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TMI Blog2020 (12) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... concentrates are manufactured by the process of magnetic separation. For this purpose, the Assessee uses High-Intensity Magnetic Separator, which increases the iron content through concentration. Eventually, the assessee manufactures Iron Ore Concentrate Fines, by upgrading the iron content to around 58%. Assessee purchases ROM, which includes a lot of impurities; it is crude ore, practically of no use unless it is processed and made suitable for its intended end-use. True, very low-grade iron ore cannot be used in metallurgical plants, for it needs to be upgraded to increase the iron content. In the Assessee's case, iron ore concentrates are manufactured by the process of magnetic separation. It essentially amounts to manufactures or process . Therefore, we find no reason to interfere with the Tribunal's findings on this sole substantial question of law. - Decided in favour of assessee. - TAX APPEALS NO.17, 25, 26 & 37 OF 2015 - - - Dated:- 9-12-2020 - M.S. SONAK DAMA SESHADRI NAIDU, JJ. Ms. Amira Razaq, Standing Counsel for the Appellant. Shri S.M. Singbal, Advocate for the Respondent. ORAL JUDGMENT: (Per Dama Seshadri Naidu, J.) Introdu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : The Substantial Questions of Law: 8. In this appeal before us, the Revenue presented two substantial questions of law: A. Was the ITAT right in allowing deduction under section l0B amounting to ₹ 4,85,30,680/- to the Assessee, though the Assessee did not carry out any manufacturing activity? B. Was the ITAT right in allowing deduction under section l0B amounting to ₹ 4,85,30,680/- to the Assessee, which includes excess deduction of ₹ 4,45,64,130/- the Assessee claimed by under-invoicing the purchases from its sister concern, resulting in an increased profit? 9. On 27.03.2015, this Court admitted the appeal, but it accepted only question A as the substantial question of law and rejected question B . That is, it has rejected the Revenue s contention that the Assessee under-invoiced the purchases from its sister concern. In this regard, this Court has reasoned that both the CIT (A) and the Tribunal found on the facts that the Assessee did not under-invoice the raw material it had purchased from its sister concern. According to it, the Revenue could not show how the concurrent findings were perverse or arbitrary. So it rejected question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring? If it does, was the ITAT right in allowing deduction under section l0B of the IT Act, amounting to ₹ 4,85,30,680/- to the Assessee? No other question should we consider. 16. Run-of-mine, as defined by Dictionary of Mining, Mineral, Related Terms[2nd ed., compiled and edited by the Staff of the U.S. Bureau of Mines, 1996], is the the raw mined material as it is delivered by the mine cars, skips, or conveyors and prior to treatment of any sort . According to the same dictionary, crude is a substance in its natural, unprocessed state: crude ore or crude oil, for example. That is, the ore found in a natural state; not cooked or prepared by fire or heat; not altered or prepared for use by any process; not refined . Further, beneficiation is defined as the dressing or processing of coal or ores for the purpose of (1) regulating the size of the desired product, (2) removing unwanted constituents, and (3) improving the quality, purity, or assay grade of the desired product . It may also amount to concentration or other preparation of coal or ores for smelting by drying, flotation, or magnetic separation. Finally, the lexicon regards 'beneficiation' as the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21. Before the substitution of section 10A by the Finance Act, 2000, with effect from April 1, 2001; Explanation (iii) to the earlier section 10A defined the term manufacture as thus: (iii) manufacture includes any (a) process, or (b) assembling, or (c) recording of programmes on any disc, tape, perforated media or other information storage device. Explanation (1) to section 10AA contained the following definition of manufacture : (iii) manufacture shall have the same meaning as assigned to it in clause (r) of section 2 of the Special Economic Zones Act, 2005 (SEZ Act). This provision of SEZ Act defines manufacture thus: to make, produce, fabricate, assemble, process or bring into existence, by hand or by machine, a new product having a distinctive name, character or use and shall include processes, such as refrigeration, cutting, polishing, blending, repair, remaking, re-engineering, and includes agriculture, aquaculture, animal husbandry, floriculture, horticulture, pisciculture, poultry, sericulture, viticulture and mining. 22. The definition under section 2 (r) of SEZ Act is similar to the definition in the Export-Import Policy. This policy defines manufacture ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said process . Applying the two-fold test, on the merits, G. Glass Industries has held that printing on bottles did not amount to manufacture. 26. Similarly, in ITO v Arihant Tiles and Marbles P. Ltd.[320 ITR 79 (SC)], the conversion of marble blocks into tiles and slabs by sawing and polishing has been declared as manufacture or production under section 80IA of the IT Act because it involves several steps. The next year, in 2010, this Court has followed the case-holding of Arihant Tiles and Marbles in Commissioner of Income Tax v. Fateh Granite (P) Ltd[[2010] 222 CTR 638 (Bombay)]. 27. But in Commissioner of Income Tax v. Sesa Goa Ltd.[271 ITR 331 (SC), as quoted in M/S Arihant Tiles Marbles(P)Ltd.], the meaning of the word production came up for consideration. The question was whether the ITAT was justified in holding that the Assessee was entitled to deduction under Section 32A of the IT Act, 1961, regarding machinery used in the mining activity, ignoring the fact that the Assessee was engaged in extraction and processing of iron ore, not amounting to manufacture or production of any article or thing. 28. This Court, in that case, while dismissing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. But the Sales Tax Officer took the view that blending of ore done while loading through the mechanical ore handling plant did not amount to manufacture or processing of ore. The question in Chowgule was whether blending of ore while loading it into the ship through the mechanical ore handling plant constituted manufacturing or processing of ore. 32. According to the Supreme Court, it is now well settled that the test for determining whether manufacture can be said to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity, but is recognised in the trade as a new and distinct commodity . In other words, the test required to be applied is this: does the processing of the original commodity bring into existence a commercially different and distinct commodity? Then, on the facts, Chowgule has held that the blending of different qualities of ore possessing different chemical and physical composition does not amount to manufacture. But it amounts to processing , when the blending takes place. After taking semantic support from Webster's Dictionary, Chowgule has held that if any commodit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly, held that ROM is crude ore, practically of no use unless it is processed and made suitable for steel making industry. Describing the manufacturing process undertaken by the Assessee, the Tribunal has held that in the iron ore production, the ROM is a raw material in a very crude form. 37. When extracted, ROM contains a lot of waste material called 'impurities'. According to the Tribunal, very low-grade iron ore cannot be used in metallurgical plants, for it needs to be upgraded to increase the iron content. In the Assessee's case, iron ore concentrates are manufactured by the process of magnetic separation. For this purpose, the Assessee uses High-Intensity Magnetic Separator, which increases the iron content through concentration. Eventually, the assessee manufactures Iron Ore Concentrate Fines, by upgrading the iron content to around 58%. Putting the Issue in Perspective: 38. We have already seen that beneficiation involves the improvement of the grade of coal or ores by milling, flotation, sintering, gravity concentration, or other processes. In the same vein, we have seen that the separation of magnetic materials from nonmagnetic materials, using ..... X X X X Extracts X X X X X X X X Extracts X X X X
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