IN HIGH COURT OF HIMACHAL PRADESH, SHIMLA ITA No. 17 of 2010 a/w ITA Nos. 18 to 21, 27 . and 34 of 2010, 18, 19, 25 and 26 of 2011, 8, .P 10, 18, 20, 22, 23, 24, 25 and 34 of 2012, 4013 and 4018 of 2013 and 2 of 2014. H Judgment reserved on: 01.09. 2014 Date of decision: September 10, 2014 of 1. ITA No. 17 of 2010 Commissioner of Income Tax rt ....Appellant Vs. ou Pawan Aggarwal . Respondent. 2. ITA No. 18 of 2010 C Commissioner of Income Tax ....Appellant Vs. M/s Himachal Wire Industries (P) Ltd. . Respondent. h ig 3. ITA No. 19 of 2010 Commissioner of Income Tax ....Appellant H Vs. M/s Himachal Winding Wire Products . Respondent. 4. ITA No. 20 of 2010 Commissioner of Income Tax ....Appellant Vs. J.B. Conductors & Cables . Respondent. 5. ITA No. 21 of 2010 Commissioner of Income Tax ....Appellant Vs. M/s Himachal Steel & Wires . Respondent. 6. ITA No. 27 of 2010 Commissioner of Income Tax ....Appellant Vs. Pawan Aggarwal . Respondent. ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 2 7. ITA No. 34 of 2010 Commissioner of Income Tax ....Appellant . Vs. .P M/s Himachal Winding Wire Products . Respondent. 8. ITA No. 18 of 2011 H Commissioner of Income Tax ....Appellant Vs. of Pawan Aggarwal . Respondent. 9. ITA No. 19 of 2011 Commissioner of Income Tax ....Appellant rt Vs. M/s Himachal Winding Wire Products . Respondent. ou 10. ITA No. 25 of 2011 Commissioner of Income Tax ....Appellant Vs. C M/s Brijsons Wire Products . Respondent. 11. ITA No. 26 of 2011 h Commissioner of Income Tax ....Appellant Vs. ig M/s Brijsons Hetreat . Respondent. 12. ITA No. 8 of 2012 H Commissioner of Income Tax ....Appellant Vs. M/s J.B.Conductors & Cables . Respondent. 13. ITA No. 10 of 2012 Commissioner of Income Tax ....Appellant Vs. M/s J.B.Conductors & Cables . Respondent. 14. ITA No. 18 of 2012 Commissioner of Income Tax ....Appellant Vs. M/s United Wire Products . Respondent. 15. ITA No. 20 of 2012 Commissioner of Income Tax ....Appellant Vs. Pawan Aggarwal . Respondent. ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 3 16. ITA No. 22 of 2012 Commissioner of Income Tax ....Appellant . Vs. .P M/s J.B. Conductors & Cables . Respondent. 17. ITA No. 23 of 2012 H Commissioner of Income Tax ....Appellant Vs. of M/s Himachal Steel & Wire . Respondent. 18. ITA No. 24 of 2012 Commissioner of Income Tax ....Appellant rt M/s Himachal Steel & Wire Vs. . Respondent. ou 19. ITA No. 25 of 2012 Commissioner of Income Tax ....Appellant Vs. C M/s Himachal Steel & Wire . Respondent. h 20. ITA No. 34 of 2012 Commissioner of Income Tax ....Appellant ig Vs. M/s Himachal Winding Wire Products . Respondent. H 21. ITA No. 4013 of 2013 Commissioner of Income Tax ....Appellant Vs. M/s Himachal Wire Industries Pvt. Ltd. . Respondent. 22. ITA No. 4018 of 2013 Commissioner of Income Tax ....Appellant Vs. M/s J.B. Conductors & Cables . Respondent. 23. ITA No. 2 of 2014 Commissioner of Income Tax ....Appellant Vs. M/s United Wire Products . Respondent. ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 4 . Coram .P Hon ble Mr. Justice Mansoor Ahmad Mir, Chief Justice. Hon ble Mr. Justice Tarlok Singh Chauhan, Judge. H Whether approved for reporting?Yes For Appellant(s) : Mr. Vinay Kuthiala, Senior Advocate with Ms. Vandana Kuthiala and of Mr. Gaurav Sharma, Advocates. For Respondent(s) : M/s Anuj Nag, J.S. Bhasin, C.S.Anand, rt Salil Kapoor and Vishal Mohan, Advocates, in respective appeals. ou Tarlok Singh Chauhan, Judge Since these appeals raise common question of law and facts, C therefore, same are being taken up together for consideration and disposal. h 2. assessees have industrial undertaking in backward ig area of Himachal Pradesh and have claimed deductions under Section 80 IC of Act. case of assessees is that they are engaged in H manufacturing of paper insulated wires and strips of copper and aluminium, which are used in oil filled electrical transformers. It is claimed by assessees that wires are drawn from wire rods and thereafter insulation coating is done on wires with different chemicals by enamel coating, annealing and then paper is wrapped on wire to make it insulated. Some of assessees are also manufacturing insulated wire strips and their product is further used to manufacture coils. 3. In regular assessment made, A.O. held that activity of drawing wires of thinner gauges from wires and rods of thicker _____________________ 1 Whether reporters of Local Papers may be allowed to see Judgment ? ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 5 gauges does not amount to manufacture or production as original commodity i.e. wire did not undergo any change in process and . .P resultant commodity was also wire, albeit of different dimensions. To come to such conclusion, he relied upon judgment of Hon ble H Supreme Court in Collector of Central Excise vs. Technoweld Industries Ltd, (2003) 11 SCC 798. of 4. assessment was confirmed in appeal by CIT(A), who agreed with AO that no new product had come into existence as rt result of process carried out and hence there was no manufacture or ou production within meaning of Section 80 IC. 5. assessees then filed appeal before Income Tax C Appellate Tribunal Chandigarh Bench (B) (for short ITAT ), who vide impugned orders allowed appeals. It is being held that process h carried out by assessees amounts to manufacture or production or ig both. It is against these orders passed by ITAT, department has come up in appeal. H 6. appeals have been admitted on following substantial questions of law: 1. Whether process of drawing wire of thinner gauge from wire or rods of thicker gauge, followed by finishing processes like annealing would amount to manufacture or production or consequently whether assessee was eligible for deduction under Section 80 IC of Income Tax Act. 2. Whether impugned judgment is contrary to ratio of judgment of Hon ble Supreme Court in Collector Central Excise vs. Technoweld Industries. 7. We have heard learned counsel for parties and have also gone through records carefully. ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 6 Question No.1: 8. There is no dispute raised by department regarding . .P assessees being entitled to deductions under Section 80 IC of Act. only dispute raised by revenue is that process undertaken by H assessees does not constitute manufacture or production and accordingly, profit and gain derived from such activity have been of denied deductions under Section 80 IC of Act. 9. On other hand, respondents contend that process rt of drawing wire from wire rods constitutes manufacture or production of ou article or thing in terms of Clause (a) of sub-section (2) read with Section 80 IC (1) of Act. C 10. ITAT in its order dated 30.11.2009 has noted contention of respondents (who were appellants before it) h regarding various processes of production and manufacture ig undertaken by respondents and observed as follows: in process of drawing of wires from wire rods, input H is firstly reduced in size through carbide dies i.e. wire-rod is drawn to smaller sizes such as intermediate wire, fine wire and, ultra fine wire. These wire rods, which constitute raw material, could either be steel rods or copper rods or aluminium rods. It has been further stated that to facilitate drawing of wire at high speeds, wire is passed through dry powered lubricant so as to avoid sticking of wire to die surface and, this process done at high speeds, results in tensile pulling of wire, which produces residual stresses and, increases its temperature. These stresses can cause distortions in wire, cracking and embrittlement of wire, which could result in premature breaking in service. To overcome these deficiencies, wire is heated above its re- crystallization temperature to allow metal grains to reform and relieve stress. This process is called annealing. Further, to protect from oxidation, which would effect mechanical and physical properties, wire is galvanized. In other words, process of drawing of wire involves following steps annealing, ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 7 pickling and, galvanizing, which can be briefly described as hereunder: . a) Annealing: Annealing is heat treatment in which .P material is exposed to elevated temperature for extended time period and then slowly cooled. It is process by which metals and other material are treated to H render them less brittle and more workable. Any annealing process consists of three stages, firstly, heating to desired temperature, secondly, holding or soaking at that of temperature and, cooling, usually to room temperature. This provides following benefits to materials; Relieves rt stresses; increases softness, ductility and toughness; produces specific microstructure or homogenizes existing microstructure; improves machinability, electrical ou properties, dimensional stability and formability for cold working, such as cold heading and stamping. b) Quenching, Acid Pickling and Flux Aplication: After C annealing process, wire is quenched in water bath. This step is necessary to prevent overheating of acid, next step in process. In acid pickling step, h wire is passed through hydrochloric acid solution. Pickling removes oxides resulting from hot wire being ig exposed to oxygen and it remove any remaining lead coating on wire from molten lead bath. These H contaminants must be removed or they will interfere with zinc galvanizing process. On passing wire through hydrochloric acid bath, acid reacts with any remaining lead to form lead chloride. lead chloride is byproduct from process. In addition, hydrochloric acid baths are discarded periodically when they have become contaminated. Any remaining traces of acid are then removed by rising wire with hot water. rinsing process is multitank, counter-flow, hot water rinse system. counter flow is necessary to ensure that water is last tank remains relatively clean and free of contaminants. water is hot to minimize both process time and potential for surface oxide formation. rinsing process results in acidic wastewater that is neutralized prior to disposal. Subsequently, wire is dipped in flux bath, usually zinc ammonium chloride solution flux is anti- oxidant, dissolving any residual oxides and preventing further oxidation of surface prior to galvanizing. Any oxidized or contaminated area on wire can cause poor ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 8 adhesion of zinc coating galvanizing process, leading to black spots and flaking. flux does not cause . adhesion of zinc and steel but only compensates for .P inadequate cleaning. c) Galvanizing: Galvanizing is practice of immersing clean, oxide-free iron or steel into molten zinc at about 860 H F(above melting temperature of 780 F) in order to form zinc coating that is metallurgically bonded to iron or steel surface. zinc coating protects surface against of corrosion, oxidation and moisture. It shields base metal from atmosphere and, further zinc provides anodic rt (or sacrificial) protection. zinc protects steel Galvanizing , thus giving process its name. When steel is dipped in zinc bath, it heats up to above ou melting temperature and zinc iron reaction occurs, creating several layers of inter-metallic alloys that bond outer layer of pure zinc to steel. reaction can only occur if iron in C steel is in intimate contact with liquid zinc and any surface contamination will impair this reaction. d )Following zinc hot dip, wire is quenched in water h to freeze zinc layer and is then coiled or spooled, which is marketed as galvanized wire. ig 11. above-mentioned processes were not contested by H revenue either before authorities below or before this Court, yet, it is contended that such processes do not constitute manufacture or production of any article or thing within meaning of Section 80 IC. 12. Now, what would appear from aforesaid facts is that this Court is required to consider as to what would constitute manufacture and production under Act. Indisputably, word manufacture was not defined under Act, uptil insertion of Section 2 (29BA) of Finance (No.2) Act, 2009 introduced w.e.f. 1.4.2009, which reads as follows: 29BA manufacture , with its grammatical variations, means change in non-living physical object or article or thing, - (a) resulting in transformation of object or article or thing into new and distinct object or article or thing having different name, character and use; or ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 9 (b) bringing into existence of new and distinct object or article or thing with different chemical composition or integral structure. . .P Though, it may be noted here that this insertion has been made with effect from 1.4.2009, while we are dealing with assessments prior to H 1.4.2009. 13. expression manufacture as well as production has of come up repeatedly for interpretation and consideration not only before various High Courts but even before Hon ble Supreme Court. rt Hon ble Supreme Court in India Cine Agencies vs. Commissioner of ou Income Tax (2009) 308 ITR 98 considered word manufacture as also production in following manner: C 3. In Black's Law Dictionary, (5th Edition), word `manufacture' has been defined as, "the process or operation of making goods or any material produced by hand, by machinery or h by other agency; by hand, by machinery, or by art. production of articles for use from raw or prepared materials by ig giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine". Thus by H process of manufacture something is produced and brought into existence which is different from that, out of which it is made in sense that thing produced is by itself commercial commodity capable of being sold or supplied. material from which thing or product is manufactured may necessarily lose its identity or may become transformed into basic or essential properties. (See Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v. M/s. Coco Fibres (1992 Supp. (1) SCC 290). 4. Manufacture implies change but every change is not manufacture, yet every change of article is result of treatment, labour and manipulation. Naturally, manufacture is end result of one or more processes through which original commodities are made to pass. nature and extent of processing may vary from one class to another. There may be several stages of processing, different kind of processing at each stage. With each process suffered, original commodity experiences change. Whenever commodity undergoes change as result of some operation performed on it or in regard ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 10 to it, such operation would amount to processing of commodity. But it is only when change or series of changes . takes commodity to point where commercially it can no .P longer be regarded as original commodity but instead is recognized as new and distinct article that manufacture can be said to take place. Process in manufacture or in relation to H manufacture implies not only production but also various stages through which raw material is subjected to change by different operations. It is cumulative effect of various of processes to which raw material is subjected to that manufactured product emerges. Therefore, each step towards such production would be process in relation to manufacture. rt Where any particular process is so integrally connected with ultimate production of goods that but for that process processing ou of goods would be impossible or commercially inexpedient, that process is one in relation to manufacture. (See Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works, C Deedwana, Rajasthan (1991 (4) SCC 473). 5. `Manufacture' is transformation of article, which is commercially different from one, which is converted. h essence of manufacture is change of one object to another for ig purpose of making it marketable. essential point thus is that, in manufacture something is brought into existence, which is different from that, which originally existed in sense that H thing produced is by itself commercially different commodity whereas in case of processing it is not necessary to produce commercially different article. (See M/s. Saraswati Sugar Mills and others v. Haryana State Board and others (1992 (1) SCC 418). 6. prevalent and generally accepted test to ascertain that there is `manufacture' is whether change or series of changes brought about by application of processes take commodity to point where, commercially, it can no longer be regarded as original commodity but is, instead, recognized as distinct and new article that has emerged as result of 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 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, test to determine whether particular activity amounts to `manufacture' or not is: Does new and ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 11 different good emerge having distinctive name, use and character. moment there is transformation into new commodity . commercially known as distinct and separate commodity having .P its own character, use and name, whether be it result of one process or several processes `manufacture' takes place and liability to duty is attracted. Etymologically word `manufacture' H properly construed would doubtless cover transformation. It is transformation of matter into something else and that something else is question of degree, whether that something of else is different commercial commodity having its distinct character, use and name and commercially known as such from that point of view, is question depending upon facts and rt circumstances of case. (See Empire Industries Ltd. v. Union of India (1985 (3) SCC 314). ou 8. aforesaid aspects were highlighted in Kores India Ltd., Chennai v. Commissioner of Central Excise, Chennai (2005 (1) SCC 385) in background of Central Excise Act, 1944 (in short C `Excise Act') and Central Excise Rules, 1944 (in short `Excise Rules') and Central Excise Tariff Act, 1985 (in short `Tariff Act'). stand of revenue was that it amounted to "manufacture", h contrary to what has been pleaded in these cases. This Court held that it amounted to manufacture. ig 9. matter can be looked at from another angle. In Commissioner of Income Tax v. Sesa Goa Ltd. (2004 (271) ITR 331) H this Court considered meaning of word `production'. issue in that case was whether extraction and processing of iron ore amounted to manufacture or not in view of various processes involved and various processes would involve production within meaning of Section 32A of Act. It was inter alia observed as under: "There is no dispute that plant in respect of which assessee claimed deduction was owned by it and was installed after March 31, 1976, in assessee's industrial undertaking for excavating, mining and processing mineral ore. Mineral ore is not excluded by Eleventh Schedule. only question is whether such business is one of manufacture or production of ore. -The issue had arisen before different High Courts over period of time. High Courts have held that activity amounted to "production" and answered issue in question in favour of assessee. High Court of Andhra Pradesh did so in CIT v. Singareni Collieries Co. Ltd. [1996) 221 ITR 48, ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 12 Calcutta High Court in Khalsa Brothers v. CIT [1996] 217 TTR 185 and CIT v. Mercantile Construction Co. [1994] 74 . Taxman 41 (Cal) and Delhi High Court in CIT v. Univmine .P (P.) Ltd, [1993] 202 ITR 825. Revenue has not questioned any of these decisions, at least not successfully, and position of law, therefore, was taken as settled. H reasoning given by High Court, in decisions noted by us earlier, is, in our opinion, unimpeachable. This court had, as early as in 1961, in of Chrestian Mica Industries Ltd. v. State of Bihar [1961] 12 STC 150, defined word "Production", albeit, in rt connection with Bihar Sales Tax Act, 1947. definition was adopted from meaning ascribed to word in Oxford English Dictionary as meaning "amongst ou other things that which is produced; thing that results from any action, process or effort, product; product of human activity or effort". From wide definition of C word "production", it has to follow that mining activity for purpose of production of mineral ores would come within ambit of word "production" since ore is "a h thing", which is result of human activity or effort. It has also been held by this court in CIT v. N.C. Budharaja and Co. ig [1993] 204 ITR 412 that word "production" is much wider than word "manufacture". It was said (page 423) : H word `production' has wider connotation than word `manufacture'. While every manufacture can be characterised as production, every production need not amount to manufacture .. 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 reside rodeos which emerge in course of manufacture of goods." 10. In "Words and Phrases" 2nd Edn. by Justice R. P. Sethi expressions `produce' and `production' are described as under: "In Webster's New International Dictionary, word "produce" means something that is brought forth either naturally or as result of effort and work; result produced. In Black's Law Dictionary, meaning of word `produce' is to `bring into view or notice; to bring to ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 13 surface'. reading of aforesaid dictionary meanings of word `produce' does indicate that if living creature is . brought forth, it can be said that it is produced. (See .P Commissioner 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 H Ors. (1994 Supp 1 SCC 280). Production or produce- word `production' or `produce' when of 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 byproducts, rt intermediate products and residual products, which emerge in course of manufacture of goods. expressions manufacture' ou and `produce' are normally associated with movables articles and goods, big and small but they are never employed to denote construction activity of nature involved in construction of C dam or for that matter bridge, road and building. (See Moti Laminates Pvt. Ltd. and Anr. v. Collector of Central Excise, Ahmedabad (1995 (3) SCC 23). h 11. In Advanced Law Lexicon, 3rd Edn. by P. Ramanatha Aiyar, ig expressions `production' and `manufacture' are described as under: H "'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) adoption of any other method to render product marketable. `Production' in relation to feature film, includes any of activities in respect of making thereof. (Cine Workers and Cinema Theatre Workers (Regulations of Employment) Act (50 of 1981) S.2(i).) word `production' may designate as well thing produced as operation of producing; (as) production of commodities or production of witness. `Manufacture' includes any art, process or manner of producing, preparing or making article and also any article prepared or ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 14 produced by manufacture. (Patent and Designs Act (2 of 1911), S.2(10). . `Manufacture' includes any process- .P (i) incidental or ancillary to completion of manufactured product; and (ii) which is specified in relation to any goods in section or H Chapter notes of First Schedule to Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, or, and word `manufacturer' shall be constructed accordingly and shall include of not only person who employs hired labour in production or manufacture of excisable goods but also any person who engages in their production or manufacturer on his own account. rt (iii) which is specified in relation to any goods by Central Government by notification in Official Gazette as amounting to ou manufacture. (Central Excise Act (1 of 1944) S.2(f)). 14. At this stage, it may be worthwhile to note that ITAT in C order impugned before us has taken note of number of judicial pronouncements of not only various High Courts but also of h Hon ble Supreme Court and proceeded to determine issue in ig following manner: H 9.1. Now, we may refer to some of judicial precedents on issue. Hon'ble J & K High Court in matter of CIT v. Abdul Ahad Najar, 248 ITR 744 (J&K) considered question, whether undertaking of n assessee engaged in extraction of timber from forest and conversion of same into logs, planks, etc. constituted industrial undertaking within meaning of section 80J(4) of Act or not ? In this case, assessee claimed that it was engaged in manufacture and production of articles. case of assessee was that planks sawn out of logs and, articles produced therefrom were different in shape from logs and trees. However, Assessing Officer did not accept contention of assessee as according to him assessee did not manufacture or produce any article. According to Assessing Officer, process of converting trees into logs did not involve much sawing operations as after felling trees, it had been cut into logs and sold as such. Revenue also contended that process of sawing of logs into planks also did not involve any manufacture of articles and that manufacturing process could not be carried out by bare hands without aid of machinery. ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 15 claim of assessee was, however accepted by Appellate Commissioner, who held that use of machinery was not . indispensible to manufacturing process and even for .P conversion of standing trees into logs, labour was required as something is converted into something else viz. logs. He was of view that logs could be said to be new product emerging H out of manufacturing process. He accordingly held that assessee was entitled to deduction under section 80J of Income-tax Act, which was confirmed by Tribunal. matter of was considered by Hon'ble High Court on above facts. Hon'ble High Court was of view that in order to claim relief under section 80J, industrial undertaking must manufacture or rt produce articles and it was condition precedent. Hon'ble High Court observed that assessee cut trees in forest, ou converted them not only into logs but also into planks and other articles for purpose of sale. As forest lessee, assessee's business was to cut standing trees and to extract timber and C convert same into form of logs, planks, etc. f or purpose of sale. It was observed that logs and planks could never be known as trees ; that two are undoubtedly different from h standing trees. Hon'ble High Court accordingly upheld stand of assessee. It is clear from above that activity of ig forest lessees of extraction of timber from forest and conversion of same into logs, planks, etc. is understood to be H manufacturing process. Hon'ble High Court on question of manufacturing further held as under:- "Otherwise also, it is clear that activity undertaken by assessee clearly amounts to manufacture and production of articles. expressions 'manufacture' and 'produce' have not been defined in Income-tax Act. dictionary meaning of 'manufacture' is 'transform or fashion new materials into changed form for use'. In common parlance, manufacture means production of articles from raw or prepared materials by giving these materials new forms, qualities, properties or combinations, whether by hand labour-or by mechanical process. In other words, it means making of articles or materials commercially different from basic components by physical labour or mechanical process, In its ordinary connotation, manufacture signifies emergence of new and different goods as understood in relevant commercial circles. So far as meaning of word 'produce' is concerned, though word 'produce' has wider connotation than word 'manufacture', when used in juxtaposition with word 'manufacture', it takes in bringing into existence new goods by process which may not amount to manufacture. activity of extraction of wood by assessee from forest by felling trees and converting same into logs, planks, sleepers and other articles, undoubtedly, falls within definition of 'manufacture'." ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 16 9.2. Hon'ble Supreme Court in matter of CIT v. N.C. . .P Budharaja & Co. [1993] 204 ITR 412 (S.C) considering similar point of law held, "The test for determining whether manufacture can be said to have taken place is whether commodity which is H subjected to process of manufacture can no longer be regarded as original commodity but is recognised in trade as new and distinct commodity." of 9.3. Hon'ble Supreme Court in case of CIT v. Sesa Goa Ltd. reported i n 27 1 IT R 331 while considering question under rt section 32A(2)(b)(iii) for grant of investment allowance dealt with question of 'production' in case where assessee's ou industrial undertaking was engaged in business of excavating, mining and processing mineral ore. Mineral ore was not excluded by Eleventh Schedule. only question was whether such business was one of manufacture or production of ore. C Hon'ble Supreme Court noted that issue was dealt with by different High Courts over period of time, and it was held that activity amounted to "production" and answered issue in h question in favour of assessee. Hon'ble Supreme Court ig held as under :- "The reasoning given by High Court, in decisions H noted by us earlier, is, in our opinion, unimpeachable. This court had, as early as in 1961, in Chrestian Mica Industries Ltd. v. State of Bihar [1961] 12 STC 150, defined word 'production', albeit, in connection with Bihar Sales Tax Act, 1947. definition was adopted from meaning ascribed to word in Oxford English Dictionary as meaning 'amongst other things that which is produced; thing that results from any action, process or effort; product; product of human activity or effort'. From wide definition of word 'production', it has to follow that mining activity for purpose of production of mineral ores would come within ambit of word 'production' since ore is 'a thing', which is result of human activity or effort ... It is, therefore, not necessary, as has been sought to be contended by learned counsel for Revenue, that mined ore must be commercially new product ... Learned counsel appearing on behalf of assessee, correctly submitted that other provisions of Act, particularly section 33(1)(b)(B) read with Item No. 3 of Fifth Schedule to Act, would show that mining of ore is treated as 'production'. Section 35E also speaks of production in context of mining activity. language of these sections is similar to language of section 32A(2). There is no reason for us to assume that word ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 17 'production' was used in different sense in section 32A." [ underlined for emphasis by us] . 9.4. Thus, having regard to proposition as discussed above, .P particularly in view of decision in Sesa Goa Ltd (supra) it is evident that, that word "production" has been used in very wide sense to mean-to bring out new product, albeit not H commercially new product. Infact, it may be relevant to state here that, in aforesaid judgment, Hon'ble Supreme Court affirmed judgment of Hon'ble Karnataka High Court in of case of CIT v. Mysore Minerals Ltd. 250 ITR 725 (Kar.) wherein activity of cutting granite blocks into slabs and sizes and polishing them was held to be manufacturing or production of goods. It was rt held therein as under: ou " Section 80-I also refers to profits and gains in respect of industrial undertaking. In view of decision given in case of assessee, we are of view that Appellate Tribunal is right in law in coming to conclusion that original assessment which granted C relief under sections 32A and 80-I to assessee was not erroneous and inference of Commissioner of Income-tax under section 263 was not proper. Tribunal is also right in law in holding that extracting granite from h quarry and cutting it to various sizes and polishing should be considered as manufacture or production of any article or thing and assessee's business activity must be ig considered as industrial undertaking for purpose of granting reliefs under sections 32A and 80-I of Income- tax Act, 1961." H 9.5. Further, following judgements in case of Sesa Goa Ltd. (supra ), Mysore Minerals Ltd (supra ) and, another judgement of Hon'ble Supreme Court in case of Kores India Ltd v CCE reported in 174 ELT 7 (2004), Hon'ble Rajasthan High Court in case of Arihant Tiles and Marbles Ltd v ITO 295 ITR 148 (Raj) held as under: "Apparently, principle applied by Supreme Court was that if without applying process thing in its raw form cannot be usable and it is made usable for particular purpose, it amounts to manufacture. court approved principle enunciated in Saraswati Sugar Mills v . Haryana State Board [1992] 1 SCC 418 that essence of manufacture is change of one object to another for purpose of making it marketable. On this principle, court accepted contention that by cutting jumbo rolls into smaller sizes, different commodity has come into existence and commodity which was already in existence serves no purpose and no commercial use, after process. new name and character has come into existence. original commodity after processing does not possess original identity. Obviously, so far as ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 18 physical characteristic of jumbo rolls and its shorter version in form of typewriter and telex roll may have same physical properties, none less on basis of their . different use as marketable commodity and after being .P cut, same cannot be used for purpose for which it could be used in original shape, activity was held to be manufacture. H principle aptly applies to present case. Here also, original commodity, namely, marble block could not be used for building purposes as such until it is cut into different sizes to be used as building material. It is only by process of cutting marble block into slabs and tiles of that it is made marketable. marble block cannot be used for same purpose as marble slab or tile can be used and after marble block has been cut into different sizes, end product by putting it simultaneously cannot be used rt as block. principle in Kores India Ltd.'s case [2004] 3 RC 613 (SC) supports contention of appellant." [underlined for Emphasis by us] ou 9.6. Also, aforesaid view has been followed by Hon'ble Bombay High Court in case of CIT v Fateh Granite (P) Ltd 314 ITR 32 (Bom.) and, Hon'ble Delhi High Court in case of CIT v C Sophisticated Granite Marble Industries reported 225 CTR 410 (Del) and, it was held that, process of purchasing marble slabs and then converting these into tiles by applying various processes like h cutting, sizing, polishing so as to produce marketable tiles constitutes "manufacturing" article. ig 10. Now, we may revert back to facts of captioned appeals. On consideration of principles stated above and, H different steps of manufacturing through which raw materials i.e. wire rods are processed, we are of considered opinion that, wire so manufactured can no longer be regarded as original commodity. Infact, final product is recognized in trade as new and distinct commodity. Ostensibly, wire rod having undergone various mechanized and chemical based processes like annealing, galvanizing etc. results into manufacture of wire with distinct name, character and use. name of raw material, originally is wire rod before processing and after processing, it becomes wire of different types, say paper/enamel insulated wires or strips or barbed wire, GSS/Stay Earth wire, chainlink, etc. Therefore, it is commercially distinct commodity with distinct name. wires so produced are used for power cables, industrial control cables, electric motors, transformers, etc. but wire rod as raw material cannot be used as such. Therefore, new and distinct commodity is manufactured and produced by assessee namely wire. Infact, in Union of India and Others v. J.G. Glass Industries Ltd. and Others (1998) 2 SCC 32, Hon'ble Supreme Court had ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 19 laid down two-fold test for determining whether particular process amounts to 'manufacture' or not ? First, whether by . said process different commercial commodity comes into .P existence or whether identity of original commodity ceases to exist. Secondly, whether commodity which was already in existence would not serve desired purpose but for said H process. Applying this two-fold test to fact situation of appellants, it is irresistible to hold that process undertaken by appellants amount to manufacture. of 11. Infact, Hon'ble Madras High Court's decision in case of Tamil Nadu Heat Treatment & Fetting Services (P) Ltd. (supra) rt supports case of appellant. In this case, assessee was receiving un-treated crankshafts, forgings and castings from its ou clients and was subjecting them to heat treatment to toughen them up for being used as automobile spare parts. said activity was held to be manufacturing activity by Hon'ble High Court. Hon'ble Madras High Court held as under: C "12. In backdrop and setting of principles, as enunciated by Supreme Court and various High Courts h as relatable to activity of "manufacture" of "processing of goods" and in light of various literature and books of foreign authors, relatable to qualitative change having ig been brought about by well termed process, as referred to above, we may now proceed to consider and decide moot question as to whether activities carried on by assessee namely, receiving untreated crankshafts and H forgings and castings from its clients and subjecting them to heat treatment to toughen them up for being used as automobile spare parts can ever construed as activities relatable to manufacture and, consequently enable it to claim investment allowance under s. 32A of IT Act." "13. We have to take note of fact that process of heat treatment to crankshaft, etc. were absolutely essential for rendering in marketable. Automobile parts as crankshafts, need to be subjected to heat treatment to increase wear and tear resistance to remove inordinate stress and increase tensile strength. raw untreated crankshafts and like can never by used in automobile industry. Thus, in crankshafts subjected to process of heat treatment etc., qualitative change is effected, to be fit for use in automobiles, although there is no physical change in them. In such state of affairs, it cannot at all stated that crankshafts, subjected to heat treatment, etc. cannot at all change status of new products of different quality for different quality for different purpose altogether. In this view of matter, we are of view that activities of assessee in relation to raw or untreated crankshafts being subjected to heat treatment, etc., is definitely "manufacturing activity" entitling it to claim "investment allowance" under s. 32A of I. T. Act. We answer questions No. 2 and 3 according." [underlined for emphasis by us] ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 20 12. From perusal of said judgement, it is evident that even qualitative changes effected in raw material through heating, . also amounts to 'manufacturing activity'. aforesaid view has .P also been followed by Ahmedabad Bench of Tribunal in case of Anil Steel Traders (supra) to hold that activity of annealing of steel rods and coils as per customer H specifications, amounts to 'manufacture'. Thus, in light of aforesaid judgements alone, we do not find any justification in stand of Revenue that assessee did not carry out any of activity of manufacturing. Undoubtedly, process undertaken by assessee results in qualitative change in inputs initially use d in process of manufacturing. argument of Revenue, rt as manifested in assessment orders, is that, activity does not bestow any physical change in article to which heat ou treatment was given by assessee. In our vie w, considered in light of judgement of Hon'ble Madras High C ourt, which again has referred to various case laws on issue, aforesaid C argument of Revenue is not sustained. 13. Further, even if test of marketability is applied to h facts of case of appellants, process carried out by them constitutes manufacture, as enunciated by Hon'ble Rajasthan ig High Court in case of Arihant Tiles and Marbles (P) Lt d v I TO (supra ) following judgement of Hon'ble Supreme Court i n t he case of Sesa Goa Ltd. ( supra) and, Kores India (supra), since H original commodity, namely, wire rod could not be used for transformers, power cables, etc. as such, until it is drawn into enameled/insulated wires. It is only by this process that, input is made marketable as distinct commodity and, therefore we hold, in facts and, circumstances of case, process undertaken by appellants amounts to manufacture of thing or article within meaning of section 80IC of Act. 14. In any case, process amounts to production, as interpreted by Hon'ble Supreme Court in case of Sesa Goa Ltd. (supra) wherein it has been held that, word "production" has been used in very wide sense to mean to bring out new product, may be not commercially new product. In this case, undisputedly and, irrefutably new product has been produced as result of various processes undertaken by appellant and, as such, even on this ground, appellants are eligible for claim of deduction u/s 80IC of Act. ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 21 15. In CIT vs. M/s Doon Valley Rubber Industries ITA No. 2 of 2009 decided on 6.11.2013 this Court has taken into consideration all . .P relevant judgments to hold that rubber crumb produced by assessee therein was commercially different from its raw material and H further held that it was commercially known to be different in market. This Court proceeded to hold as under: of 5. question as to what amounts to manufacture is no more resintegra. three Judges Bench of Apex Court in case rt of Aspinwall and Co. Ltd. v. Commissioner of Income Tax, 2001 (251) ITR 323, has expounded thus: ou .. word manufacture has not been defined in Act. In absence of definition of word manufacture it has to be given meaning as is C understood in common parlance. It is to be understood as meaning production of articles for use from raw or prepared materials by giving such materials new forms, h qualities or combinations whether by hand labour or ig machines. If change made in article results in new and different article then it would amount to manufacturing activity. H 6. In latest decision of Apex court in case of Income Tax Officer vrs. Arihant Tiles and Marbles P. Ltd., (2010) 320 ITR 79 (SC) after analyzing its earlier decisions and including in case of Aman Marble Industries P. Ltd. vrs. Collector of Central Excise, (2003) 157 ELT 393 (SC) it has been noted that expression used in Section 80IA - which is analogous to expression used in Section 801B, which uses words manufactures or produces, as applicable to present case mandates Court to consider not only word manufacture but also connotation of word production . Having noted this position, Court went on to observe that said expressions have wider meaning as compared to word manufacture . Further, word production , means manufacture plus something in addition thereto. Court also noticed exposition in CIT vrs. Sesa Goa Ltd.(2004) 271 ITR 331 (SC) wherein it has been held that while every manufacture can constitute production, every production did not amount to manufacture. Further, test for determining whether manufacture can be said to have taken place is whether ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 22 commodity, which is subjected to process, can no longer be regarded as original commodity, but is recognized in trade as . new and distinct commodity. Further, word production , when .P used in juxtaposition with word manufacture takes in bringing into existence new goods by process which may or may not amount to manufacture. word production takes in all H by-products, intermediate products and residual products, which emerge in course of manufacture of goods. of 16. word manufacture and processing came up for consideration before Hon ble Supreme Court in its recent judgment in Mamta rt Surgical Cotton Industries, Rajasthan vs. Assistant Commissioner (Anti-Evasion), Bhilwara, Rajasthan (2014) 4 SCC 87. ou Though in that case Hon ble Supreme Court was dealing with entirely different Act and word manufacture therein was in no C manner pari materia with term manufacture , now introduced in h Income Tax Act, how even judgment assumes importance as it has dealt with word manufacture and processing in detail alongwith ig relevant case law and held as under: H 13. It is, therefore, relevant to notice definition of 'manufacture' as defined in dictionary clause of Act. Section 2(27) of Act defines expression 'manufacture' as under: "2.(27) "manufacture" includes every processing of goods which bring into existence commercially different and distinct commodity but shall not include such processing as may be notified by State Government." definition aforesaid is inclusive definition and therefore would encompass all processing of goods which would produce new commodity which is commercially different and distinctly identifiable from original goods. definition however excludes all such mechanisms of processing of goods which have been notified by State Government to said effect. Admittedly, no such exclusion in respect of process in analysis for surgical cotton has been notified by State Government. Therefore, process of transformation has to be tested on anvil of proposition whether surgical cotton is processed such that it is commercially different and distinctly identifiable than cotton. ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 23 14. essential test for determining whether process is manufacture or not has been analysis of end product of . such process in contradistinction with original raw material. In .P 1906, Darling, J. had subtly explained quintessence of expression manufacture in McNichol and Anor v. Pinch, [1906] 2 KB 352 as under: H I think essence of making or of manufacturing is that what is made shall be different thing from that out of of which it is made. 15. In order to understand finer connotation of rt expression 'manufacture', it may be useful to refer to decision of this Court in case of Empire Industries Limited and Ors. v. ou Union of India and Ors.,(1985) 2 SCC 314, wherein this Court after exhaustively noticing views of Indian Courts, Privy Council and this Court had stated as under: (SCC p.329, para 24) "24. .. 14. .'Manufacture implies change, but every C change is not manufacture and yet every change of article is result of treatment, labour and manipulation. But something more is necessary and there must be h transformation; new and different article must emerge ig having distinctive name, character or use. *" (CCE v. Osnar Chemical (P) Ltd., (2012) 2 SCC 282; Jai Bhagwan Oil & Flour Mills v. Union of India, (2009) 14 SCC 63; Crane Betel H Nut Powder Works v. Commr. of Customs & Central Excise, (2007) 4 SCC 155; CIT v. Tara Agencies, (2007) 6 SCC 429; Ujagar Prints (II) v. Union of India, 1986 Supp SCC 652; Saraswati Sugar Mills v. Haryana State Board, (1992) 1 SCC 418; Gramophone Co. of India Ltd. v. Collector of Customs, (2000) 1 SCC 549; CCE v. Rajasthan State Chemical Works, (1991) 4 SCC 473; CCE v. Technoweld Industries, (2003) 11 SCC 798; Metlex (I) (P) Ltd. v. CCE, (2005) 1 SCC 271; Aman Marble Industries (P) Ltd. v. CCE, (2005) 1 SCC 279; Shyam Oil Cake Ltd. v. CCE, (2005) 1 SCC 264; South Bihar Sugar Mills Ltd. v. Union of India, (1968) 3 SCR 21; Laminated Packings (P) Ltd. v. CCE, (1990) 4 SCC 51; Dy. CST v. Coco Fibres, 1992 Supp (1) SCC 290; CST v. Jagannath Cotton Co., (1995) 5 SCC 527; Ashirwad Ispat Udyog v. State Level Committee, (1998) 8 SCC 85; State of Maharashtra v. Mahalaxmi Stores, (2003) 1 SCC 70; Aspinwall & Co. Ltd. v. CIT, (2001) 7 SCC 525; J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. STO, (1965) 1 SCR 900; CCE v. Kiran Spg. Mills, (1988) 2 SCC 348 and Park Leather Industry (P) Ltd. v. State of U.P., (2001) 3 SCC 135). ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 24 16. following observations by Constitution Bench of this Court in Union of India v. Delhi Cloth & General Mills Co. Ltd., . .P 1963 Supp (1) SCR 586 where change in character of raw oil after being refined fell for consideration are also quite apposite: (AIR p.794, para 14) H 14. word 'manufacture' used as verb is generally understood to mean as 'bringing into existence new substance' and does not mean merely 'to produce some of change in substance.' 17. For determining whether process is manufacture or not, this Court in Union of India v. J.G. Glass Industries Ltd., (1998) 2 rt SCC 32 has laid down two-pronged test. Firstly, whether by such process different commercial commodity comes into existence or ou whether identity of original commodity ceases to exist and secondly, whether commodity which was already in existence would serve no purpose but for said process. In light of C said test it was held that printing on bottles does not amount to manufacture. h 18. Constitution Bench of this Court in Devi Das Gopal Krishnan v. State of Punjab, (1967) 3 SCR 557 observed that if by ig process different identity comes into existence then it can be said to be manufacture and therefore, when oil is produced out H of seeds process certainly transforms raw material into different article for use. 19. In CCE v. S.R. Tissues (P) Ltd., (2005) 6 SCC 310, issue for consideration was whether process of unwinding, cutting and slitting to sizes of jumbo rolls into toilet rolls, napkins and facial tissue papers amounted to manufacture. While holding that said process did not amount to manufacture this Court inter alia, held as under: (SCC p.317, para 12) 12. However, end use of tissue paper in jumbo rolls and end use of toilet rolls, table napkins and facial tissues remains same, namely, for household or sanitary use. predominant test in such case is whether characteristics of tissue paper in jumbo roll enumerated above is different from characteristics of tissue paper in form of table napkin, toilet roll and facial tissue. In present case, Tribunal was right in holding that characteristics of tissue paper in jumbo roll are not different from ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 25 characteristics of tissue paper, after slitting and cutting, in table napkins, in toilet rolls and in facial . tissues. (emphasis supplied) .P 20. At this stage discussion of difference between processing and manufacture holds much relevance to well H appreciate contention canvassed by Shri Giri that transformation of cotton into surgical cotton would be mere processing and not manufacture. of 21. According to Oxford English Dictionary one of meanings of word process is continuous and regular action or succession of actions taking place or carried on in definite rt manner and leading to accomplishment of some result . In Chambers 21st Century Dictionary, term process has been ou defined as Process.- (1) series of operations performed during manufacture, etc. (2) series of stages which product, etc. C passes through, resulting in development or transformation of it. 22. In East Texas Motor Freight Lines v. Frozen Food Express, h 351 US 49 Supreme Court of United States of America has held that processing of chicken in order to make them marketable ig but without changing their substantial identity did not turn chicken from agriculture commodities into manufactured commodities. H 23. three-Judge Bench of this Court in Pio Food Packers case (supra) has dealt with distinction between manufacture and processing . Therein appeals were filed against order of Kerala High Court holding that turnover of pineapple fruits purchased for preparing pineapple slices for sale in sealed cans is not covered by Section 5- A(1)(a) of Kerala General Sales Tax Act, 1963. This Court while deciding whether such conversion of pineapple fruit into pineapple slices for sale in sealed cans amounted to manufacture or not has observed as follows: (SCC p. 176, para 5) 5. 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 ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 26 commodity to point where commercially it can no longer be regarded as original commodity but instead is . recognised as new and distinct article that manufacture .P 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 H 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. of (emphasis supplied) This Court held that when pineapple fruit is processed into pineapple slices for purpose of being sold in sealed cans, there rt is no consumption of original pineapple fruit for purpose of manufacture. Pineapple retains its character as fruit and whether ou canned or fresh, it could be put to same use and utilized in similar fashion. 24. In Sterling Foods case (supra) this Court has observed that C processed and frozen shrimps, prawns and lobsters cannot be regarded as commercially distinct commodity from raw shrimps, prawns and lobsters. aforesaid view has further been adopted h and applied by this Court in Shyam Oil Cake Ltd. case (supra) wherein classification of refined edible oil after refining was ig under consideration and on similar lines it was held that process of refining of raw edible vegetable oil did not amount to H manufacture. 25. In Aman Marble Industries case (supra), this Court has held that cutting of marble blocks into smaller pieces would not be process of manufacture for reason that no new and distinct commercial product came into existence as end product still remained same and thus its original identity continued. 26. This Court in Crane Betel Nut Powder Works case (supra) citing earlier decision in Brakes India Ltd. v. Supdt. of Central Excise, (1997) 10 SCC 717 wherein process of drilling, trimming and chamfering was said to amount to manufacture , has reiterated that if by process, change is effected in product and new characteristic is introduced which facilitates utility of new product for which it is meant, then process is not simple process, but process incidental or ancillary to completion of manufactured product. 27. In Kores India Ltd. v. CCE, (2005) 1 SCC 385 cutting of duty-paid typewriter/telex ribbons in jumbo rolls into standard predetermined lengths was considered by this Court and it was held that such cutting brought into existence commercial product ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 27 having distinct name, character and use and amounted to manufacture and attracted liability to duty. In Standard . Fireworks Industries v. Collector of Central Excise, (1987) 1 SCC .P 600 this Court held that cutting of steel wires and treatment of paper is process for manufacture of goods in question. 28. In Lal Kunwa Stone Crusher case (supra), decision H relied upon by Shri Giri, this Court has considered that whether on crushing stone boulders into gitti, stone chips and dust different commercial goods emerge so as to amount to manufacture as per of definition of manufacture under Section 2(e-1) of U.P. Sales Tax Act, 1948 and observed that even if gitti, kankar, stone ballast, etc. may all be looked upon as separate in commercial rt character from stone boulders offered for sale in market, stone as under relevant Entry is wide enough to include ou various forms such as gitti, kankar, stone ballast. It is in this light, that Court had opined that stone gitti, chips, etc. continue to be identifiable with stone boulders. C After taking into consideration entire law on subject, Hon ble Supreme Court has finally concluded as under: h ig 35. It is trite to state that manufacture can be said to have taken place only when there is transformation of raw materials into new and different article having different identity, characteristic H and use. While mere improvement in quality does not amount to manufacture, when change or series of changes transform commodity such that commercially it can no longer be regarded as original commodity but recognised as new and distinct article. 17. In fairness to counsel for parties, we may place on record that they cited several other reported and unreported decisions. That indeed, indicates their industry. However, we are of considered opinion that question to be answered in this appeal can conveniently be answered only with reference to exposition in decisions of Apex Court and decision of this Court in M/s Doon Valley (supra), referred to above, for which reason, we are not burdening this judgment ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 28 with other citations pressed into service by respective counsel, across Bar. . .P 18. From perusal of factual aspects, it is evident that qualitative changes effected in raw material by various means like H annealing, quenching, acid pickling and flux application, galvanizing and following zinc hot dip, definitely amounts to manufacture. There is of complete transformation of raw materials into new and different article having different identity, characteristic and use. series of changes rt transform commodity into different commercial commodity whereby ou it can no longer be regarded as original commodity but recognised as new and distinct article. C 19. Further, keeping in mind exposition of law set out above, we have no hesitation in concluding that Appellate Tribunal was h justified in concluding that paper insulated wires and strips of copper ig and aluminium being manufactured/processed by assessees were commercially different from its raw material and further it is commercially H known different in market. In other words, assessees were engaged in manufacture of product and, therefore, were entitled to deductions claimed under Section 80 IC of Act. We find no reason to disagree with said opinion of Tribunal and question No.1 is, therefore, answered accordingly against revenue. Question No.2: 20. learned counsel for revenue has heavily relied upon judgment of Hon ble Supreme Court in case of Technoweld Industries (supra), to contend that case of assessees is fully covered by ratio laid down in aforesaid case. We have considered aforesaid judgment in detail and are of considered view that facts ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 29 in aforesaid case were totally different from facts in present case. assessee in that case was engaged in business of wire . .P drawing from thicker gauge to thinner gauge by cold drawing process and was in fact not engaged in manufacture or production of wire with H different chemical/ electrical/mechanical properties and product was also not made to undergo any process. Further there was no manufacture of of new product, this would be clear from following observations: 2. rt In all these appeals, respondents purchased duty paid wire rods and drew wire into thinner gauge. question is whether by drawing wire into thinner gauge, manufacture has ou taken place. question is whether wire of thinner gauge is excisable to duty. 3. This question came to be considered by Customs, C Excise and Gold (Control) Appellate Tribunal. In case of Vishvaman Industries v. CCE (2001) 127 ELT 155 (Trib) by order dated 2.11.2000, it was held that process of drawing wire from h wire rods did not amount to manufacture. Tribunal based its decision on earlier decision of Tribunal in case of Jyoti ig Engg.Corpn. v. CCE (1989) 42 ELT 100. In Jyoti case, tariff entry concerned was 26-AA (i-a) which included bars, rods, coils, wires H etc. Tribunal has held that raw material was wire rod and final product was also wire. It has held that no new product has come into existence and that there was no manufacture. Civil appeals filed against both aforementioned decisions were dismissed. ******* ********** ********* 7. This Court was also taken through processes which are undergone by manufacturer and which have been set out in some of orders passed by Commissioner. It was submitted that raw material is rod falling under Tariff Item 72.13 and/or 72.15 whereas after processing distinct and separate marketable product falling under Tariff Item 72.17 has come into existence. It was submitted that market price of both products is also different inasmuch as cost of raw material was approximately Rs.13,000 per metric ton whereas for final product market price was approximately Rs.15,000 per metric ton. It was submitted that under these circumstances, Court must now hold that earlier decisions of Tribunal are not ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP 30 correct and that final product i.e. wire which is drawn by cold drawing process is excisable product. . 8. We are unable to agree with submission. It is to be seen .P that initial product was wire rod. ultimate product is also wire. All that is done is that gauge of rod is made thinner and product is finished little better. In our view earlier H decisions of Tribunal are correct. There is no manufacture of new product. Merely because there are two separate entries does not mean that product becomes excisable. product of becomes excisable only if there is manufacture. Now, insofar as these cases are concerned, we after taking rt into consideration factual and legal aspects while answering question ou No.1, have already held that process being carried out by assessees amounts to manufacture or production and, therefore, C assessees are eligible for deduction under Section 80IC of Income Tax Act. h Accordingly, this question also stands answered against ig revenue. 21. In view of findings recorded above, we find no merit in H these appeals and accordingly, same are dismissed, so also pending application(s), if any. parties are left to bear their own costs. authenticated copy of this judgment be placed in all connected files. (Mansoor Ahmad Mir), Chief Justice September 10, 2014 (Tarlok Singh Chauhan), (GR) Judge. ::: Downloaded on - 15/09/2015 10:38:36 :::HCHP Commissioner of Income-tax v. Pawan Aggarwal