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TMI Blog2007 (7) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... n this appeal, we are called upon to examine whether the business activity of the respondent assessee falls within the ambit of production, manufacturing or processing? The respondent-assessee would be entitled to weighted deduction under Section 35B(1A) of the Act in case the goods exported were manufactured or produced in small scale industrial undertaking but, in case it falls short of production or manufacture, then the respondent would not be entitled to the benefit under Section 35B(1A) of the Act. The said benefit, according to the relevant statute, is restricted to only goods produced or manufactured in the small scale industrial undertaking for export. The benefit cannot be extended in case the goods are merely processed by the small scale industrial undertaking. In order to derive benefit under Section 35B(1A) the goods have to be either manufactured or produced by the small scale industrial undertaking. 4. Section 35B(1A) was introduced with effect from 1-4-1978 and the respondent-assessee claimed entitlement to weighted deduction being a small scale exporter. The Income Tax Officer disallowed the claim of the respondent assessee. 5. The respondent assessee aggrieved b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on who exports goods manufactured or produced in any small scale industrial undertaking or undertakings owned by him; Provided that such persons do not own any industrial undertaking which is not a small-scale industrial undertaking. (b) "Export House Certificate" means a valid Export House Certificate is sued by the Chief Controller of Imports and Exports, Government of India; (c) "provision of technical know-how" has the meaning assigned to it in sub-section (2) of section 80MM; (d) "small-scale industrial undertaking" has the meaning assigned to it in clause (2) of the Explanation below sub-section (2) of section 32A. (2) Where a deduction under this section is claimed and allowed for any assessment year in respect of any expenditure referred to in sub-section (1), deduction shall not be allowed in respect of such expenditure under any other provision of this Act for the same or any other assessment year." 9. All the three stages, namely, production, manufacturing and processing of tea can be enumerated as under. The tea is produced in the tea gardens. This first stage is called production of tea. The second stage is manufacture of tea. In this stage, the tea leaves are pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an article or material by physical labour or applied power'; but the practice is to accept as 'manufacture' a wider range of industrial activities than such a definition would suggest. It includes articles made in situ as well as articles made in a factory." 15. The Supreme Court of the United States of America has defined the term "manufacture" a century ago in Anheuser-Busch Brewing Assn. v. United States, (1907) 52 L Ed. 336. The definition has been followed in subsequent American, English and Indian cases. The definition reads as under: "Manufacture implies a change, but every change is not manufacture, and yet every change in an article is the result of treatment, labour and manipulation But something more is necessary. There must be transformation; a new and different article must emerge, 'having a distinctive name, character or use'." Production 16. In Black's Law Dictionary (5th Edition), the term "production" has been defined as under: "Production. Process or act of producing. That which is produced or made; i.e. goods. Fruit of labor, as the productions of the earth, comprehending all vegetables and fruits; the productions of intellect, or genius, as poems and prose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he term 'process' has been defined as under: "A process is series of actions which are carried out in order to achieve a particular result. A process is a series of things which happen naturally and result in a bio logical or chemical change. When raw materials or foods are processed, they are treated chemically or industrially before they are used or sold." 24. The term 'process' as defined in the New Webster's Dictionary of the English Language [Deluxe Encyclopaedia Edition] is as under: "Process, To treat or prepare by some particular process; to convert, as an agricultural commodity, into marketable form by some special treatment; Produced or treated by some artificial means; as, process sugar; of or pertaining to photographic reproduction that involves photo or photomechanical means; relating to special effects obtained in motion pictures through the use of special filming techniques." 25. Mr. Mohan Parasaran, learned Additional Solicitor General appearing on behalf of the appellant submitted that the activity of the respondent, namely, blending of tea, packaging and selling the same does not amount to manufacture or production of a commercially new and different product. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 'processing of goods' includes any art or process for producing, preparing or making an article by subjecting any material to a manual, mechanical, chemical, electrical or any other like operation. 30. Mr. Parasaran placed reliance on the decision in D.D. Shah & Bros. v. Union of India & Another reported in 2006 (283) ITR 486 (Raj.). In this case, similar question arose for consideration before the Rajasthan High Court whether the blending of different types of tea by the assessee amounts to production of a thing or an article by an industrial undertaking within the meaning of the expression as used in Section 80-1B of the Act. 31. The High Court in the said judgment has dealt with the terms "manufacture", "production" and "process" in great detail. The High Court in the said judgment arrived at a definite finding that blending though does not amount to manufacturing of goods but it clearly amounts to processing of goods in the sense that it brings some change in the goods. 32. It may be pertinent to mention that reference of Chowgule's case ac quires greater significance because, in that case, this Court dealt with a Division Bench judgment of the Bombay High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d but it would not amount to manufacture as no new commodity came into existence. 36. In Bharat Forge and Press Industries v. CCE, (1990) 1 SCC 532, this court observed that tariff item 26-AA(iv) encompasses all sorts of pipes and tubes. It calls for no distinction between pipes and tubes manufactured out of sheets, rods, bars, plates or billets and those turned out from larger pipes and tubes. It is of no consequence whether the pipes and tubes are manufactured by rolling, forging, spinning, casting, drawing, annealing, welding or extruding. The expression 'pipe fittings' merely denotes that it is a pipe or tube of a particular length, size or shape. 'Pipe fittings' do not cease to be pipes and tubes, they are only a species thereof. They are merely intended as accessories or supplements to the larger pipes and tubes. They are pipes and tubes made out of pipes and tubes. There is no change in their basic physical properties and there is no change in their end use. It cannot be said that pipe fittings, though they may have a distinctive name or badge of identification in the market, are not pipes and tubes. 37. The court in this case observed that the "processing" may be an inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2000) 1 SCC 549, this Court examined earlier cases and held that "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 name, character and use. In this case, the word 'manufacture' has various shades of meanings but unless defined under the Act, it is to be interpreted in the context of the object and the language used in the section. it would not be applicable in cases where only processing activity is carried out. Further, such production activity must be by an industrial undertaking." 45. In Collector of Central Excise, Jaipur etc. v. Rajasthan State Chemical Works, Deedwana, Rajasthan etc., 5(1991) 4 SCC 473, the court had defined the word 'manufacture' as under: "Manufacture implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the end result of one or more processes through which the original commodities are made to pass. The nature and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax, Ernakulam, 2001 (7) SCC 525, M/s. J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur & Another, 1965 (1) SCR 900, Collector of Central Excise v. Kiran Spinning Mills, 1998 (2) SCC 348, Park Leather Industry (P) Ltd. & Another v. State of UP & Others, 2001 (3) SCC 135. 47. Mr. Bhargava Desai, learned Counsel appearing on behalf of the respondent-assessee submitted that the respondent buys various varieties of packed tea of different grades and prices in public auction covering various tea gardens. These diverse varieties of tea are all different in size, liquor and other characteristics of tea. The respondent-assessee has to make purchases in order to meet the requirement of blending to achieve the same quality, taste and form of tea which the respondent has to sell to its customers. 48. The respondent further submitted that once enough quantity is available of the required types of tea for blending and the respondent is able to manufacture the required quantity for the "Standard tea" or approved sample, the respondent produces a small sample in required proportions on the table and subsequently a blend sheet is prepared indicating the measure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 50. Mr. Desai, appearing on behalf of the respondent-assessee also strongly relied on the judgment of this court in Chowgule's case and submitted that in view of the clear findings in the said judgment, the controversy involved in this case is no longer res integra. According to Mr. Desai, the present case is squarely covered by the decision in Chowgule's case and consequently the respondent-assessee is entitled to the weighted deduction under section 35B(1A) of the Act. 51. The respondent has also relied upon the decision in G.A. Renderian Ltd.'s case (supra). In the said case, the assessee carried on the business of purchasing tea of different qualities, blending the same by mixing one type with another and selling it. The assessee claimed that it was an industrial company within the meaning of Section 2(7)(c) of the Finance Act, 1978 and was entitled to concessional rate of tax. The Tribunal disallowed the claim on the ground that there was no processing as the end product remained the same and the entire process was manual. The High Court while placing reliance on the decision in Chowgule's case (supra) came to the conclusion that the activity of the assessee amounted to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) conveying the ore to the dressing plant; (iii) washing, screening and dressing the ore; (iv) conveying of the ore from the mine site to the river side; (v) transport of the ore from the river side to the harbour by means of barges; (vi) stacking of the ore at the harbour in different stock piles according to its physical and chemical composition, and (vii) blending of the ore from different stock piles with a view to produce ore of the required specifications and loading it into the ship by means of the mechanized ore handling plant. The question was whether goods purchased by the assessee for use in the above operations could be said to be goods purchased for use "in the manufacture or processing of goods for sale or in mining" so as to attract the lower rate of sales tax under Section 8(1)(b) of the Central Sales Tax Act, 1956. The relevant part of Section 8(1)(b) at the material time is as under: "8. (1) Every dealer, who is in the course of inter-State trade or commerce- (a) sells to the government any goods; or (b) sells to a registered dealer other than the government goods of the description referred to in sub-section (3); shall be liable to pay tax under this Act, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xing, qualitative change, in that the tea mixture which came into existence was of different quality and flavour than the different brands of tea which went into the mixture." 58. In view of the specific language of the Statutes in Nilgiri's case (supra) and Chowgule's case (supra); the term 'processing' has been specifically incorporated in the statute, therefore, the assessees were justifiably held to be entitled to the benefit. 59. Undoubtedly, the facts of Nilgiri's case are identical to the facts of the present case and the ratio of Nilgiri's case is fully applicable to this case. But we have to bear in mind a significant difference in the language employed in Section 8 of the Bombay Sales Tax Act, 1953 in Nilgiri's case and the language of Section 35(1)(B) of the Income-tax in the present case. The difference is that the term 'processing' which has been specifically incorporated in Nilgiri's case has been specifically omitted in the present case. Similarly, in Chowgule's case, the term 'processing' has been incorporated in the statute and the activities of the assessees both in Chowgule's and Nilgiri's cases were held to be processing and, in these respective cases, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise undertaken by the court is to make explicit the intention of the legislature which enacted the legislation. It is not for the court to reframe the legislation for the very good reason that the powers to 'legislate' have not been conferred on the court. 65. In Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests, Palghat & Another, 1990 (Supp) SCC 785, the court rightly observed that in seeking legislative intention judges not only listen to the voice of the legislature but also listen attentively to what the legislature does not say. 66. House of Lords in Pinner v. Everett, (1969) 3 All ER 257 aptly observed that we have been warned again and again that it is wrong and dangerous to proceed by substituting some other words for the words of the statute. 67. Therefore, the legal position seems to be clear and consistent that it is the bounden duty and obligation of the court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute which the legislature in its wisdom has deliberately not incorporated. 68. On clear construction and interpretation of Section 35B(1A) of the Act, we are clearly of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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