9911796707
TMI Blog2003 (4) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on 4th February, 1993. The assessee was allowed this deduction under section 80HHC amounting to Rs. 10,16,493 which, consequent to appellate order being given appeal effect, was reduced to Rs. 9,82,426. However, on 21st December, 1994, the CIT issued a notice under section 263 which, inter alia, stated that deduction under section 80HHC, on account of export proceeds from fine mica which is processed from raw mica, was erroneously allowed to the assessee as 'at the relevant time, minerals and ores, including processed minerals and ores, stood specifically excluded from the benefits of section 80HHC". Accordingly, the assessee was required to show cause as to why the CIT should not exercise his powers under section 263 to direct the Assessing Officer to withdraw the deduction under section 80HHC. Pursuant to the opportunity granted by the CIT, the assessee filed elaborate written submissions vide letter dated 8th February, 1995, but the CIT was not impressed. It was in the backdrop of these facts that the CIT passed the impugned order which, inter al" stated as follows: "The mineral in the form of raw mica extracted had admittedly undergone certain processes before export but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om". Their Lordships then observed that- "It is necessary immediately to note that the Mines and Minerals (Regulation and Development) Act covers granite as a minor mineral. This Court in the State of Mysore v. Swamy Satyanand Saraswati (dead) by his Lrs. AIR 1971 SC 1569 has held that granite is a mineral. The Court quoted Halsbury Laws of England thus: 'The test of what is a mineral is what, at the date of instrument in question, the word meant in the vernacular of the mining world, the commercial world, and among land owners, and in case of conflict this meaning must prevail over the purely scientific meaning.' No material was laid by the assessee before the Tribunal to suggest that in the export world granite was treated as anything but a mineral.' The above observations make it clear that the question as to what constitutes a 'mineral' has to be answered having regard to what "the word meant in the vernacular of the mining world, the commercial world,....and in case of conflict this meaning must prevail over the purely scientific meaning'. The Hon'ble Supreme Court, in the above light, took note of the fact that there was nothing before the Tribunal to suggest that "in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular shapes and blocks which are referred to as a "scrap" and which are in the form of irregular shapes and are only slightly less clear or pure. Other items are mica splittings, mica condenser films, mica powder, micanite, silvered mica, punched mica, mica paper, mica tapes, mica flakes. All these products of mica mineral and mica are processed items. 4. The processed mica and products derived from processing of mica minerals and mica ore will not amount to export of minerals and ores and hence will qualify for relief under section 80HHC of the Income tax Act, 1961." 5. It is clear from the above discussions that 'processed minerals' and 'minerals' cannot always be treated at par. This position has duly been accepted by the Revenue and even in assessment years prior to 1991-92, the Board has treated 'processed minerals'. In certain conditions, eligible for deduction under section 80HHC. The Hon'ble Supreme Court has also observed, quoting Halsbury Laws of England, that in such cases commercial meaning of the words must give way to purely scientific meanings of these words. Let us now come back to the facts of this case. 9. It is an admitted position that, as observed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed at any time crude mica. On the above basis, the Assessing Officer has allowed the assessee's claim under section 80HHC of the Act." While passing the impugned order, the CIT did not deal with the above contentions. Even before us, the ld. DR has not been able to meet the points made by the assessee. 10. In the light of the above discussions, we are of the considered view that the CIT did not have any material to hold that the goods exported by the assessee retained the basic character of "mineral". In any case, there was value addition to the raw mica and it is also undisputed position that, as per export bills raised by the assessee, the assessee had exported fabricated mica - "electronic components and silvered mica for capacitors, mica blocks and condensor films, fabricated ruby mica etc." Clearly, therefore, such processed minerals are not at par with 'mineral' per se so far as commercial meaning of the word 'mineral' is concerned. No doubt, in scientific terms, those products may retain the character of mineral but, as observed by the Hon'ble Supreme Court in Stonecraft Enterprises' case, commercial meaning of the words must give way to the scientific meaning of those wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, I am unable to endorse the view taken by my learned brother. On the other hand, I agree with the order of the Commissioner of Income-tax passed under section 263 for the reasons mentioned therein and the same is hereby upheld. 15. In the result, the Commissioner of Income-tax was right to withdraw the deduction which was wrongly given to the assessee. So, I dismiss the appeal filed by the assessee. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961. As there is a difference of opinion between the Members, we refer the following point to the Hon'ble President, Income-tax Appellate Tribunal under section 255(4) of the Income-tax Act, 1961: "Whether, on the facts and in the circumstances of the case, the assessee was eligible for deduction under section 80HHC of the Income-tax Act, 1961 for the assessment year under consideration (1990-91) in respect of export of fabricated Mica products, particularly as amendment in section 80HHC(2)(b) was effective from 1st April, 1991 (assessment year 1991-1992)?" THIRD MEMBER ORDER Per Shri M.A. Bakshi Vice-President--Appeal of the assessee was earlier heard by 'B' Bench of the Tribunal constituted of two Members. Since there was a d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee. The CIT-II, Kolkata on perusal of the assessment record found that the deduction claimed by the assessee at Rs. 10,16,493 under section 80HHC of the Income-tax Act, 1961, having been reduced to Rs. 9,82,426 as a result of CIT(A)'s order, was wrongly allowed to the assessee insofar as deduction was not permissible on the export of minerals and ores. It has been pointed out by the CIT that export of the processed minerals as specified in XIIth Schedule qualify for deduction under section 80HHC with effect from 1-4-1991 only and, therefore, the action of the Assessing Officer in allowing the deduction to the assessee for the assessment year 1990-91 was erroneous insofar as prejudicial to the interests of the Revenue. He had, accordingly, issued a show-cause notice to the assessee and after hearing the arguments came to the conclusion that the assessee was not entitled to deduction under section 80HHC. The Assessing Officer was, accordingly, directed to revise the order of assessment withdrawing the benefit of deduction under section 80HHC. 7. The learned counsel for the assessee pleaded that the view expressed by the Ld. Accountant Member is the appropriate view as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asstt. Director [1980] 123 ITR 899 in support of the contention. It was pointed out that in the case of Stone Craft Enterprises the issue was as to whether granite is a mineral. Their Lordships of the Supreme Court held in favour of the Revenue on the ground that there was nothing on record to indicate that what the assessee exports is value added granite. It was further contended that the Ld. CIT has admitted in the impugned order that the assessee was purchasing raw Mica and processing the same. Reliance was placed on the decision of the Karnataka High Court in the case of CIT v. God Granites [1999] 240 ITR 343 in which Their Lordships held that the processed cut and polished granite exported qualify for deduction under section 80HHC. Reliance was also placed on the decision of the Calcutta High Court in the case of CIT v. East India Hotels Ltd. [1994] 209 ITR 854 wherein Their Lordships have held that the processing/cooking of food and supplying the same for consumption of air passengers in bulk amounted to the production of articles and things and thus assessee was entitled to deduction under section 80J. It was pointed out that the earlier judgment in the case of CIT v. Sky Ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed from India. It was, accordingly, pleaded that the order passed by the CIT under section 263 was without jurisdiction and may, accordingly, be cancelled. 10. The learned Departmental Representative, on the other hand, stated that it is not disputed that the assessee had applied various processes to the raw Mica before exporting the same. However, the moot question is as to whether such processing altered the mineralogical identity of Mica. According to the Ld. Departmental Representative the answer is no. It was further contended by the Ld. Departmental Representative that in the products exported by the assessee the original mineralogical properties of Mica were required to be retained otherwise the products could not have been used for specific purposes. It was pointed out that though the product was processed by the assessee but the products emerging after processing was not a different product with properties different from Mica. It was further contended by the Ld. Departmental Representative that the Legislature had in its wisdom extended the benefit of deduction under section 80HHC to the processed minerals and ores with effect from 1-4-1991 and, therefore, the interpret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of the profits derived by the assessee from the export of such goods or merchandise: (2)(a) (b) This section does not apply to the following goods or merchandise, namely:-- (i) mineral oil; and (ii) minerals and ores." 12. As is evident from above, section 80HHC provides for deduction in respect of goods exported by the assessee except in respect of the export of goods specified under sub-section (2) of the said section. It is not disputed that for the assessment year 1990-91 minerals and ores were one of the items mentioned under sub-section (2) of section 80HHC on the export of which deduction under section 80HHC was not permissible. With effect from 1-4-1991 section 80HHC(2)(b) was amended to read as under: "(i) Mineral oil, and (ii) minerals & ores (other than processed minerals and ores specified in the Twelfth Schedule.) THE TWELFTH SCHEDULE [See section 80HHC(2)(b)(ii)] PROCESSED MINERALS AND ORES (i) to (iv)*** (v) Mica blocks, mica splittings, mica condenser films, mica powder, mica nite, silvered mica, punc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved from the notes and clauses of Finance (No. 2) Act, 1991 that by the amendment of section 80HHC(2)(b) the Legislature sought to extend the benefit of deduction under section 80HHC in respect of profits derived from export of processed minerals and ores specified in XIIth Schedule. A pertinent question requiring consideration raised by the Ld. Judicial Member as also by the Ld. Departmental Representative, is as to what was the necessity for the Legislature to amend section 80HHC(2)(b) when deduction under the said section was permissible in respect of the processed minerals even before the incorporation of the amendment. 16. At this stage it would be relevant to refer to certain principles of interpretation. It is well established principle of law that no word or expression used in any statute can be said to be redundant or superfluous. Their Lordships of the Supreme Court in the case of CIT v. Distributors (Baroda) (P.) Ltd. [1972] 83 ITR 377 (SC) held that no part of the provision of statute can be just ignored by saying that the Legislature enacted it not knowing what it was saying". Similar view has been expressed by Their Lordships of the Supreme Court in the case of CWT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the help of cranes, dressing, shaping, sizing, colouring and giving uniform grains to these stones etc., and the process also involved removing of certain natural flows such as airpores, veins, cracks, etc., in order to ensure quality of the product. Certain chemical impurities are also required to be removed in special manufacturing process, which requires special machines/equipments, etc., like jet burners block cutters, vertical and horizontal drilling machines, etc." 20. On these facts, Their Lordships of the Madras High Court held as under:-- "It is well-settled principle of construction of the provisions that when the Legislature enacts law, the law must be understood with reference to the language used in the provisions and construed in the light of the scheme of the Act and object of the statute and provisions therein. If the provision is introduced with a view to confer a benefit, which had not been conferred before such introduction, even though the provision to which the amendment was incorporated is beneficial provision that does not necessarily imply that the amendment is to be given retrospective effect even without a declaration to that effect from the Legislatur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , put forth yet another contention that granite blocks exported by the assessee is not mineral for the purpose of section 80HHC, though in common parlance granite may be considered as mineral, by drawing support from the Circular No. 729 dated 1st November 1995. In the circular in para 3 the CBDT recorded its opinion to the effect that while granite alone can be considered as mineral, any process applied to granite would deprive the quality of rough mineral from the dimensional blocks of granite, which is a value added marketable commodity. When rough granite is cut to dimensional blocks of uniform colour and size, it not only undergoes mechanical process of cutting, but also a certain amount of dressing and polishing is involved to remove various natural flaws and become a value added marketable commodity and accordingly be eligible for deduction under section 80HHC of the Act. This circular and the earlier Circular dated 17-11-1994, were issued to clarify the goods which are included for the benefit under section 80HHC by means of the amendment from 1-4 1991, onwards. When we concluded that the amended provision itself is not available for the assessment year under consideration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under section SOHHC was not permissible on minerals and ores which had not been processed. It would be relevant to understand the meaning of the word "minerals". Their Lordships of the Supreme Court in the case of Stone Craft Enterprises explained the meaning of the word "minerals" as under: "... Entries in the Schedules of sales tax and excise statutes list some articles separately and some articles are grouped together. When they are grouped together, each word in the entry draws colour from the other words therein. This is the principle of noscitur a sociis." It was submitted, based upon this doctrine, that the word "minerals" in section 80HHC should be read in the context of the word "ores" with which it was associated and must draw colour therefrom; that is to say, it must read as referring only to such minerals as are extracted from ores and not others, thus excluding granite. We agree that the said doctrine is applicable. The word "minerals" in sub-section (2)(b) of section 80HHC must be read in the context of "mineral oil" and "ores" with which it is associated. It seems to us that these words taken together are intended to encompass all that may be extracted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake place." 27. In the case of Chowgule & Ca Ltd v. UOI [1981] 47 STC 124 (SC) the Hon'ble Supreme Court was required to consider whether blending of ore in the course of loading it into the ship through the mechanical ore handling plant constituted manufacture or processing of ore. The Supreme Court applied the test : "does the processing of the original commodity bring into existence a commercially different and distinct commodity ? On application of this test, it was held that the blending of different qualities of ore processing differing chemical and physical composition so as to produce ore of the contractual specifications cannot be said to involve any process of manufacture, since the ore that is produced cannot be regarded as a commercially new and distinct commodity from the ore of different specifications blended together. What is produced as a result of blending is commercially the same article namely, ore, though with different specifications than the ore which is blended and, hence, it cannot be said that any process of manufacture is involved in the blending of ore. In the aforesaid case, the Supreme Court further considered whether the ore blended in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ica 2,98,966,650 Gm. 71,33,626.05 Stores 63,850.15 71,97,476.20 ---------------- ------------ 1,23,36,701 To Mica Purchases Kg.1,69,946,470 Gm 1,21,15,792.54 To Stores Purchases 1,04,531.85 1,22,20,324.39 ------------ 3,72,574 To Wages For: Cutting & Sortings 1,34,789.74 Splittings 28,083.57 CondenserPassing/opening 1,79,554.50 Leave Wages & Others 21,232.90 69,926 To Cartage, Collies & Transport 3,63,660.71 2,51,429 To Shipping charges 1,01,766.16 98,327 To Packing Charges 2,80,860.02 1,481 To Factory expenses 1,19,913.19 19,77,487 To Gross Profit C/D 1,712.55 28,22,399.50 ------------------------------------------------------------------------------------------ 1,97,81,559 Kg. 4,68,913,120 Gm 2,31,03,112.72 ------------------------------------------------------------------------------------------ Previous year Rs. P. RS. P. 1,25,84,083 By Sales: Mica Local Sales Kg. 10,192.565 Gm. 5,74,382.14 Mica Foreign Sales Kg 1,18,114.065 1,83,96,672.42 ---------------- --------------- 1,89,71,554.56 --------------- Less: Export Duty 7,36,559.96 M.T.C. S/Charges 3,53,625.30 10,90,185.66 1,78,81,368.90 71,97,476 By CLOSING STOCK : At C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the manufacture of any articles and things. 34. The next question that arises for consideration is as to whether the products exported by the assessee are recognized as minerals in the commercial world or whether after processing the goods had lost the identity as minerals. 35. Their Lordships of the Supreme Court in the case of Stone Craft Enterprises held that "The test of what is a mineral is what, at the date of instrument in question, the word meant in the vernacular of the mining world, the commercial world, and among land owners, and in case of conflict this meaning must prevail over the purely scientific meaning." On the basis of the above observation, the Ld. Accountant Member has held that the products exported by the assessee are recognized as different products in the commercial world than the minerals. It has been pointed out that the raw mica after processing is differently known in the commercial world, than the minerals. In my view there is nothing on record to establish that what the assessee had exported is not known as mineral in the commercial world. The Ld. Accountant Member has relied upon the above quoted portion of the decision of the Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld dust, gold leaves, etc. Though all the aforementioned items of gold are having a different commercial name, yet most of these items are recognized as nothing but pure gold in the commercial world. The same may not be true in respect of gold ornaments and jewellery. Such items are recognised as different items made from pure gold. This is perhaps because gold ornaments are made after mixing copper etc. to pure gold. Similarly, gold jewellery is made after embedding jewels, diamonds, etc. in the gold. In these items there is apparently some addition to pure gold. Therefore, the mere commercial name by itself is not a determinative factor for ascertaining as to whether fabricated mica, silvered mica, mica plates, etc. are recognized something other than minerals in the commercial world, merely because some words have been prefixed and suffixed to the word "mica". In my humble view, a distinction is to be drawn between commercial name and commercially recognized as a different item. The decision of the Supreme Court in the case of Indian Hotels Co. Ltd. would also be relevant for the purpose of appreciating this distinction. In this case Their Lordships of the Supreme Court held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having the approximate chemical formula H2 MKg3 Al(SiO4)3, is commonly called 'amber' mica. The Ld. Author explains the processing of Mica as under:-- "The ordinary mica crystals as they come out of a mine is in the form of rough books or lumps of irregular shape, size and thickness associated with impurities and structural imperfections. They have to undergo long operation of cutting, sorting and processing from crude to commercial quality. The waste resulting from the production of crude to commercially useful sheet mica forms about 90 per cent of the total output of mica from a mine, which are sold as scrap mica for use as ground mica. No machine has yet been designed to process mica mechanically. The processing technique, therefore, involves only a pair of hands, eyes and a simple knife. The operations performed consists of cobbing or cleaning the crude crystals as extracted from the mine with its associated impurities, rifting or splitting the cobbed mica into usable sheets by sickle and then by sharp knife removing major flaws and structural imperfections, such as cracks, holes, reeves, cross-grains and other physical defects to obtain the maximum usable area with minimum wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) V-2, Ruby Clear and Slightly Stained; (c) V-3, Ruby Fair Stained; (a) V-4, Ruby Good Stained; (e) V-5 , Ruby Stained A Quality; (h) V-6, Ruby A Q; (g) V-7, Ruby Stained B Quality; (h) V-8, Ruby B Q; (t) V-9, Ruby Heavy Stained; (1) V-10, Ruby Densely Stained; (k) V-11, Black Dotted; (o) V-12, Black Spotted (Or Spotted 1st Quality); (m) V-13, Black/Red Stained (Or Spotted and Quality); (n) V-14, Green/Brown First Quality; (o) V-15, Green/Brown 2nd Quality; (p) V-16, Green/Brown Stained or BQ. 39. From the information about the nature of processing involved in the transformation of mica Blocks into commercially saleable mica and in the fight of the principles of law referred to above, it is evident that in this case there is no manufacture or production of any article or thing. It is abundantly clear that the process involved in the goods exported by the assessee does not bring into existence of any goods recognized as something different than mineral in the commercial world. Fabricated mica, silvered mica, mica paper, reconstituted mica and ground mica are nothing but different varieties or different quality of natural mica. These items are recognized as different forms or dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t calls for future inquiry. It is his duty to ascertain the truth of the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry." 41. In the light of the above conclusion, I would like to point out with utmost respect that the Tribunal in the case of Perfect Projects Ltd has proceeded on the wrong assumption that the circulars issued by the Board were applicable even before the amendment of section 80HHC. The said decision has been rendered without taking into consideration the legislative intention behind the amendment made in section 80HHC(2) with effect from 1-4-1991. The Tribunal in that case have taken into account the fact that the export of raw mica was banned as per the export policy of the Government of India. In my considered view, if the restriction under section 80HHC(2)(b) was applicable only in respect of rough minerals, then the prohibition provided under section 80HHC(2) would be redundant. As has been pointed out earlier, there is no presumption that any provision of law made by the Legislature is superfluous. In the light of the aforementioned facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
