These two appeals by assessee are directed against common order of CIT(A) dated 17-8-2006 for above assessment years. Since issues involved in all these appeals are common, these appeals were clubbed together, heard together and are being disposed of by this common consolidated order for sake of convenience. assessee raised following grounds:- "(1) Assessing Officer passed order in violation of principles of equity and natural justice and also denied opportunity of examining witness from whom statements were recorded and used against assessee for completing assessment. (2) CIT(A) erred in confirming disallowance of deduction under section 80-IB holding that assessee is not engaged in manufacturing activities and instead is only doing trading of mushroom powder in capsule form though assessee is engaged in operation of production of capsules. (3) CIT(A) erred in confirming disallowance of payment of differential duty of tax demanded by Excise Department. Alternatively, CIT(A) has erred in not directing Assessing Officer to consider this claim of assessee as petition for rectification under section 154 of Income-tax Act since this payment was actually made as per section 43B of Act. (4) CIT(A) erred in not deciding issue on merit taxability of interest income of Rs. 4,41,564 and Rs. 7,53,385 for assessment years 2003-04 and 2004-05 respectively, though Assessing Officer treated it as income from other sources. (5) CIT(A) erred in confirming levy of interest under sections 234B and 234C of Income-tax Act." 2. brief facts of case are that assessee is engaged in dealing with Ayurvedic Medicinal Products at Pondicherry for which assessee h s obtained licence under Drugs & Cosmetics Act, 1940 and 1945. assessee has been dealing with two Ayurvedic Products viz., Reshi GANO (RG) and GANO Ceilium (GL). assessee has also obtained licence from Food & Drug Administration, Pondicherry with effect from 13-3-2002. For assessment year 2003-04, assessee claimed deduction under section 80-IB at Rs. 7,91 96,432. Similarly for assessment year 2004-05, assessee claimed deduction under section 80-IB at Rs. 5,66,07,651. assessment was completed under section 143(3) after giving notice under section 143(2) of Income-tax Act. These deductions claimed by assessee were denied by authorities below. Before completion of assessment, assessee was heard by Assessing Officer on following dates:- 24-11-2004, 28-12-2004, 2-2-2005, 1-3-2005, 23-3-2005, 10-5-2005, 27-6- 2005, 23-8-2005, 8-9-2005 and 3-1-2006. assessment order under section 143(3) was passed on 10-2-2006. During course of assessment, factory premises was inspected by Assessing Officer on 23-12-2005. Assessing Officer obtained statement under section 131 of Act from production incharge of factory viz., Shri P. Diwakaran. He has stated in his statement as under:- "With reference to main raw materials-Reishi Gano and Genocelium-they are in form of fine powder when purchased as raw material from our suppliers. As finished goods when powders are capsules they are then also in nature of fine powder both in respect of Reishi Gano and Ganocelium, both in quality and in nature. Thus, raw material does not undergo any change in quality and in nature with reference to end-product... raw material is filled in same form in gelatin capsules." 3. lower authorities observed that assessee was importing two combination of edible mushrooms in bulk powder form and simply filling them into capsules so as to make them convenient for use as also its marketability. assessee has not carried out any process of whatever nature on inputs received in powder form. so procured readymade mushroom powder was put in hard gelatin capsules which are polished and inspected before bottling in HDPE bottles which also contain Dhy Drating dehydrating agents. These bottles are capped, labelled, shrink packed and dispatched to warehouse for final packing. According to Department, assessee's job is limited to packing pre-prepared powder in form of capsules before marketing it. assessee has got imported requisite mushroom powder RG & GC which is manufactured by assessee's parent company, non-resident, by name M/s. D X N International (P.) Ltd. Department also relied on agreement entered into by assessee with M/s. DXN International (P.) Ltd., and assessee-company did not have know-how of any kind. According to Department, assessee has not manufactured any product to enable it to claim deduction under section 80-IB of Act. 4. Before us, contention of assessee is that Assessing Officer relied on sworn statement and other information collected from its production in-charge, and copy of sworn statement obtained from production in- charge on 23-12-2005 was not furnished to assessee and this would mean violation of principles of natural justice. Further, opportunity of cross-examining production in-charge was also not given. production in-charge stated that RG or GC is filled in empty gelatin capsules in appropriate weight. assessee's contention is that whether filling in gelatin capsules in appropriate weight amounts to manufacture or production was not examined by Assessing Officer. According to assessee, filling RG or GC in gelatin capsules in appropriate weight amounts to production. For this purpose, assessee relied on judgment of Hon'ble jurisdictional High Court in case of Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 (SC). According to assessee, statement of production in-charge is basis for assessment. Since it was not furnished to assessee for cross- examination, assessment should be quashed. 5. learned Departmental Representative, on other hand, kly relied on orders of authorities below. 6. We have heard rival submissions and perused material on r e c o r d . Assessing Officer visited factory premises for better understanding of operation of assessee. Assessing Officer has given adequate opportunities of hearing on various dates as extracted above. There is no record to show that assessee has asked for copy of any statement from Assessing Officer or opportunity for cross-examining production in- charge. assessee kept quite (sicquiet) during course of assessment proceedings. production in-charge stated nothing but bare facts. assessee stated more or less verbatim of what production in-charge stated before Departmental authorities and also before us. For proper appreciation, we reproduce same hereunder:- manufacturing/production activities including process are as follows: (i) Filling section - bulk drugs powder are filled in power hopper and empty gelatin capsules are filled in capsules hopper of semi-automatic filling machine. filling machine will be operated by machine operators. filling machine will be set to achieve weight required for each filled capsule. prescribed weight for RG capsule is 270 mg. and GL capsule is 450 mg. During production, it should be ensured that temperatures and humidity are within limits and weights of filled capsules are within limit. Simultaneously, quality control will come for inspection and take samples of filled capsules to carry out necessary tests like disintegration test, microbiological test, moisture content test, stability test, weight test parameters and specification test, etc. filling section maintains separate production record. (ii) Polishing section - In polishing, outer surface of capsules having powder masses shall be polished by polishing machine operated by said machine's operator. Again QC inspector/personnel shall inspect and observe qua-lity of capsules so polished. This section also maintains separate job record. (iii) Sorting/inspection section - operators will inspect and sort out defected capsules as per in-house specification. Again QC inspector and personnel will inspect capsules sorted and capsules defected. Those defected filled capsules will be rejected accordingly. This section also maintains separate job record. (iv) Counting and bottling section - In counting and bottling, filled capsules are counted either in 30 Nos. or 90 Nos. by operator via counting plate, then it will be transferred to HDFE bottles. Then it will be weighed in weighing balance for counter-checking. Then silica gel are inserted into bottle for moisture preservation purpose, then it will be caped. In this section, QC inspector/personnel also will carry out required testing. This section also maintains separate job record. (v) Labelling section - In labelling section, sticker pasted on bottle by manually or via labelling machine. same QC inspector/personnel also will carry out required testing. This section also maintains separate job record. (vi) Batch printing section - In batch printing, batch number, manufacturing date and expiry date is printed on bottom of bottle. QC inspector/personnel also will carry out required testing. This section also maintains separate job record. (vii) Shrink pack section - In shrink pack, red/blue seal and sleeves has been placed on bottle and it will be shrinked in shrink pack machines. QC inspector/personnel also will carry out required testing. This section also maintains separate job record. (viii) Packing section - In packing section, 10 bottles are arranged in one polythene cover and it will be sealed by sealing machine and subsequently arranged in carton box. Each carton box contains 250 bottles of 90 capsules or 400 bottles of 30 capsules. After each carton box is filled it will be sealed and pasted with production information slip. After quality control personnel examined and satisfied themselves with various testing, approved seal is affixed and subsequently released to warehouse. (ix) All above manufacturing process of each section in production shall be done in specified temperature and humidity as well as quality control and testing, and manufactured as per Schedule T of Drugs and Cosmetics Rules, 1945. RG and GL drugs are checked by quality control at each and every process. That every batch of 'raw materials', 'packing materials', and 'batch of finished goods' shall be tested by quality control by various test such as microbiological test, disintegration test, specifications test, moisture test, stability test, etc. (x) warehouse also shall maintain inventories of 'raw materials', 'packing materials' and 'finished goods'. 'raw materials', 'packing materials' and 'finished goods' shall be stored and kept at separate place so as to comply with Drugs and Cosmetics Rules, 1945. 7. From above it is evident that no injury was caused to assessee by Departmental authorities. purpose of natural justice was not to defeat justice but to promote and protect justice. argument of assessee is only superficial and peripheral for which this forum cannot be party. After going through entire facts of case, we feel that no useful purpose will be served by setting aside matter back to Departmental authorities for giving opportunity to assessee to cross-examine production in-charge. object of principles of natural justice is to foster justice and not to thwart justice. principles of natural justice should reflect and guard values of fairness and impartiality. It is true that audi alteram partem and nemo judex in causa sua are twin formidable pillars supporting natural justice. In order to decide whether in instant case non-examination of production in-charge was necessary, it becomes necessary to know whether appellant-assessee suffered any prejudice on account of non-furnishing of information collected from him. It is not case of appellant-assessee that assessing authority made use of some undisclosed information or evidence before he disallowed claim of assessee. Addition is made solely on basis of return filed by assessee and documents produced by him and submissions made by assessee. Principles of natural justice are not engraved on tablets of stone as Lord Bride of Harwich said in Lloyd v. McMohan [1987] 1 All ER 1118 (CA). Supreme Court in Rattan Lal Sharma v. Managing Committee, Dr. Hari Ram (Co-education) Higher Secondary School AIR 1993 SC 2155 opined that natural justice is not fixed but flexible concept, that there is no invariable standard of fair hearing and that each case has to be decided on its own merits. Since principles of natural justice are not "embodied" rules and, therefore, it is not possible nor practicable to precisely define parameters of natural justice; that aim of principles of natural justice is to secure justice or not to prevent miscarriage of justice and not to thwart justice; that there is no invariable standard of reasonableness in matter of hearing and whether in particular case natural justice has been contravened or not is ultimately for Courts to decide. Supreme Court in Union of India v. J.N. Sinha AIR 1971 SC 40 and Chandra Bhawan Boarding & Lodging v. State of Mysore AIR 1970 SC 2042, opined that each case has to be decided on its own merits. In Mineral Development Ltd. v. State of Bihar AIR 1960 SC 468, Supreme Court observed that concept of fair hearing is "an elastic one and is not susceptible of easy and precise definition". Again, Supreme Court in Fedco (P.) Ltd. v. S.N. Bilgrami AIR 1960 SC 415, observed that there can be no invariable standard for reasonableness in such matters except that Court's conscience must be satisfied that person against whom action is proposed has had fair chance of convincing authority who proposes to take action against him that ground on which action is proposed are either non-existence, or even if they exist, they do not justify proposed action. core decision on this question will necessarily and invariably depend upon peculiar facts and circumstances of each case, including nature of decision-making body, nature of action proposed, grounds on which action is proposed, materials on which allegations are based, attitude of party against whom action is proposed in showing cause against such proposed action, nature of plea raised by him, his admissions by conduct or otherwise of some or all of allegations, effect of ruling made and all other matters which help mind of authority in coming to fair conclusion on question. In Smt. Maneka Gandhi v. Union of India AIR 1978 SC 597, Supreme Court was pleased to observe that:- "The rules of natural justice are not embodied rules. What particular rule of natural justice should apply to given case must be depend to great extent on facts and circumstances of that case, framework of law under which enquiry is held and constitution of Tribunal or body of persons appointed for that purpose. Whenever complaint is made before Court that some principle of natural justice had been contravened Court has to decide whether observance of that rule was necessary for just decision on facts of case." (p. 628) 8. In instant case, it cannot be said that non-furnishing of copy of statement given by production in-charge of assessee- company amounts t o denying opportunity of cross-examining production in-charge which has t o denying opportunity of cross-examining production in-charge which has resulted in causing prejudice to assessee. We say this because, addition made by Assessing Officer was exclusively and solely on basis of disclosure made by assessee at assessment stage before Assessing Officer. Even before us, learned counsel for assessee stated same facts without any change or variation. Hence, argument of assessee as above will not hold water. Accordingly, we dismiss this ground of assessee. 9. Regarding next ground, learned counsel for assessee submitted that assessee is engaged in manufacture of drugs. He relied on term defined in Black's Law Dictionary and submitted that as per that dictionary meaning, 'manufacture' means "the process or operation of making goods or any material produced by hand, by machinery or by other agency, anything made from raw materials by hand, by machinery or by art. production of articles for use from raw or processed materials by giving such materials new form, quality, properties or combination, whether by hand labour or machine". He further submitted that production means process or art of producing. learned counsel for assessee relied on judgment of Hon'ble Supreme Court in case of Aspinwall & Co. Ltd. v. CIT [2001] 251 ITR 323 wherein it was held that:- "This Court while determining as to what would amount to manufacturing activity held in Dy. CST v. Pio Food Packers [1980] 46 STC 63 (SC) that test for determination whether manufacture can be said to have taken place is whether commodity which is subjected to process of manufacture can no longer be regarded as original commodity, but is recognized in trade as new and distinct commodity. It was observed (p. 65) that: Commonly, manufacture is end result of one or more processes through which original commodity is made to pass. nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps different kind of processing at each stage. With each process suffered, original commodity experiences change. But it is only when change, or series of changes, take commodity to point where commercially it can no longer be regarded as original commodity but instead is recognized as new and distinct article that manufacture can be said to take place." 10. learned counsel for assessee submitted that final product o f assessee is in capsule form which is different from original raw material used and it is new and distinct product from what it was prior to process employed. For this process of production, assessee has obtained various licence and assessee has carried out various processes by which imported raw material has to undergo changes to become final product. He further submitted that by putting raw mushroom powder into gelatin capsule, new product has been emerged which is different from raw material and only capsulation makes product marketable and consumable. It is only because of capsulation, product becomes digestible in human system slowly and delayedly and because of this capsulation, drug will function in human body in manner it is expected to function and will achieve desired result. 11. learned counsel for assessee further submitted that when capsule is consumed by end user what is digested in system is not only mushroom powder but also capsule itself. capsule is absolutely made of material which is edible. end-product is mushroom (+) gelatin capsule. This is new product distinct from original raw material. He relied on judgment of Hon'ble Supreme Court in case of Empire Industries Ltd. (supra) wherein it was held that cotton fabrics which are subjected to process of bleaching, dying, etc., amount to manufacture though at end of that manufacturing process, product will still be cotton fabric only. He relied on judgment of Hon'ble Supreme Court in case of Union Carbide Industries Ltd. v. Union of India [1986] 2 SCC 547 wherein it was held that goods manufactured or produced must be capable of being sold to consumer. He also relied on judgment of Hon'ble Supreme Court in case of Moti Laminates (P.) Ltd. v. CCE [1995] 3 SCC 23 wherein it was held that since solution produced by manufacturer could not be used as such without any further processing or application of head or pressure, it could not be considered as goods on which excise duty can be levied. learned counsel for assessee also relied on judgment of Hon'ble Supreme Court in case of Dy. CST v. Coco Fibres 1992 Suppl. (1) SCC 290, and submitted that question before Hon'ble Supreme Court was whether making coconut fibre question before Hon'ble Supreme Court was whether making coconut fibre from husk would be manufacture. Hon'ble Supreme Court held that article that emerged from manufacture should be distinct and new article recognized and known as such in commercial parlance for sale or supply. He further submitted that in case of Laminated Packings (P.) Ltd. v. CCE [1990] 4 SCC 51, short question that arose is whether limitation of duty paid craft paper with polythene would amount to manufacture. Hon'ble Supreme Court held "by this process of lamination, distinct goods come into being and therefore it was manufacture". 12. learned counsel for assessee further relied on case law in case of CCE v. Eastern Paper Industries Ltd. [1989] 4 SCC 244, and submitted that Hon'ble Supreme Court held "excise is duty on manufacture". Manufacture is process or activity, which brings into existence new, identifiable and distinct goods. Goods have been understood to be articles known as identifiable articles known in market as goods and marketed or marketable in mart as such. It was essential requirement to be goods to be wrapped in paper. Anything required to make goods marketable, must form part of manufacture and any raw material or any materials used for same would be component part of end product. Processes incidental or ancillary to wrapping are to be included in process of manufacture, manufacture in sense of bring goods into existence as these are known in market. Here paper to be marketed is not complete until it is wrapped in wrapping paper. Apart from that, under rule 56A of Rules, assessee would be entitled to benefit of deduction of duty to be charged on all wrapping papers, if any. 13. learned counsel for assessee further placed reliance in case of CIT v. N.C. Budharaja & Co. [1993] 204 ITR 412 (SC) wherein Hon'ble Supreme Court has categorically held as under:- "The word 'production' has wider connotation than word 'manufacture'. While every manufacture can be characterized as production, every production need not amount to manufacture. word 'production' or 'produce', when used in juxta-position with word 'manufacture', takes in bringing into existence new goods by process, which may or may not amount to manufacture. It also takes in all by- products, intermediate products and residual products, which emerge in course of manufacture of goods. expressions 'manufacture' and 'produce' are normally asso-ciated with movables-articles and goods, big and small but they are never employed to denote construction activity of nature involved in construction of dam or building. word 'article' is not defined in IT Act or Rules. It must, therefore, be understood in its normal connotation sense in which it is understood in commercial world. It is equally well to keep in mind context, since word takes its colour from its context. word 'articles' in section 80HH(2)(i) cannot comprehend or take within its ambit dam, bridge, building, road, canal and so on." 14. learned counsel for assessee argued that bulk powder cannot b e consumed directly because it may lead to inaccurate intake. dose may b e influenced by many factors like size of spoon, density of powder, humidity, degree of setting fluffiness due to agitation and processing pattern. Hence, administrating drug in capsule form is very much required. Capsules are solid dosage form in which drugs are enclosed in gelatin capsule cells and these capsules are prepared by special process designed to modify rate at which active ingredients are released. 15. learned counsel for assessee submitted that there are various advantages in putting drug in capsule form as detailed below:-1. They obscure taste and odour of unpleasant drugs. 2. They are attractive in appearance. 3. They are slippery when moist and, hence, easy to swallow with draught of water. 4. If properly stored, shells contain 12-15 per cent of moisture which gives flexibility and, consequently, very considerable resistance to mechanical stress. 5. Less adjuncts are necessary than for tablets (see Carter et al., 1972b) 6. contents are usually in fine powder which, combined with freedom o r near-freedom from adjuncts, provides rapid and uniform release of medicament in gastrointestinal tract. 7. shells can be specified (with titanium dioxide) or coloured, to give protection from light (contrast cachets). 8. shells are made to very fine limits; hence cap and base fit well and give substantial protection against air and moisture (contrast cachets). 9. shells are physiologically inert and easily and quickly digested in gastrointestinal tract. 10.Presentation of drug in capsules, rather than in tablets, allows quicker submission of new drug for clinical trials, because fewer development problems are involved. Also it is easier to vary dose. 11.Complicated machinery is unnecessary for extemporaneous dispensing of few capsules (contrast tablets). In nutshell, he submitted that preparation of capsule is very important activity of manufacturing process. 16. learned Departmental Representative submitted that assessee is importing bulk mushroom powder and putting it in gelatin capsules. Even these empty capsules are not being manufactured by assessee. As per agreement with foreign company M/s. DXN International (P.) Ltd., foreign company has exclusive expertise and know-how in respect of product and t h e foreign company is fully guarded itself regarding product said to be manufactured by assessee. assessee-company is not allowed to sell product in its own trade mark or name in India and bound to use trade mark of foreign company. learned Departmental Representative further submitted that by putting imported raw material i.e., bulk mushroom powder in capsule, it does not make any change in product. Putting powder into capsule does not mean manufacture. He submitted that quality of original product remains in final product also. degree of taste of final product is not different in any way from original product. Mushroom powder remains same only. capsule is only container for purpose of marketing product which is one way of packaging. There is no manufacturing activity at all involved. He relied on decision of Special Bench of Tribunal in case of Shaw Scott Distilleries (P.) Ltd. v. Asstt. CIT [2001] 76 ITD 89 (Cal.) wherein it was held that:- "Potable spirit was already manufactured and did not require any further manufacturing. Only some processing was required to produce IMFLs like brandy, whisky and rum, etc., by adding certain percentage of water, colour, essence and for safe marketing required bottling. No article or thing was consumed for production of another. No distinct article or thing had been produced. Alcohol remained alcohol throughout processing stage till it was marketed. There was no difference between potable spirit and whisky or brandy except that in process of production, water and certain essences had been added to them. dealer and consumer regarded both as alcohol. activities of assessee did not involve any manufacturing but only processing. Therefore, assessee was not entitled to benefit of section 80HH." Apart from above decision, learned counsel for assessee relied on following judgments:- (i) CIT v. S.P. Jaiswal Estates (P.) Ltd. [1992] 196 ITR 179 (Cal.) (ii) S.P. Jaiswal Estates (P.) Ltd. v. CIT [1994] 209 ITR 307 (Cal.) (iii) CIT v. S.P. Jaiswal Estates (P.) Ltd. [1995] 214 ITR 448 (Cal.) (iv) S.P. Jaiswal Estates (P.) Ltd. v. CIT [1995] 216 ITR 145 (Cal.) (v) CIT v. Bharath Sea Foods [1999] 237 ITR 46 (Ker.)(FB). (vi) CIT v. Relish Foods [1999] 237 ITR 59 (SC). (vii) CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 237 ITR 174 (SC) (viii) CIT v. Hindustan Metal Refining Works (P.) Ltd. [1981] 128 ITR 472 (Cal.) (ix) CIT v. Lucky Mineral (P.) Ltd. [1997] 226 ITR 245 (Raj.) (x) CIT v. Anjani Kumar & Co. (P.) Ltd. [1997] 227 ITR 786 (Jai.) 17. We have heard rival submissions and perused material on record. We have gone through case law relied on by parties. main contention of assessee is that it is engaged in capsulation of mushroom powder. This capsulation makes commodity marketable and consumable. Without capsulation commodity has no marketable value. Only after capsulation, commodity becomes marketable and consumable and becomes distinct from original commodity and gelatin is swallowed along with mushroom powder which leads to uniform release of medicament in gastrointestinal tract. capsulation involves various stages of production like filling into capsules, polishing of surface, sorting, inspection of filled in capsules, bottling of capsules, labelling of bottles, batching of product, printing, shrink packing and putting red/blue seal, placing of sleeves and packing bottles by putting in polythene cover etc. These activities are done by maintaining specific temperature and all these are governed by various Acts of Government. Hence, according to assessee, this is said to be manufacturing activity. 18. We have carefully gone through above activities. In our opinion, all these activities do not bring in any new article or product into existence. mushroom powder even after capsulation remains same. There is no transformation of mushroom powder into new article. Before capsulation, it was mushroom powder and even after capsulation, it remains to be mushroom powder only. Once capsule is removed, only mushroom powder emerges out of it. By filling this mushroom powder into gelatin capsules no new and distinct or separate product comes into existence. There is no change in basic identity of product and taste of product. 19. As per section 80-IB of IT Act, where gross total income of assessee includes profits and gains derived from any business refer to sub- section as eligible business and subject to provisions of this section, be allowed, in computing gross total income of assessee, deduction from such profits and gains of amount equal to such percentage and for such number of assessment years as specified in this section. To avail this deduction industrial undertaking is required to fulfil certain conditions mentioned in section. important conditions in clause (iii) of sub-section (2) of section 80-IB which reads as under:- "(iii) it manufactures or produces any article or thing not being any article or thing specified in list in Eleventh Schedule or operates one or more cold storage plant or plants in any part of India: Provided that condition in this clause shall in relation to small scale industrial undertaking or industrial undertaking referred to in sub-section (4) shall apply if words 'not being any article or thing specified in list in Eleventh Schedule' had been omitted. Thus, it is important that assessee is engaged in manufacture or production of any article or thing." 20. Now first question for consideration before us is whether there is difference between expressions "produce" and "manufacture" or they are exactly synonyms. words "manufacture" or "production" have not been defined in Income-tax Act, therefore, have to be accepted in their ordinary m e n i n g as part of statute. expressions "manufacture" and "produce/production" have definite connotations in judicial vocabulary and have been held to be not expression of art. expression "manufacture" has been explained in Black's Law Dictionary as under:- "The process or operation of making goods or any material produced by hand, by machinery or by other agency; anything made from raw materials by hand, by machinery, or by art. production of articles for use from raw and prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine." aforesaid explanation has been given as noun. Black's Law Dictionary defines "manufacture" as making of goods or wares by manual labour or by machinery, especially on large scale, has expanded as workmanship and art have advanced, so that now nearly all artificial products of human industry, nearly all such materials as have acquired changed conditions or new and specific combinations, whether from direct action of human hand, from chemical processes devised and directed by human skill, or by employment of machinery, are commonly designated as "manufactured". Cor-respondingly, expression "manufacturer" has been defined to mean one who by labour, art or skill transforms raw material into some kind of finished product or article for trade. 20.1 In contrast, expression "produce" as verb and as noun has multifarious meanings depending on context in which it is used, like to produce witnesses, to bring forward, to bring into view or notice, to present play, etc. Firstly, "produce", as noun means product of natural growth, labour or capital. Articles produced, or grown from or on soil or found in soil. As verb, in context, it is stated to mean "to make, originate, or yield, as gasoline. To bring to surface, as oil". 20.2 expression "production" has been defined as under: "Process or act of producing. That which is produced or made; i.e., goods. Fruit of labour, as productions of earth, comprehending all vegetables and fruits; productions of intellect, or genius, as poems and prose compositions; productions of art, as manufactures of every kind." Thus, production not only includes expression manufacture of articles or things by applying labour or process on existing raw material but also bringing to surface natural produce of soil like agricultural product, horticultural product, production of fruits and vegetables and excavation of minerals and mineral oil from product of plants which are grown by cultivators, agriculturists through labours and other plant products as well as exploitation of other natural resources like mines. Thus, learned counsel for assessee is right when he says that word "produce" or "production" has wider connotation than term "manufacture". 20.3 expression "produce" in context of producing any thing or article has been assigned its meaning in Oxford Dictionary as under:- "3. (b) Of animal or plant; To generate, bring forth, give birth to, bear, yield (offspring, seed, fruit, etc.); (d) To work up from raw material, fabricate, make, manufacture (material objects); (e) To produce goods, money, results." Apparently, expression used in provision with which we are concerned relates to "produce". 20.4 In contrast, word "manufacture" has been defined to mean: "1. (b) action or process of making articles or material (in modern use, on large scale) by application of physical labour, or mechanical power. 1. To work up (material) into forms suitable for use." These definitions denote one inherent property of term "manufacture" that is, existence of raw material which is subjected to certain process, whether manually or by machine or by chemical treatment and as result of which it undergoes change and brings about new commodity known to commercial world. Thus, manufacture is activity which is applied to existing product known as raw material for altering its face to something else. However, question still arises whether expression "produce" is wide enough to cover even process which though makes commodity more marketable does not result in bringing into existence any article or thing which did not earlier exist or brought out as commercial commodity which may amount to production. 21. In Dy. CST v. Pio Food Packers [1980] 46 STC 63, Supreme Court was considering expression "manufacture" used in Kerala General Sales- tax Act, 1963. question has arisen in context of activity carried on by Pio Food Packers of processing fruit pineapple into slices for purpose of being sold in sealed cans. provision with which Supreme Court was concerned related to charge of purchase tax. contention of dealer before Supreme Court was that tinned fruit and fresh fruit are two different commodities and, therefore, petitioner was engaged in manufacturing of tinned fruits, therefore, on purchase of pineapple he was not liable to pay purchase tax. Supreme Court dealt with meanings of "manufacture" and quoted with approval following passage from Anheuser-Bush Brewing Association v. United States [1907] 52 L.Ed. 336, 338 (p. 66):- "Manufacture implies change, but every change is not manufacture, and yet every change in article is result of treatment, labour and manipulation. But something more is necessary .... There must be transformation; new and different article must emerge, 'having distinctive name, character or use'." Court further held that in processing raw pineapple into slices by pealing off its kernel, fruit was not consumed as was requirement of Kerala Act. ratio of decision is primarily in context of provision of Kerala Sales-tax Act which required consumption of fruit in process before it could be termed as manufacture. Court said (p. 66): "There is no essential difference between pineapple fruit and canned pineapple slices. dealer and consumer regard both as pineapple. only difference is that sliced pineapple is presentation of fruit in more convenient form and by reason of being canned, it is capable of storage without spoiling. additional sweetness in canned pineapple arises from sugar added as preservative. On total impression, it seems to us, pineapple slices must be held to possess same identity as original pineapple fruit." In coming to this conclusion, Court referred to yet another decision from United States in East Texas Motor Freight Lines v. Frozen Food Express [1995] 100 L Ed 917 where United States Supreme Court held that dressed and frozen chicken was not commercially distinct article from original chicken. It was pointed out (p. 66):- "killing, dressing and freezing chicken is certainly change in commodity. But, it is no more drastic change than change which takes place in milk from pasteurizing, homogenizing, adding vitamin concentrates, standardizing, and, bottling.... There is hardly less difference between cotton in field and cotton at gin or in bale or between cottonseed in field and cottonseed at gin, than between chicken in pen and one that is dressed. ginned and baled cotton and cottonseed, as well as dressed chicken, have gone through processing stage. But, neither has been 'manufactured' in normal sense of word." 22. In recent case of Aman Marble Industries (P.) Ltd. v. CCE [2005] 1 SCC 279; [2003] 58 RLT 595 (SC), Supreme Court has held that cutting of marble block into marble slabs or tiles does not amount to manufacture as in both forms marble remains marble. However, for present context, principle which emerged from Supreme Court case is that manufacture is essentially process applied to existing raw material which transforms raw material into commercially distinct article. 23. Supreme Court in case of Dy. Commissioner of Agril. IT/ST v. Palampadam Plantations Ltd. AIR 1969 SC 930; [1969] 24 STC 231 (SC) had considered this issue in slightly different context. It was considering meaning of term "produce" used in Kerala General Sales-tax Act, 1963. expression used was "the person who sells goods produced by him by manufacture, agriculture, horticulture or otherwise". question has arisen whether spontaneously grown plants which were cut by assessee and sold in market as timber was person who had produced timber. principal question was whether spontaneous growth of plantation resulting in providing timber to dealer amounted to production of timber by him. Court, held at p. 233 that:- "... context in which word 'produced' appears in definition can only mean 'to bring forth, bring into being or existence-to bring (a thing) into existence from its raw materials or elements...." Thus, expression "produced" was given wider meaning than word "manufacture" pointing out that word "produced" will include activity of manufacturing materials by applying human endeavor on some existing raw material, but word "produce" may include securing certain produce from natural elements, for example, by growing plants on soil, or by operating mines and like or for example, by milking cow milkman produces milk though he has not applied any process on any raw material for purpose of bringing into existence thing known as milk. 24. In CIT v. N.C. Budharaja & Co. [1993] 204 ITR 412, question has arisen before Supreme Court for interpreting like provision contained under section 80HH of Income-tax Act, 1961, as is contained in section 80-IB with which we are concerned. Under section 80HH, one of conditions for availing of benefit of deduction under section 80HH was prescribed under sub-section (2) which was couched in same language as is provision of section 80-IB(2)(iii) with which we are concerned. assessee had claimed that foundation for superstructures on which dam is to be constructed is n article manufactured by assessee. Court referring to its earlier decision in Dy. CST v. Pio Food Packers [1980] 46 STC 63 (SC), reiterated difference as under (p. 423):- "Commonly, manufacture is end-result of one or more processes through which original commodity is made to pass. nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps different kind of processing, at each stage. With each process suffered, original commodity experiences change. But, i t is only when change, or series of changes, take commodity to p o i n t where commercially it can no longer be regarded as original commodity, but instead is recognized as new and distinct article that manufacture can be said to take place." 25. Coming to expression "production", Court added as seen in p. 423 that:- "The word 'production' or 'produce', when used in juxtaposition with word 'manufacture' takes in bringing into existence new goods by process which may or may not amount to manufacture. It also takes in all by- products, intermediate products and residual products which emerge in course of manufacture of goods." In case of manufacture, original commodity transform into new commodity as per illustrations we have seen earlier. cultivation of crops, operation of mines for getting minerals from sub-soil or for getting milk by milking cow or say by producing meat by slaughtering animals, making milk of different grades by pasteurizing, homogenizing, adding vitamin concentrates, standardizing and bottling, or applying process to original chicken by converting into dressed or frozen, does not amount to act of manufacture or production as it does not bring into existence new commodity. Further, Court said manufacture or produce article or thing refers to bringing into existence movable thing or article and construction of building or dam cannot be construed as activity of manufacture for bringing thing or article into existence. ratio of this decision clinches issue. In either case- manufacture or produce-brings into existence new commodity either by altering face of raw material, or by bringing into existence new product from natural elements or process. It is immaterial whether new product is direct result or indirect result. 26. Illustratively, reference can be made to Supreme Court decision in case of Aspinwall & Co. Ltd. v. CIT [2001] 251 ITR 323 , wherein Court after noticing nine processes through which raw coffee is made to undergo before it ultimately results into coffee beans amounts to manufacture as coffee beans have independent identity distinct from raw material from which it was manufactured. distinct change comes about in finished product. 27. In case of CIT v. Sterling Foods (Goa) [1995] 213 ITR 851, Hon'ble Bombay High Court has held that expression "manufacture and production" used in Act are to be understood in context in which they have been used. These words used in different taxation statutes are not inter- changeable. Every process does not mean "manufacture" unless processing results in production of article having distinctive character, name, use and value. In case of DCIT v. Pio Food Products (supra) it was held that 'manufacture' normally involves consumption of particular commodity in process of manufacture of another commodity. goods purchased should be consumed and consumption should be in process of manufacture and result must be manufacture of other goods. There are special criteria for determining whether commodity is consumed in manufacture of another. determining whether commodity is consumed in manufacture of another. Generally, prevalent test is whether article produced is regarded in trade by those who deal in it as distinct in identity from commodity involved in its manufacture. Manufacture is end-result of one or more processes through which original commodity is made to pass. nature and extent of processing may vary from one case to another and indeed there may be special stages of processing and different kinds of processing. In each process, original commodity experiences change. It is only when change or series of changes takes place in commodity, point that it can no longer be regarded as original commodity but instead is recognized as new and distinct article with manufacturing process can be said to take place. Where there is no essential difference in identity between original commodity and processed article, it is not possible to say that one commodity has been consumed in manufacture of another. Although it has undergone degree of processing it must be regarded as still retaining its original identity. Thus manufacturing or production must result in bringing into existence article or thing as distinct marketable commodity. 28. In present case, above observation of Hon'ble Supreme Court is squarely applicable as stated in earlier paragraph. In beginning it was mushroom powder which was imported and after putting same into gelatin capsules, it remains to be mushroom powder only. No distinct article or thing has been produced. Mushroom powder remains same throughout processing stage till its consumption. There is no difference between raw material used and end-product. All processes enumerated earlier are only to market product in particular container. original identity of product remains as it is. 29. assessee relied on judgment of Hon'ble Supreme Court in case of Union Carbide v. Union of India [1986] 2 SCC 547 and also judgment in case of Moti Laminates (P.) Ltd. v. CCE [1995] 3 SCC 23. This case is based on Central Excise Act and judgment was delivered with reference to exigibility of goods from levy of excise duty under that Act. It is settled principle that expression used in different Acts cannot automatically have same meaning. It has to be read in context of subject-matter of that Act. This principle has been clearly stated by Hon'ble Supreme Court in its judgment in case of Ashirwad Ispat Udyog v. State Level Committee [1998] 8 SCC 85 wherein it was held that decision constituting meaning of word "manufacture" is used in other statutes do not apply unless definition of that word in particular statute under consideration is similar to that constituted in decision. case of Laminated Packings (P.) Ltd. v. CCE [1990] 4 SCC 51, CCE v. Eastern Paper Industries Ltd. [1989] 4 SCC 244, and CCE v. Johnson & Johnson Ltd. 2005 (188) ELT 467 (SC) are all related to Central Excise Act and hence ratio of these cases cannot be applied to present case on hand. Similarly, judgment in case of Dy. CST v. Coco Fibres [1992] Supp. (1) SCC 290 was delivered in context of Kerala General Sales Act, 1963 and hence ratio of this case also cannot be applied to present case. Supreme Court in case of Aspinwall & Co. Ltd. v. CIT [2001] 251 ITR 323 and in case of CIT v. N.C. Budharaja & Co. [1993] 204 ITR 412 was of opinion that bringing into existence new commodity is of essence of manufacture or production. 30. Now question before us is whether putting mushroom powder i n t o gelatin capsule to make it fit for marketing, product can be considered as producing thing or article under section 80-IB. It is matter of fact that mushroom powder can be consumed in bulk form nakedly without being put into any enclosure or it can be consumed by putting into gelatin capsule. Putting of mushroom powder into gelatin capsule is for purpose of smoothening its marketability which is nothing but processing which does not amount to manufacture or production of thing or article so as to fulfil conditions stipulated for availing benefit under section 80-IB of Act. For this purpose, we feel it pertinent to place reliance on judgment of Hon'ble Supreme Court in case of Nilgiri Tea Co. [1959] 10 STC 500, it was held that when different brands of tea are mixed by assessee for purpose of producing of tea mixture of different kind and quality, according to formula evolved by them, there was plainly indubitably processing of different brands of tea because these brands of tea experienced as result of mixing, qualitative change in that tea mixture which came into existence was of different quality and flavour than different brands of tea which went into mixture. But question whether processing brings into existence any article or thing which may be said to be distinct from article on which process has been applied had been answered in negative. It was held that it was processing only. 31. In view of above discussion, we have no hesitation in coming to conclusion that expression 'manufacture' or 'producing' any thing or article under section 80-IB(2)(iii) has been used in generic sense and within its ambit it does not include any processing of goods, which does not bring out new or commercially distinct commodity. Accordingly, putting mushroom powder into gelatin capsule does not amount to manufacture or production of any commercially distinct commodity. Therefore, we hold that assessee is not entitled for deduction under section 80-IB. This ground of assessee is rejected. 32. Regarding third ground learned counsel for assessee submitted that section 43B stipulates that irrespective of method of accounting followed by assessee, any sum payable by way of taxes, duties, cess, etc. shall be allowed as deduction in previous year in which it is actually paid by assessee. fact of assessee here is that excise duty liability was in dispute and payment of disputed liability has been disclosed in accounts which was available with Assessing Officer at time of framing assessment. lower authorities refused to entertain claim for reason that it was only claimed during course of assessment before learned Assessing Officer and not through valid revised return. 33. learned counsel for assessee submitted that CIT(A) has also not gone into facts fully. In fact, in page 18 of order on top, learned CIT has stated "It is also not clear to exact nature of liability to be eligible for allowance for deduction as claimed under section 43B of Act." Reference was also made to Hon'ble Supreme Court decision in case of Goetze India Ltd. v. CIT [2006] 284 ITR 323. question there was whether deduction can be claimed or not otherwise than by way of filing revised return. However, in assessee's case, there was no claim of expenditure because payment on account of statutory liability stands on different footing. 34. learned counsel for assessee further submitted that section 4 3 B opens with non obstante clause which means it overrides all other provisions of Act and, therefore, all other provisions should be ignored. Section 29 clearly states that income under head 'Profits and gains of business and profession' shall be computed in accordance to provisions contained in sections 30 to 43D of Act. Except section 43B, no other section from sections 30 to 43B deals with payment of taxes or duties. Even section 30 talks of sums paid on account of land revenue, local rates and municipal taxes only. Therefore, sum paid against excise duty liability should be allowed as deduction. This section clearly stipulates that once statutory tax, duty, cess, etc. is paid in particular year, it should be allowed in that year as deduction in computing income. word 'deduction' is not defined in sections 28 to 43D. Section 30 to section 36 are with reference to specific heads of expenditure and section 37 is residuary head for allowing any expenditure. word 'expenditure' has not been defined in Act. deductions under section 43B are in nature of tax deducted and therefore they are not expenditure as normally understood in commercial sense as money spent to earn income. Excise duty is duty on manufacture and moment goods are produced, liability to pay excise duty is fastened. Central Excise Act permits payment of duty at point of time when goods are removed from factory gate or moved out of bonded stores. It is in this context that one must look at word 'deduction' that is used in section 43B as opposed to word 'expenditure' that is used in section 37. fact that excise duty is under dispute is of no consequence since Department has crystallised liability and issued order for payment of duty. Until appeal is allowed, liability to duty is fastened and, therefore, whatever has been paid by way of excise duty irrespective of fact that it is paid pending dispute or otherwise is immaterial. method of accounting is also immaterial as held in case of Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 1 SCC 46. Therefore, payment of excise duty must be allowed. In alternative, matter must be set aside to Assessing Officer to consider since learned CIT(A) has observed in this matter as to exact nature of liability. learned CIT(A), when it is not clear, should have called for facts and examined it without dismissing issue. 35. learned counsel for assessee relied on judgment of Hon'ble Supreme Court in Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 1 SCC 46, Hon'ble Supreme Court has held as under: "It is true nature and quality of receipt, and not head under which it is entered in account books, as would prove decisive. If receipt is trading receipt, fact that it is not so shown in account books of assessee, would not prevent assessing authority from treating it as trading receipt." learned counsel for assessee argued that based on same principle, fact that assessee shows to treat excise duty paid as disputed and therefore showed it as asset will not make difference since assessee had order by which Excise Department had charged him with this liability. Therefore at point of time when section 43B was sought to be invoked, Assessing Officer should have attempted to find out whether excise duty had been paid and if so, extent to which it has been paid should have been allowed as deduction. 36. Further learned counsel for assessee relied on judgment of Hon'ble Gujarat High Court. In case of Motilal Ambaidas v. CIT [1977] 108 ITR 136, Gujarat High Court has held in context of section 41(1) of Income-tax Act, 1961 as under: "Under circumstances, amounts of sales-tax collections which assessee-firm was bound to show on credit side when received and was entitled to claim as deduction when sales-tax was paid, must be treated as deductions which ought to have been made. words at commencement of section 41(1) "where allowance or deduction has been made in assessment for any year" should be read as "where allowance or deduction ought to have been made in assessment for any year" so far as facts of this case are concerned and, so reading that provision, it must be held that provisions of section 41(1) apply to facts of this case. It is, therefore, clear that first condition regarding applicability of section 41(1) is completely satisfied in this case and refund of sales-tax obtained by assessee as result of decision of Supreme Court is clearly amount obtained in cash or in any other manner falling within section 41(1)." learned counsel for assessee contended that in light of above judgment also excise duty ought to have been allowed. 37. learned Departmental Representative submitted that assessee never furnished details of payment either to Assessing Officer or to CIT(A). For first time, claim was made before Assessing Officer during course of assessment without producing any evidence in support of t h e claim. nature of liability was not substantiated. Further, learned Departmental Representative submitted that claim can be made by assessee only after filing revised returns. In this case, no such return was filed. He relied on judgment of Hon'ble Supreme Court in case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323. 38. We have heard rival submissions and perused material on record. assessee claimed this amount of Rs. 2,58,93,909 as expenditure towards excise duty liabilities for assessment year 2003-04 and similarly for assessment year 2004-05 at Rs. 3,31,56,118. This expenditure was never claimed as expenditure in books of account and this was shown as advance in books of account. assessee made this claim before Assessing Officer by way of letter. Assessing Officer disallowed this claim since there was no provision under Income-tax Act to make amendments in return of income by modifying it by application at assessment stage without filing revised return of income. same was confirmed by tho CIT(A) placing reliance on judgment of Hon'ble Supreme Court in Goetze India Ltd.'s case (supra). Before us, learned counsel for assessee has not furnished any iota of evidence in support of claim of assessee. Admittedly this amount was shown as current assets being loans and advances. assessee is not in position to spell out nature of liability. assessee was making o n l y verbal argument without stating nature of expenditure, for which assessment year it relates and whether it was wholly and exclusively spent for business purpose and whether it was advance payment or payment towards liability for current year. assessee has not produced any order of excise duty through which this liability is stated to have emerged. No judgment from any Court of law was also produced for compliance. In our opinion, to avail of deduction, payments are required to be actually paid within time stipulated in proviso to section 43B of Act. If payments have not been made within stipulated time, deduction cannot be claimed at any time thereafter. For this proposition, we place reliance on judgment of Hon'ble jurisdictional High Court in case of CIT v. Synergy Financial Exchange Ltd. [2007] 288 ITR 366 (Mad.) and judgment of Hon'ble Rajasthan High Court in case of CIT v. Udaipur Distillery Co. Ltd. [2005] 274 ITR 429. 39. assessee relied on following case law:- (i) Chowringhee Sales Bureau (P.) Ltd. v. CIT [1973] 1 SCC 46 - In this case, assessee collected sales-tax being auctioneer but neither paid this amount to State Exchequer for reason that statutory provision creating that liability upon assessee was not valid nor did it pass amount to actual owner for reason that statutory liability for payment of sales-tax was on assessee. revenue authorities treated this amount as income of assessee being trading receipt. On appeal, Hon'ble Supreme Court held that this sales-tax amount is trading receipt though it was shown in accounts of assessee as liability under head 'Sales-tax collection account' and just showing amount under this head does not make any material difference but only nature and quality of receipt is important. facts of this case is entirely different from one before us. In present case, issue relates to payment to Excise Department without showing nature of payment for claiming deduction. (ii) Motilal Ambaidas v. CIT [1977] 108 ITR 136 (Guj.) - This case also differs from facts of present case and this case relates applicability of section 41(1) of Income-tax Act and facts of case decided by Hon'ble Gujarat High Court cannot be applied to present case. learned Departmental Representative relied on judgment of Hon'ble Supreme Court in case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 wherein Hon'ble Supreme Court has made it clear that assessee could not make claim or deduction other than by filing revised return. Hence, by filing letter at time of assessment, without revised return of income, assessee cannot claim deduction. case law relied on by assessee are not applicable to facts of t h e present case. Hence, we have not considered same. In circumstances, we decline to interfere with order of lower authorities and order of CIT(A) on this issue is confirmed. 40. Regarding taxability of interest income of Rs. 4,41,564 for assessment year 2003-04 and Rs. 7,53,385 for assessment year 2004-05, assessee raised this ground before CIT(A) who has not adjudicated in his order. Hence, we set aside this issue to file of CIT(A) with direction to adjudicate this ground on merits after affording opportunity of hearing to assessee and record his findings. This ground is allowed for statistical purpose. 41. last ground is with regard to levy of interest under sections 234B and 234C of Income-tax Act. This is only consequential and mandatory in nature and hence no interference is called for. Accordingly, this ground is dismissed and order of CIT(A) on this issue is confirmed. 42. In result, appeals filed by assessee are allowed in part for statistical purpose. *** DXN HERBAL MANUFACTURING (INDIA) (P) LTD. v. INCOME TAX OFFICER