Taxap/462/2019 Of The Principal Commissioner Of Income Tax, Vadodara 1 v. M/S Fine Line Circuits Company

C/TAXAP/460/2019 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 460 of 2019With R/TAX APPEAL NO. 461 of 2019With R/TAX APPEAL NO. 462 of 2019With R/TAX APPEAL NO. 463 of 2019With R/TAX APPEAL NO. 464 of 2019FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALASd/-andHONOURABLE MR.JUSTICE A.C. RAOSd/-==========================================================1 Whether Reporters of Local Papers may be allowed to Yessee the judgment ?2 To be referred to the Reporter or not ?Yes3 Whether their Lordships wish to see the fair copy of the Nojudgment ?4 Whether this case involves a substantial question of law Noas to the interpretation of the Constitution of India or any order made thereunder ?==========================================================THE PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA 1 VersusM/S FINE LINE CIRCUITS COMPANY ==========================================================Appearance:MR.VARUN K.PATEL(3802) for the Appellant(s) No. 1RULE NOT RECD BACK(63) for the Opponent(s) No. 1========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALAandHONOURABLE MR.JUSTICE A.C. RAO Date : 16/09/2019 COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1.As the substantial questions of law in all the captioned tax appeals are the same and the assessee is also the same, those were heard analogously and are being disposed of by this common judgment and order. 2.For the sake of convenience, the Tax Appeal No.460 of 2019 is treated as the lead matter. 3.This tax appeal under Section 260A of the Income Tax Act, 1961 (for short “the Act”) is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal “C” Bench dated 29[th ]November, 2018 in the ITA No.2183/Ahd/2015 for the A.Y.2004-05. 4.This tax appeal was ordered to be admitted on the following substantial questions of law; “(A) Whether on the facts and in the circumstances of the case, the learned ITAT has erred in law and on facts in allowing the deduction u/s.10B of the Act r.w.t. Export of Copper Cladded Glass expoxy Laminate (CCGL) even though the assessee had not carried out any manufacturing activities quathe said product i.e. CCGL? (B)Whether on the facts and in the circumstances of the case, the learned ITAT has erred in law and on facts in allowing the deduction claimed by the assessee u/s. 10B of the Act without appreciating the fact that there was no manufacturing activities carried out by the assessee which made it eligible to claim deduction u/s.10B?” 5.The facts giving rise to this appeal may be summarized as under; 5.1The assessee is a hundred percent export oriented undertaking, having its place of business at Plot No.E-8, GIDC, Manjusar, Savli, District: Vadodara. The assessee has been registered as the EOU in the Kandla Free Trade Zone, State of Gujarat. The return of income was filed by the assessee on 30[th ]October, 2004, declaring the total income of Rs.19,04,308/- along with the audit report in then Form No.3CB and the report under Section 10B of the Act in the Form No.56G. The assessee claimed deduction of Rs.2,83,46,239/- under Section 10B of the Act. 5.2The assessment under Section 143(3) of the Act was finalized on 29[th] December, 2006 at the assessed income of Rs.34,49,503/-. While finalizing the assessment proceedings, the claim of the assessee under Section 10B of the Act was restricted to Rs.2,69,73,700/- as against the original claim of Rs.2,83,46,239/-. 5.2The assessment under Section 143(3) of the Act was finalized on 29[th] December, 2006 at the assessed income of Rs.34,49,503/-. While finalizing the assessment proceedings, the claim of the assessee under Section 10B of the Act was restricted to Rs.2,69,73,700/- as against the original claim of Rs.2,83,46,239/-. 5.3Being aggrieved with the order passed under Section 143(3) of the Act, the assessee preferred an appeal before the CIT (A). The CIT (A)-II, Vadodara, vide order dated 1[st] February, 2008, affirmed the action of the Assessing Officer and the same was further affirmed by the ITAT vide order passed in the ITA No.1144/Ahd/2008 dated 15[th] April, 2011. 5.4The survey action under Section 133A(1)(b) of the Act was carried out on 25[th] March, 2010. In the course of the survey, it was noticed that the assessee was claiming deduction under Section 10B of the Act on the export of the CCGL (Copper Cladded Glass Epoxy Laminate) without undertaking any manufacturing process. It was noticed that the CCGL sheets were being exported, and after cutting them into smaller sheets, those were being repacked and exported. According to the Revenue, the same cannot be termed as any manufacturing process and, in such circumstances, the assessee is not liable to claim deduction under Section 10B of the Act. 5.5In such circumstances, referred to above, the case was reopened under Section 147 of the Act by issue of notice under Section 148 of the Act dated 8[th] March, 2011. The assessment under Section 143(3) read with Section 147 was finalized on 14[th] December, 2011 at a total income of Rs.82,63,600/- restricting the deduction under Section 10B of the Act at Rs.2,21,19,603/- as against Rs.2,83,46,239/- claimed by the assessee in his return of income. 5.6The assessee preferred an appeal before the CIT (A)-II, Vadodara. The appeal came to be dismissed by the CIT (A) vide order dated 16[th] August, 2012. 5.7The assessee went in appeal before the ITAT. The ITAT passed a common order dated 25[th] June, 2013 for the A.Y.2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. The ITAT restored the issue of sale of CCGL to the file of the Assessing Officer for being examined afresh keeping in mind the stance of the Excise Department in respect of the export of the CCGL. It appears that the Assessing Officer passed a fresh assessment order under Section 143(3) read with Section 254 of the Act on 12[th] May, 2014 at Rs.1,73,72,867/-, thereby disallowing the claim of deduction under Section 10B on the deemed export as well as on the export of the CCGL. 5.8The assessee went in appeal before the CIT(A). The appeal of the assessee with regard to deduction under Section 10B of the Act came to be allowed by the CIT(A). The Revenue, being dissatisfied with the order passed by the CIT(A), preferred appeal before the ITAT. The ITAT dismissed the appeals preferred by the Revenue and thought fit to grant the deduction under Section 10B of the Act with regard to the export of the CCGL. 5.9Being dissatisfied with the order passed by the ITAT, the Revenue is here before this Court with this appeal. -Submissions on behalf of the AppellantRevenue: 6.Mr. Varun K. Patel, the learned counsel appearing for the Revenue vehemently submitted that the term “manufacture” implies a change, and every change is not “manufacture”. According to Mr. Patel, all that the assessee is doing is to import the CCGL sheets cut them to a particular size, repack those sheets and, thereafter, export it at a particular place in accordance with the order. According to Mr. Patel, by doing so, it cannot be said that a new and different article having a distinct name, character or use has emerged. According to Mr. Patel, the CCGL sheets retain a continuing substantial identity through the process stage and it cannot be said that the CCGL -Submissions on behalf of the AppellantRevenue: 6.Mr. Varun K. Patel, the learned counsel appearing for the Revenue vehemently submitted that the term “manufacture” implies a change, and every change is not “manufacture”. According to Mr. Patel, all that the assessee is doing is to import the CCGL sheets cut them to a particular size, repack those sheets and, thereafter, export it at a particular place in accordance with the order. According to Mr. Patel, by doing so, it cannot be said that a new and different article having a distinct name, character or use has emerged. According to Mr. Patel, the CCGL sheets retain a continuing substantial identity through the process stage and it cannot be said that the CCGL sheets have been manufactured. Mr. Patel, in support of his aforesaid submissions, has placed reliance on the following decisions; “(I)In the case of Deepkiran Foods (P.) Ltd. vs. ACIT, reported in (2014) 361 ITR 437; (II)In the case of Hindustan Poles Corporation vs. Commissioner of C. Ex., Calcutta, reported in 2006 (196) E.L.T 400; (III)In the case of Commissioner of Commercial Tax vs. A.R. Thermosets (Pvt.) Ltd., reported in 2016 (339) E.L.T. 500; (IV)In the case of Nishant Export vs. ACIT, reported in (2018) 401 ITR 401; (V)In the case ofLucky Minerals (P.) Ltd. vs. Commissioner of Income Tax, reported in (2000) 245 ITR 830; (VI)In the case of Aman Marble Industries Pvt. Ltd. vs. Collector of C. Ex. Jaipur, reported in 2003 (157) E.L.T 393; 7.In such circumstances, referred to above, Mr. Patel prays that there being merit in this appeal, the same be allowed and the substantial questions of law, formulated by this Court, may be answered in favour of the Revenue and against the assessee. -Submissions on behalf of the RespondentAssessee 8.On the other hand, this appeal and the connected appeals have been vehemently opposed by Mr. B.S. Soparkar, the learned senior counsel appearing for the assessee. Mr. Soparkar would submit that no error, not to speak of any error of law, could be said to have been committed by the ITAT in passing the impugned order. 9.Mr. Soparkar gave us a fair idea as regards the process of manufacture of CCGL. According to Mr. Soparkar, the CCGL sheets undergoes the following process; “(i)Receipt of purchase order from the customers; (ii)Issuance of Job Travel Card for manufacturing, which would include instructions for manufacture as per the specific design and the production process to be deployed. (iii)Job Card goes to the Store Department for identity and issuance of required material to the production department viz. Copper Gladded Glass Epoxy Laminates. (iv)Raw Material is sent to the Shearing Department. (v)The shearing machine is set for the desired size and the laminates are cut into specified sizes decided by the customer. (vi)After shearing, production inspection takes place where laminates are checked for oxidation effect. (vii)A thorough surface clearing is done to remove the oxidation. (viii) The cut pieces of laminates are checked by the Quality Control Department for final inspection. This department verifies various quality parameters like the thickness of material, thickness of copper using Alco Meter (Copper thickness guage), Micrometer, Measuring Tape, Verifier Caliper and Magnifying glass. (ix)Such inspected laminates are packed by the Packing Department. At this stage, the product is called as CCGL. The same is registered under the Excise and KandlaEconomicZoneas “Sorting/Checking/Clearing/Packing/repacking of Copper Gladded Laminates.” (vi)After shearing, production inspection takes place where laminates are checked for oxidation effect. (vii)A thorough surface clearing is done to remove the oxidation. (viii) The cut pieces of laminates are checked by the Quality Control Department for final inspection. This department verifies various quality parameters like the thickness of material, thickness of copper using Alco Meter (Copper thickness guage), Micrometer, Measuring Tape, Verifier Caliper and Magnifying glass. (ix)Such inspected laminates are packed by the Packing Department. At this stage, the product is called as CCGL. The same is registered under the Excise and KandlaEconomicZoneas “Sorting/Checking/Clearing/Packing/repacking of Copper Gladded Laminates.” 10.Mr. Soparkar further submitted that his client is paying excise on the manufacturing of the CCGL on domestic sales. He would submit that if it is the case of the Revenue that the activity, referred to above, does not amount to manufacture or production for the purpose of Section 10B of the Act, then the assessee would be free to plead that he is not liable to pay excise duty etc. because the activity does not constitute manufacture. 11.Mr. Soparkar submits that, by process of manufacture, something is produced and brought into existence which is different from that, out of which, it is made, in the sense that the thing produced is, by itself, a commercial commodity capable of being sold or supplied. He would submit that manufacture is the end result of one or more process through which the original commodities are made to pass. The essence of manufacture is the change from one object to another for the purpose of making it marketable. According to Mr. Soparkar, the process through which the CCGL undergoes is a clear indicator that at the end of the process, a new and different commodity could be said to emerge. 12.In such circumstances, referred to above, Mr. Soparkar prays that there being no merit in the appeals preferred by the Revenue, those be dismissed. 13.Mr. Soparkar, in support of his submissions, has placed reliance on the following decisions; (I)In the case of Mrs. Delna Rushtam Boyce, (2009) 318 ITR 455;185 Taxman 180 (AAR) New Delhi, wherein the assessee was deriving profit from business of squeezing of juice from fruits and vegetables and etc. was eligible for deduction u/s.80IB of the Act to be holding the same to be manufacturing. (II)In the case of CIT vs. Esquire Translam Industries, (2012) 344 ITR 308; 25 Taxmann.com 98 (Mad.), wherein conversion of electric steel into lamination was held to be manufacturing for the purpose of section 80IB of the Act. (III)In the case of CIT vs. Innovative Industries, (2012) 207 taxman 189 (Mag.); 19 taxmann.com 140 (Guj.), wherein this Court has held that the process undertaken by the assessee in producing air freshner would amount to manufacturing. (IV)In the case ofCIT vs. Business Information Processing Services, (2012) 345 ITR 548; (2013) 33 taxmann.com 549 (Raj.), wherein the Rajasthan High Court took the view that the computer data processing and sale of computer stationary amounts to manufacturing. (V)The Punjab & Harayan High Court, in the case of CIT vs. HSED Corporation Ltd., has held that the activity of manufacturing of voter identity card amounts to manufacture. (VI)In the case of CIT vs. Zainab Trading (P.) Ltd., (2011) 333 ITR 144; 200 Taxmann.com 91 (Mag.); 11 taxmann.com 355 (Mad.), the Madras High Court has held that the conversion of paper corrugated sheets into paper boxes was held to be manufacturing. (VII) The Supreme Court, in the case of CIT vs. Vinbros & Co., (2012) 210 Taxman 252; 25 taxmann.com 367, has held that blending and bottling Indian manufacture foreign liquor would amount to manufacturing. (V)The Punjab & Harayan High Court, in the case of CIT vs. HSED Corporation Ltd., has held that the activity of manufacturing of voter identity card amounts to manufacture. (VI)In the case of CIT vs. Zainab Trading (P.) Ltd., (2011) 333 ITR 144; 200 Taxmann.com 91 (Mag.); 11 taxmann.com 355 (Mad.), the Madras High Court has held that the conversion of paper corrugated sheets into paper boxes was held to be manufacturing. (VII) The Supreme Court, in the case of CIT vs. Vinbros & Co., (2012) 210 Taxman 252; 25 taxmann.com 367, has held that blending and bottling Indian manufacture foreign liquor would amount to manufacturing. (VIII) In the case of CIT vs. Emptee PolyYarn (P.) Ltd., (2010) 188 Taxman 188; the Apex Court has held that twisting of yarn amounts to manufacturing. (IX)The Madras High Court, in the case of CIT vs. Balaji Hotels & Enterprises Ltd. (2009) 311 ITR 389; has held that printing of paper labels constitute manufacturing. (X)In the case of India Cine Agencies vs. Dy. CIT, (2012) 210 taxman 253; 25 taxman.com 366; the Supreme Court has held that even cutting of jumbo film roles into small marketable sizes amounts to manufacturing. (XI)The Allahbad High Court, in the case of CIT vs. Shiv Oil & Dal Mill,(2006) 281 ITR 221; 153 Taxman 27; has held that refining of oil amounts to manufacturing. (XII) This High Court, in the case of CIT vs. Prabhudas Kishordas Tobacco Products (P.) Ltd., (2006) 282 ITR 568; 154 taxman 404 (Guj.), took the view that even buying tendu lives and tobacco and thereafter making bid amounts to manufacturing. (XIII) The Madras High Court, in the case of CIT vs. Premier Tobacco Packets (P.) Ltd., (2006) 284 ITR 222 (Mad.); has held that Tobacco curing was held to be manufacturing. (XIV)The Madras High Court, in the case of CIT vs. P. Damodaran, (2006) 282 ITR 466; has held that cable joining kit is manufacturing. (XV) The Supreme Court, in the case of Vijay Ship Breacking Corpon. vs. CIT, (2009) 314 ITR 309;175 Taxman 77; has held that even ship breaking activity would entitle to deduction u/s.80HH & 80IA of the Act. (XVI)The Karnataka High Court, in the case of CIT vs. Darshak Ltd., (2001) 247 ITR 489; 118 Taxman 863; has held that conversion of plain glass ware into decorative glass were amounts to manufacture. (XVII)The Calcutta High Court, in the case of Addl. CIT vs. A. Mukherjee & Co. (P.) Ltd., (1978) 113 ITR 718; has held that the book publishing activity amounts to manufacturing. (XVIII)The Bombay High Court, in the case of CIT vs. Tata Locomotive & Engg. Co. Ltd. (1968) 68 ITR 325 (Bom.); has held that assembling works amounts to manufacturing. The Bombay High Court, in the case of CIT vs. (XIX) In the case of CIT vs. Kanam Latex Industries (P.) Ltd., (1996) 221 ITR 1; 86 Taxman 466 (Ker.), the Court has held that conversion of natural latex into preserved latex amounts to manufacturing. (XX) The Allahbad High Court, in the case of CIT vs. Tarai Development Corpn., (1979) 120 ITR 342; 2 Taxman 359; has held that processing of seeds is a process which amounts to manufacture or production. (XXI) The Supreme Court, in the case of ITO vs. Arihant Tiles & Marbels (P.) Ltd., (2010) 320 ITR 79; 186 Taxman 439; has held that conversion of marvels blocks into slabs and tiles amounts to manufacturing. (XXII) The Himachal Pradesh High Court, in the case of CIT vs. Janakraj Bansal, (2010) 329 ITR 417 (HP); has held that conversion of lime stone into lime powder was held to be manufacturing activity. (XXIII)The Madras High Court, in the case of CIT vs. M.R. Gopal, (1965) 58 ITR 598 (Mad.); has held that the conversion of boulders into stones is a manufacturing. The Madras High Court, in the case of CIT vs. M.R. (XXIV)The Rajasthan High Court, in the case of Poonam Chand Prem Raj vs. CIT, (1994) 207 ITR 895; 74 Taxman 521 (Raj.) has held that ginning of cotton is process, thus entitled to deduction. (XXII) The Himachal Pradesh High Court, in the case of CIT vs. Janakraj Bansal, (2010) 329 ITR 417 (HP); has held that conversion of lime stone into lime powder was held to be manufacturing activity. (XXIII)The Madras High Court, in the case of CIT vs. M.R. Gopal, (1965) 58 ITR 598 (Mad.); has held that the conversion of boulders into stones is a manufacturing. The Madras High Court, in the case of CIT vs. M.R. (XXIV)The Rajasthan High Court, in the case of Poonam Chand Prem Raj vs. CIT, (1994) 207 ITR 895; 74 Taxman 521 (Raj.) has held that ginning of cotton is process, thus entitled to deduction. ANALYSIS 14.We have already given a fair idea of the process through which the CCGL undergoes. The Supreme Court in India Cine Agencies vs. Commissioner of Income-Tax, Madras, (2009) 308 ITR 98 (SC) has, in details, clarified the position of law on the subject. In the case before the Supreme Court, the assessee was carrying on business of conversion of jumbo Rolls of photographic films into small flats and rolls in the desired sizes. The assessee claimed deductions under Section 32AB, 80HH and 80-I of the Act. The lower authorities disallowed the claim of the assessee on the ground that the activity undertaken by it was neither manufacture nor production. The High Court of Madras also held that in any event because of Item 10 of the Eleventh Schedule of the Act, no deduction was permissible. The Supreme Court has observed as under; “3. In Black's Law Dictionary, (5th Edition), the word `manufacture' has been defined as, "the process or operation of making goods or any material produced by hand, by machinery or by other agency; by the hand, by machinery, or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine". Thus by process of manufacture something is produced and brought into existence which is different from that, out of which it is made in the sense that the thing produced is by itself a commercial commodity capable of being sold or supplied. The material from which the thing or product is manufactured may necessarily lose its identity or may become transformed into the basic or essential properties. (See Deputy Commissioner of Sales Tax(Law), Board of Revenue (Taxes), Ernakulam v. M/s. CocoFibres(1992 Supp. (1) SCC 290). 4. 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 extent of processing may vary from one class to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount to processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognized as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected to that the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. (See Collector of Central Excise, Jaipur v.Rajasthan State Chemical Works, Deedwana, Rajasthan(1991 (4) SCC 473). 5. `Manufacture' is a transformation of an article, which is commercially different from the one, which is converted. The essence of manufacture is the change of one object to another for the purpose of making it marketable. The essential point thus is that, in manufacture something is brought into existence, which is different from that, which originally existed in the sense that the thing produced is by itself a commercially different commodity whereas in the case of processing it is not necessary to produce a commercially different article. (See M/s. Saraswati Sugar Mills and others v.Haryana State Board and others(1992 (1) SCC 418). 6. The prevalent and generally accepted test to ascertain that there is `manufacture' is whether the change or the series of changes brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that has emerged as a result of the process. There might be borderline cases where either conclusion with equal justification can be reached. Insistence on any sharp or intrinsic distinction between `processing and manufacture', results in an oversimplification of both and tends to blur their interdependence. (See Ujagar Prints v. Union of India(1989 (3) SCC 488). 7. To put it differently, the test to determine whether a particular activity amounts to `manufacture' or not is: Does a new and different good emerge having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes `manufacture' takes place and liability to duty is attracted. Etymologically the word `manufacture' properly construed would doubtless cover the transformation. It is the transformation of a matter into something else and that something else is a question of degree, whether that something else is a different commercial commodity having its distinct character, use and name and commercially known as such from that point of view, is a question depending upon the facts and circumstances of the case. (SeeEmpire Industries Ltd. v. Union of India (1985 (3) SCC 314). 8. The aforesaid aspects were highlighted in Kores IndiaLtd., Chennai v. Commissioner of Central Excise, Chennai(2005 (1) SCC 385) in the background of Central ExciseAct, 1944 (in short the `Excise Act') and Central Excise Rules, 1944 (in short the `Excise Rules') and CentralExcise Tariff Act, 1985 (in short the `Tariff Act'). The stand of the revenue was that it amounted to "manufacture", contrary to what has been pleaded in these cases. This Court held that it amounted to manufacture. 8. The aforesaid aspects were highlighted in Kores IndiaLtd., Chennai v. Commissioner of Central Excise, Chennai(2005 (1) SCC 385) in the background of Central ExciseAct, 1944 (in short the `Excise Act') and Central Excise Rules, 1944 (in short the `Excise Rules') and CentralExcise Tariff Act, 1985 (in short the `Tariff Act'). The stand of the revenue was that it amounted to "manufacture", contrary to what has been pleaded in these cases. This Court held that it amounted to manufacture. 9. The matter can be looked at from another angle. InCommissioner of Income Tax v. Sesa Goa Ltd. (2004 (271) ITR 331) this Court considered the meaning of word `production'. The issue in that case was whether the extraction and processing of iron ore amounted to manufacture or not in view of the various processes involved and the various processes would involve production within the meaning of Section 32Aof the Act. It was inter alia observed as under: "There is no dispute that the plant in respect of which the assessee claimed deduction was owned by it and was installed after March 31, 1976, in the assessee's industrial undertaking for excavating, mining and processing mineral ore. Mineral ore is not excluded by the Eleventh Schedule. The only question is whether such business is one of manufacture or production of ore. -The issue had arisen before different High Courts over a period of time. The High Courts have held that the activity amounted to "production" and answered the issue in question in favour of the assessee. The High Court of Andhra Pradesh did so in CIT v. Singareni Collieries Co. Ltd. [1996) 221 ITR 48, the Calcutta High Court in Khalsa Brothers v. CIT [1996] 217 TTR 185 and CIT v. Mercantile Construction Co. [1994] 74 Taxman 41 (Cal) and the Delhi High Court in CIT v.Univmine (P.) Ltd, [1993] 202 ITR 825. The Revenue has not questioned any of these decisions, at least not successfully, and the position of law, therefore, was taken as settled. The reasoning given by the High Court, in the decisions noted by us earlier, is, in our opinion, unimpeachable. This court had, as early as in 1961, in Chrestian MicaIndustries Ltd. v. State of Bihar[1961] 12 STC 150, defined the word "Production", albeit, in connection with the Bihar Sales Tax Act, 1947. The definition was adopted from the meaning ascribed to the word in the Oxford English Dictionary as meaning "amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort". From the wide definition of the word "production", it has to follow that mining activity for the purpose of production of mineral ores would come within the ambit of the word "production" since ore is "a thing", which is the result of human activity or effort. It has also been held by this court in CIT v. N.C. Budharaja and Co.[1993] 204 ITR 412 that the word "production" is much wider than the word "manufacture". It was said (page 423) : "The word `production' has a wider connotation than the word `manufacture'. While every manufacture can be characterised as production, every production need not amount to manufacture . The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and reside rodeos which emerge in the course of manufacture of goods." 10. In "Words and Phrases" 2nd Edn. by Justice R. P. Sethi the expressions `produce' and `production' are described as under: "The word `production' has a wider connotation than the word `manufacture'. While every manufacture can be characterised as production, every production need not amount to manufacture . The word 'production' or 'produce' when used in juxtaposition with the word 'manufacture' takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and reside rodeos which emerge in the course of manufacture of goods." 10. In "Words and Phrases" 2nd Edn. by Justice R. P. Sethi the expressions `produce' and `production' are described as under: "In Webster's New International Dictionary, the word "produce" means something that is brought forth either naturally or as a result of effort and work; a result produced. In Black's Law Dictionary, the meaning of the word `produce' is to `bring into view or notice; to bring to surface'. A reading of the aforesaid dictionary meanings of the word `produce' does indicate that if a living creature is brought forth, it can be said that it is produced. (SeeCommissioner of Income Tax v. Venkateswara Hatcheries(P) Ltd. (1999 (3) SCC 632), Commissioner of Income Tax, Orissa and Ors. v. M/s N.C. Budharaja and Company and Ors. (1994 Supp 1 SCC 280). Production or produce- The word `production' or `produce' when used in juxtaposition with the word `manufacture' takes in bringing into existence new goods by a process, which may or may not amount to manufacture. It also takes in all the byproducts, intermediate products and residual products, which emerge in the course of manufacture of goods. The expressions `manufacture' and `produce' are normally associated with movables articles and goods, big and small but they are never employed to denote the construction activity of the nature involved in the construction of a dam or for that matter a bridge, a road and a building. (See Moti Laminates Pvt. Ltd. and Anr.v. Collector of Central Excise, Ahmedabad (1995 (3) SCC 23). “ 11. In Advanced Law Lexicon, 3rd Edn. by P. Ramanatha Aiyar, the expressions `production' and `manufacture' are described as under: "'Production' with its grammatical variations and cognate expressions; includes- (i) packing, labeling, relabelling of containers. (ii) re-packing from bulk packages to retail packages, and (iii) the adoption of any other method to render the product marketable. `Production' in relation to a feature film, includes any of the activities in respect of the making thereof. (Cine Workers and Cinema Theatre Workers (Regulations ofEmployment) Act(50 of 1981) S.2(i). The word `production' may designate as well a thing produced as the operation of producing; (as) production of commodities or the production of a witness. `Manufacture' includes any art, process or manner of producing, preparing or making an article and also any article prepared or produced by manufacture. (Patent andDesigns Act(2 of 1911), S.2(10). `Manufacture' includes any process- (i) incidental or ancillary to the completion of a manufactured product; and (ii) which is specified in relation to any goods in the section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, or, and the word `manufacturer' shall be constructed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods but also any person who engages in their production or manufacturer on his own account. (iii) which is specified in relation to any goods by the Central Government by notification in the Official Gazette as amounting to manufacture. (Central Excise Act(1 of 1944) S.2(f)) `Manufacture' includes any process- (i) incidental or ancillary to the completion of a manufactured product; and (ii) which is specified in relation to any goods in the section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, or, and the word `manufacturer' shall be constructed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods but also any person who engages in their production or manufacturer on his own account. (iii) which is specified in relation to any goods by the Central Government by notification in the Official Gazette as amounting to manufacture. (Central Excise Act(1 of 1944) S.2(f)) 12.The matter can yet be looked from another angle. If there was no manufacturing activity, then the question of referring to Item 10 of the Eleventh Schedule for the purpose of exclusion does not arise. The Eleventh Schedule, which was inserted by Finance (No.2) Act,1977 w.e.f. 1.4.1978 has reference to Sections 32A,32AB,80CC(3)(a)(i), 80-I(2), 80J(4) and 88A (3)(a)(i) of the Act.“ 15.The aforesaid decision of the Supreme Court is a complete answer to the principal argument of Mr. Patel, the learned counsel appearing on behalf of the Revenue. The essence of manufacture is the change of one object to another for the purpose of making it marketable. As held by the Supreme Court in India Cine Agencies (supra) that the essential point is that, in manufacture, something is brought into existence which is different from that which originally existed, in the sense that the thing produced is, by itself, a commercially different commodity, whereas in the case of processing, it is not necessary to produce a commercially different article. It is the cumulative effect of the various processes, to which, the raw material is subjected to that the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. 16.It appears that in the case on hand, the raw material is first sent to the shearing department. The shearing machine is set for the desired size and the laminates are cut into the specified sizes as required by the customer. The laminates are, thereafter, checked for the oxidation effect. A thorough surface clearing is done to remove the oxidation. The Quality Control Department, thereafter, would verify the quality parameters like the thickness of the material, thickness of copper using Alco Meter etc.. At the end of the entire process, the final product is called as CCGL. 17.At this stage, we may also look into the findings recorded by the ITAT in its impugned order. “The facts of the case ITAT, Ahmedabad vide combined order dated 25.06.2013 for A.Y.2004-05, 2005-06, 2006-07, 2007-08 & 2008-09 discussed the issue of 'manufacture' at length and has restored the issue of sale of CCGL to the file AO to examine afresh the exact position of the Excise Department in respect of CCGL Export. The relevant portion of the ITAT order is reproduced under: We have heard both the sides. We have also perused the material place before us. According to us, this technical 17.At this stage, we may also look into the findings recorded by the ITAT in its impugned order. “The facts of the case ITAT, Ahmedabad vide combined order dated 25.06.2013 for A.Y.2004-05, 2005-06, 2006-07, 2007-08 & 2008-09 discussed the issue of 'manufacture' at length and has restored the issue of sale of CCGL to the file AO to examine afresh the exact position of the Excise Department in respect of CCGL Export. The relevant portion of the ITAT order is reproduced under: We have heard both the sides. We have also perused the material place before us. According to us, this technical question about the manufacturing activity cannot be decided merely on the basis of certain documentation. To appreciate the correct factual position, it is always advisable to personally watch the process of manufacturing, if possible. Due to certain procedural duplicates as also paucity of time, it is not possible for a Revenue Officer to personally visit and in respect the manufacturing unit so as to understand the manufacturing activity. Therefore, this type of issue remains a matter of controversy, however, while looking at the second stage of appeal we have to depend the factual findings of the lower authorities as also the document place before us. In the present case on analyzing all these materials. We have noticed that CCGL has been purchased by the assessee stated to be in long sheet. The CCGL sheets were cleaned by removing the Oxidization effect. Upto this stage mere cleaning process thus can not be termed as manufacturing activity, therefore, we are with the argument of learned DR that the removing of the oxidation effect was nothing but 'processing'. Therefore, as per the assessee's claim, those CCGL sheets have been cut into various small sizes. That fact has not been clearly established even through documents provided by the assessee. The reason of ambiguity is the description mentioned in the sales invoices. The sale invoices have mentioned the product sold as “Copper Clodded Glass Epoxy Laminates”. Simultaneously the finding of the A0 on inquiry was that the raw material was also the same i.e.. “Copper Clodded Glass Epoxy Laminates”. The A0 has also examined the description of the alleged raw material purchased by the assessee. He has found that the purchases were made from ISOLA Laminate System Co. Ltd., China and Nauya Plastic Co,, Taiwan. The CCGL was, therefore, imported and as per the description, as also, as per the allegation of the A0, there was no change in the product purchased and thereafter sold. 0nthe other hand, the assessee has vehemently contested that after the manufacturing process the said product was subjected to excise duty. In respect of this contention now before us-Form A.R.E-I is placed. This is an application or removal of excisable goods for export. The AR has therefore contested that because of the manufacturing activity the excise was levied on the goods exported. However, the basis on which the excise was levied on the product exported has not been clarified. In fact, the assessee is required to clearly specify the specification of the CCGL sheets purchased. The specification such as size of the sheets surface of the sheets and thickness of the sheets are the subject matter of scrutiny. In this regard, an Inspection report can also be procured from a specialized person. The Inspection report which is not part at the matter book only mentioned that oxidation was done on the sheet. Meaning thereby the product in question has only passed the test of cleanliness As we have opined, the process of oxidization can only be held as “processing” and not “manufacturing”. an another argument has been raised that, a Central Excise Department has given a registration certificate to the assessee. It has also been mentioned that a certificate has been issued by Kandla Special Zone, Gandhinagar. In this regard, we have noted that there is no denial of fact that the assessee as a whole in a manufacturing unit because a deduction was claimed in respect of the items manufactured of Rs. 1,67,47,045/-. But the dispute is only in respect of those sale which have not undergone manufacturing process. Even this argument is not very convincing that the product in question was an intermediary product manufactured by the assessee. In this regard, the Hon’ble Kerala High Court (supra) has examined the process of Lyre manufacturing and then arrived at the finding of fact that the said intermediary was manufactured from which the lyres were manufactured. As far as the present factual position is concerned we are unable to give such a finding unless and until the correct factual position in respect of the assessee, is placed on record. Even in the case of National Laminate Industries (supra), the respected third member has identified the original commodity and the commodity found to be manufactured by the said appellant. A clear cut finding was given that there was a transformation into a new commodity which was commercially known as distinct and separate commodity having its own character, use and name, rather, the respected third member has given a finding that the identity of the original commodity had ceased to exist. It was also held that the commodity which was manufactured and came into existence had meant for a separate purpose. As per the said judgment; in the manufacturing procedure, certain changes take place and the original commodity thus no longer be regarded as a manufacture commodity. 0n the other hand, the main case of the Revenue Department is that allegedly no such change had taken place, therefore, the original commodity remain unchanged. However, a question has yet to be answered that how another Government Department has treated the sale of CCGL? For this limited purpose, we deem it proper, as also justifiable, to restore this issue back to the stage of AO to examine afresh the exact position of the Excise Department in respect of CCGL export.” 18.It goes without saying that the change or the series of changes brought about by the application of the process explained above, the commodity in the form of CCGL can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that is emerged as a result of the process. 19.The Supreme Court, in Income Tax Officer, Udaipur vs. Arihant Tiles & Marbles (P.) Ltd., (2010) 320 ITR 79 (SC), has observed as under; 18.It goes without saying that the change or the series of changes brought about by the application of the process explained above, the commodity in the form of CCGL can no longer be regarded as the original commodity but is, instead, recognized as a distinct and new article that is emerged as a result of the process. 19.The Supreme Court, in Income Tax Officer, Udaipur vs. Arihant Tiles & Marbles (P.) Ltd., (2010) 320 ITR 79 (SC), has observed as under; “13. In the case of Aman Marble Industries Pvt. Ltd. vs. Collector of Central Excise, reported in 157 ELT 393 (SC), the question that arose for consideration was whether cutting of marble blocks into marble slabs amounted to manufacture for the purposes of Central Excise Act. At the outset, we may point out that in the present case, we are not only concerned with the word "manufacture", but we are also concerned with the connotation of the word "production" inSection 80IAof the Income Tax Act, 1961, which, as stated herein-above, has a wider meaning as compared to the word "manufacture". Further, when one refers to the word "production", it means manufacture plus something in addition thereto. The word "production" was