officer during the course of assessment proceedings asked the assessee to furnish names and addresses of the persons to whom secret commission has been claimed to have been paid to verify the claim of the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ought to be deducted as business expenditure under section 37." 23. Shri S.N. Inamdar, the learned counsel for the assessee reiterated the submissions made before the CIT(A) and further relied upon the four authorities cited by him before the Assessing Officer and the CIT(A) as detailed in para 19 above. He submitted that while dealing with the public limited companies, the business cannot be obtained without payment of secret commission. The practice is prevailing worldwide from top to bottom in every field. Even the ordinary person is facing the problem of secret commission every day in his routine life. Thus in these circumstances to ask for further evidence to establish the payments and the practice prevailing which is bitter truth of day-to-day life is absolutely uncalled for. He submitted that the assessee has not maintained the names and addresses of the payees. But it was because the nature of the payments of secret commission being such that no documentary evidence could be produced; however, circumstantial evidence is clearly justifying the payment i.e. vertical jump in the income of the assessee firm. 24. Shri Hari Krishan, the learned D.R. strongly supported the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missible entertainment expenditure Rs. 11,282 ---------- 27. The assessee appealed to the CIT(A) and submitted that the tea expenses for the factory and office were exclusively for staff purposes and it is not for the entertainment of visitors. The CIT(A) states 'however, no evidence in support of its claim has been produced before the undersigned. Under the circumstances, it appears that the Assessing Officer has correctly worked out the disallowances as per section 37(2) of the Income-tax Act, 1961." He accordingly upheld the disallowance of Rs. 11,282. 28. Shri S.N. Inamdar, the learned counsel for the assessee submitted that he will be satisfied if 2096 of the total expenses incurred are allowed for the staff accompanying the visitors and then the disallowance under section 37(2) may be computed, The learned D.R. relied upon the authorities below. 29. After hearing both the parties, we direct the Assessing Officer to allow 20 per cent of the total claim of the expenditure for staff who accompanied the visitors and on the balance disallowance under section 37(2) may be computed as per the provisions of law. This ground accordingly succeeds in part. 30. Ground No. 4 reads a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dities. In this connection, reference can be made to the judgment of the Hon'ble Supreme Court in the case of Pio Food Packers. The test applied by the Supreme Court appears at page 65 of the reports as under: --- "There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture." Applying the aforesaid test, the court held at page 66 as under :--- "In the president case, there is no essential difference between pineapple fruit and the canned pineapple slices. The dealer and the consumer regard both as pineapple. The only difference is that the sliced pineapple is a presentation of fruit in a more convenient form and by reason of being canned it is capable of storage without spoiling. The additional sweetness in the canned pineapple arises from the sugar added as a preservative. On a total impression, it seems to us, the pineapple slices must be held to possess the same identity as the original pineapple fruit." The test was again applied by the Apex Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommodities. 37. The third test applied by the Hon'ble Supreme Court is the 'Functional or user test." In the case of Atul Glass Industries (P.) Ltd. v. Collector of Central Excise [1986] 63 STC 322, the Apex Court at page 327 held as under :--- "The test commonly applied to such cases is : How is the product identified by the class or section of people dealing with or using the product? That is a test which is attracted whenever the statute does not contain any definition. Porritts & Spencer (Asia) Ltd. v. State of Haryana [1978] 42 STC 433(SC). It is generally by its functional character that a product is so identified. In Commissioner of Sales Tax, U.P. v. Macneill & Barry Ltd. [1986] 61 STC 76(SC); [1985] 2 SCALE 1093 this Court expressed the view that ammonia paper and ferro paper, used for obtaining prints and sketches of site plans could not be described as paper as that word used in common parlance. On the same basis the Orissa High Court held in State of Orissa v. Gestetner Duplicators (P.) Ltd. [1974] 33 STC 333 that stencil paper could not be classified as paper for the purposes of the Orissa Sales Tax Act. It is a matter of common experience that the identity of an art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to merits of the case it would be useful to refer the following observations of the Full Bench of Kerala High Court in the case of N. Sundareswaran v. State of Kerala [1993] 91 STC 476 :--- "The common parlance test is pressed into service if the article is one in daily household use or is used by the common man. The commercial parlance test is called in aid while dealing with the construction of goods known to the merchant community and the consumers of those goods. In the substantial identity test what is material is whether a distinct article as understood by the people who commonly deal with it, has come into being, i.e., in other words, whether in the market, it is regarded as a district article. It would be difficult for the court to say that one test overrides the other or that any one of them is the dominant one. It will be for the Court to consider in each case the principle to be applied on an overall view of the matter and taking guidance from decided cases. 39. In the present case the ordinary sugar which is subject to processing and candy sugar which is produced from the process are commodities of daily use by common man as well as in the business circle. The ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Motilal v. CST [1965] 16 STC 297. In this case "Misri & Patasha" have been held to be different from 'Sugar". These decisions have been given by applying the test of common parlance. 41. In the proposed order, much emphasis has been laid on the fact that candy sugar is only the purer form of sugar and therefore no emergence of new commodity. According to him essential ingredients continue to remain the same. So the identity of the original commodity is not lost. With due respect, I am unable to agree with this approach. The only relevant criteria is whether the item produced out of a process is considered a different items from the original item or not. If the item produced is different from the original one in view of tests laid down by apex court then such process has to be considered as manufacturing process. The reliance can be placed on the Supreme Court decision in the case of Coco Fibres. In that case question before the court was whether coconut husk and coconut fibres were different commodities. The process involved was as under:--- "Green coconut husk is soaked in saltish sea water for days together and after decomposition, it is subjected to beating by mechanical or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s different item in the commercial or common parlance. Therefore, the claim of assessee cannot be rejected in the present case on the mere ground that properties of sugar continues to remain in the "Candy Sugar". 42. The decision of Supreme Court in the case of Sakarwala Bros. heavily relied upon by the revenue is quite distinguishable and does not help the revenue. In that case, the question was whether "Sugar" as defined in entry 47 of Schedule 'A' of Bombay Sales Tax Act would include Patasha, harda & Elaichidana. Entry 47 had adopted the meaning Sugar as defined in item No. 8 of First Schedule to the Central Excise Act which read as under:--- "Sugar means any form of Sugar containing more than 90 per cent of sucrose" It is because of this definition, it was held by the apex court that Patasa, harda and Elaichidana fell within the definition of Sugar since these items contained more than 90% of sucrose. The court was never concerned with a question whether such item were different from the ordinary sugar in common parlance. This distinction has been considered by the Gujarat High Court in the same very case which is also reported at page 24 of the same report. At page 29, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 80-I of the Income-tax Act, 1961 ?" 2. The assessee-firm deals in sugar and also claimed to be carrying on a manufacturing activity which results in the production of the following commodities : --- (a) Candy sugar (b) P.G. Sugar, i.e., Pharma grade. (c) Pulverised sugar (d) Bura sugar The items at (a) to (c) are claimed to be used by pharmaceutical companies, whereas item at (a) above is a by-product of sub-standard quality developed during the manufacture of items at (a) to (c) above. Candy sugar is known by various names in different parts of India and is known as "Misri" in north India. The question posed is whether the processing of sugar by the assessee, which results mainly in the production of candy sugar, is a manufacturing activity within the meaning of section 80-I of the Income-tax Act. The learned Accountant Member has indicated the details of the process involved in para 2 of his order and it is not necessary to reproduce it again. 3. Before me, the learned counsel for the assessee has taken me through the photographs of the details of the processing involved and the photographs are at pages 53-I to 53J. The photographs show melting section, filter section, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted from the commercial sugar. 6. Study of the plant and the process is convincing beyond doubt to state that M.B. Chemicals Ltd. plant at Nilgavan is a genuine manufacturing activity involving intricate processing, energy consumption and strict quality control." It has also filed before the revenue authorities a certificate from Vasantdada Sugar Institute, which may be seen at page 53F of the APB, and it reads as follows :--- 'To whomsoever it may concern 1. This is to certify that M/s. M.B. Chemicals at Nilgavan in Malegaon Taluka of Nasik district, are manufacturing 'Candy Sugar' and Bura Sugar. 2. The above mentioned products are produced using plantation white sugar as raw material by following melting, clarification and filtration of the melt and further crystallisation and centrifugation process sequence is being followed for final products; as such the unit is performing manufacturing activity. 3. The "Candy Sugar" sample, supplied by M/s. M.B. Chemicals is analysed and Tested for standard characteristics. The results of analysis of candy sugar are given here with commercial plantation white sugar std. specifications along with typical analysis of plantation white s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Materials" 6. Certificate given by UCB Pharma Ltd. may be seen at page 53C of the APB and it reads as follows:--- "TO WHOMSOEVER IT MAY CONCERN This is to certify that we have been purchasing Candy Sugar 'F' Grade (small candy) from M/s. M.B. Chemicals since 1991. Candy Sugar 'F' Grade (small candy) manufactured by M/s. M.B. Chemicals passes as per specifications and therefore manufacturing our products we require Candy Sugar 'F' Grade (small candy) only. Ordinary sugar cannot be used as substitute to candy sugar 'F' Grade (small candy) For UCB Pharma Limited Sd/- Place: Mumbai (A.M. Pimutkar) Dated: 17-7-1998 Manager-Purchase & Admn." 7. It is also claimed that for the purposes of levy of excise duty, candy sugar is treated as a different product from sugar and in support of this proposition, the assessee has filed a proforma of the registration certificate issued by the excise authorities, which may be seen at page 37 of the APB. In this certificate dated 7-6-1994, it is shown that the assessee manufactures and sells candy sugar and the item falls under Tariff-17. In the application for registration, which is at pages 38 to 40 of the APB, it is clearly mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that crystal is only a ball shaped particle of the substance from which it is formed. Candy sugar is sugar formed by boiling down sugar syrup. When water is heated, it takes more sugar than it does at room temperature and crystallization is a natural process. It is also claimed that the certificate given by Vasantdada Sugar Institute, which we have reproduced hereinabove, is misleading to the extent it mentions that there is a change in the chemical position of sugar when it is processed into candy sugar. In other words, it is claimed that all the changes mentioned in the certificate are only physical changes. It is also mentioned that expert evidence given by an associate is not reliable. He emphasised that a natural process like crystallization does not tantamount to a manufacture. He has also referred to various cases mentioned by the learned Accountant Member and sought support from them. He emphasised that sales tax cases are not decisive of the matter because they construed a different legislative provision and the crucial test to be applied is whether the substance chemically speaking remains the same after processing or whether there is a change in the substance. It is ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter. 12. The question posed in the present reference is not easy to decide. Both the learned Accountant Member and the learned Judicial Member have stated their views with clarity and a bare reading of the two orders is sufficient to impress upon the reader the subtlety of the question posed. Having said this, I am of the view that I have to agree with the learned Judicial Member. There is no dispute about the test to be applied to decide whether a particular processing activity amounts to manufacture or not. The test has been laid down by the Apex Court and various High Courts in unmistakable terms. The learned Accountant Member has extracted in para 10 at page 15 of his order the following extract from the judgment of the Apex Court in the case of Delhi Cloth & General Mills Co. Ltd. : "Manufacture implies a change, but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation, a new and different article must emerge having a distinctive character, name and use." The test is whether the processing has resulted in a commercially different product or no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o I am of the view that this decision is distinguishable and does not necessarily decide the issue against the assessee. The same is the position in the case of Sakarwala Bros. decided by the apex court. The head note of this decision reads as follows :--- "Patasa, harda and alchidana fall within the definition of "sugar" in entry 47 of Schedule A to the Bombay Sales Tax Act, 1959, and their sales are exempt from the payment of sales tax. The word "sugar" in entry 47 is intended to include within its ambit all forms of sugar, that is to say, sugar of any shape or texture, colour or density and by whatever name it is called. Decision of the Gujarat High Court affirmed." Both the Hon'ble Gujarat High Court and the apex court which affirmed the decision of the Hon'ble Gujarat High Court in this case have considered the difference between 'variety' and 'form" of a substance used in the legislative provisions. They have held that the words 'any form' appearing in the relevant provision has been used in a sense distinct and different form 'any variety'. The observations of the Hon'ble Gujarat High Court are as follows :--- "It was urged by the learned Advocate-General that the word " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There is nothing in these certificates which say that in common parlance both the commodities are known as two different commercial commodities.... Thus all these certificates do not apparently make any distinction between both the commodities . . . ." It may be observed that in this case, the evidence produced by the assessee in terms of the various certificates filed did not show that copper sulphate powder was a commercially different commodity from copper sulphate crystal. The exact opposite is the position in the present case. The various certificates produced by the assessee from the pharmaceutical laboratories which I have extracted hereinabove show that candy sugar is a different commodity from sugar. The above conclusion is also supported by the decision of the Hon'ble Andhra Pradesh High Court in the case of Surana & Co. v. State of A.P. [1977] 40 STC 192, wherein it was observed as follows : "As rightly observed by Chinnappa Reddy, J., though the only component of "sugar-candy" is 'sugar' in common parlance the expression "sugar" and "sugar-candy" are used to denote substances identifiable and distinct substances and if the expressions "sugar" and "sugar-candy" are u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h which the statute is dealing would attribute to it." This rule of construction was accepted and applied by the Supreme Court in Rainavatar v. Assistant Sales Tax Officer and also in Planters Nut Chocolate Co. Ltd. v. The King and Commissioner of Sales Tax, Madhya Pradesh v. Laddumal Jangilal it is obvious that sugar as understood in the popular sense does not include products of sugar like "Batasa". "Chiranji", "Mishri", etc. So, in Jethmal Ramswaroop v. The State, Wanchoo, C.J. (as he then was) observed : "Turning briefly to the merits of the case, we are of opinion that there is no force in the contentions raised by the applicants. Misri, Batasa, etc., are not merely sugar and the fact that sales tax has been paid on sugar is no reason for not levying sales tax on these articles made from sugar. Nor are we prepared to accept that they are Deshi sweetmeats. It would be impossible to attempt a definition of Deshi Sweetmeats. But it is common knowledge that no one in this part of the country would consider Misri, Batasa or toys made of sugar etc. Deshi sweetmeats. So they are not exempt under the Schedule". In our view, products like "Batasa", "Chiranji" and "Mishri" cannot be r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case, in the light of evidence furnished before me, to which I have adverted in the earlier part of this order, it is clear that candy sugar is put to different uses from sugar and it is generally known as a different commercial commodity. Candy sugar is used by pharmaceutical companies and it has been ascertained in the course of the hearing that 45% of the sales of candy sugar by the assessee have been effected to pharmaceutical companies. There is merit in the contention of the learned DR that a decision under sales tax or excise laws in favour of the assessee is not decisive of the matter for ascertaining whether the process involved amounts to manufacture or not. That is because the legislative provision under those laws need not be identical with the relevant provision under the Income-tax Act. However, independently of the cases decided under the sales tax or excise laws cited by both the parties before, me, it appears that there is sufficient evidence on record to come to the conclusion that candy sugar is a commercially different commodity from sugar. This is also the observation of Their Lordships of the Hon'ble Madhya Pradesh High Court in the case of Channulal Motilal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sess the same identity as the original pineapple fruit." It may be observed that the finding given is that the dealer and the consumer regard both the raw material and the finished product only as pineapple. In the case before me it appears to me that neither the consumer nor the dealer consider sugar and candy sugar only as sugar. As already mentioned hereinbefore, if the consumer asks for sugar, he does not get candy sugar from the dealer. If he asks for candy sugar, he does not get sugar either. In the case of Tungabhadra Industries Ltd., the Hon'ble Supreme Court has held that purification/refining of groundnut oil to obtain refined groundnut oil does not amount to manufacture. This is the authority on which the case of the revenue hinges. The relevant observations of the apex court from this case have been quoted both by the learned Accountant Member and the learned Judicial Member. The observations quoted by the learned Accountant Member are as follows :--- "When raw groundnut oil is converted into refined oil, there is no doubt processing, but this consists merely in removing from raw groundnut oil that constitute part of the raw oil which is not really oil. The elements r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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