C/TAXAP/460/2019 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 460 of 2019 With R/TAX APPEAL NO. 461 of 2019 With R/TAX APPEAL NO. 462 of 2019 With R/TAX APPEAL NO. 463 of 2019 With R/TAX APPEAL NO. 464 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/- and HONOURABLE MR.JUSTICE A.C. RAO Sd/- 1 Whether Reporters of Local Papers may be allowed to Yes see judgment ? 2 To be referred to Reporter or not ? Yes 3 Whether their Lordships wish to see fair copy of No judgment ? 4 Whether this case involves substantial question of law No as to interpretation of Constitution of India or any order made thereunder ? PRINCIPAL COMMISSIONER OF INCOME TAX, VADODARA 1 Versus M/S FINE LINE CIRCUITS COMPANY Appearance: MR.VARUN K.PATEL(3802) for Appellant(s) No. 1 RULE NOT RECD BACK(63) for Opponent(s) No. 1 Page 1 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 16/09/2019 COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. As substantial questions of law in all captioned tax appeals are same and assessee is also same, those were heard analogously and are being disposed of by this common judgment and order. 2. For sake of convenience, Tax Appeal No.460 of 2019 is treated as lead matter. 3. This tax appeal under Section 260A of Income Tax Act, 1961 (for short Act ) is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal C Bench dated 29th November, 2018 in ITA No.2183/Ahd/2015 for A.Y.2004-05. 4. This tax appeal was ordered to be admitted on following substantial questions of law; (A) Whether on facts and in circumstances of case, learned ITAT has erred in law and on facts in allowing deduction u/s.10B of Act r.w.t. Export of Copper Cladded Glass expoxy Laminate (CCGL) even though assessee had not carried out any manufacturing activities qua said product i.e. CCGL? (B) Whether on facts and in circumstances of case, learned ITAT has erred in law and on facts in allowing deduction claimed by assessee u/s. Page 2 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT 10B of Act without appreciating fact that there was no manufacturing activities carried out by assessee which made it eligible to claim deduction u/s.10B? 5. facts giving rise to this appeal may be summarized as under; 5.1 assessee is hundred percent export oriented undertaking, having its place of business at Plot No.E-8, GIDC, Manjusar, Savli, District: Vadodara. assessee has been registered as EOU in Kandla Free Trade Zone, State of Gujarat. return of income was filed by assessee on 30 th October, 2004, declaring total income of Rs.19,04,308/- along with audit report in then Form No.3CB and report under Section 10B of Act in Form No.56G. assessee claimed deduction of Rs.2,83,46,239/- under Section 10B of Act. 5.2 assessment under Section 143(3) of Act was finalized on 29th December, 2006 at assessed income of Rs.34,49,503/-. While finalizing assessment proceedings, claim of assessee under Section 10B of Act was restricted to Rs.2,69,73,700/- as against original claim of Rs.2,83,46,239/-. 5.3 Being aggrieved with order passed under Section 143(3) of Act, assessee preferred appeal before CIT (A). CIT (A)-II, Vadodara, vide order dated 1st February, 2008, affirmed action of Assessing Officer and same was further affirmed by ITAT vide order passed in ITA No.1144/Ahd/2008 dated 15th April, 2011. Page 3 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT 5.4 survey action under Section 133A(1)(b) of Act was carried out on 25th March, 2010. In course of survey, it was noticed that assessee was claiming deduction under Section 10B of Act on export of CCGL (Copper Cladded Glass Epoxy Laminate) without undertaking any manufacturing process. It was noticed that CCGL sheets were being exported, and after cutting them into smaller sheets, those were being repacked and exported. According to Revenue, same cannot be termed as any manufacturing process and, in such circumstances, assessee is not liable to claim deduction under Section 10B of Act. 5.5 In such circumstances, referred to above, case was reopened under Section 147 of Act by issue of notice under Section 148 of Act dated 8th March, 2011. assessment under Section 143(3) read with Section 147 was finalized on 14th December, 2011 at total income of Rs.82,63,600/- restricting deduction under Section 10B of Act at Rs.2,21,19,603/- as against Rs.2,83,46,239/- claimed by assessee in his return of income. 5.6 assessee preferred appeal before CIT (A)-II, Vadodara. appeal came to be dismissed by CIT (A) vide order dated 16th August, 2012. 5.7 assessee went in appeal before ITAT. ITAT passed common order dated 25th June, 2013 for A.Y.2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. ITAT restored issue of sale of CCGL to file of Assessing Officer for being examined afresh keeping in mind Page 4 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT stance of Excise Department in respect of export of CCGL. It appears that Assessing Officer passed fresh assessment order under Section 143(3) read with Section 254 of Act on 12th May, 2014 at Rs.1,73,72,867/-, thereby disallowing claim of deduction under Section 10B on deemed export as well as on export of CCGL. 5.8 assessee went in appeal before CIT(A). appeal of assessee with regard to deduction under Section 10B of Act came to be allowed by CIT(A). Revenue, being dissatisfied with order passed by CIT(A), preferred appeal before ITAT. ITAT dismissed appeals preferred by Revenue and thought fit to grant deduction under Section 10B of Act with regard to export of CCGL. 5.9 Being dissatisfied with order passed by ITAT, Revenue is here before this Court with this appeal. Submissions on behalf of Appellant-Revenue: 6. Mr. Varun K. Patel, learned counsel appearing for Revenue vehemently submitted that term manufacture implies change, and every change is not manufacture . According to Mr. Patel, all that assessee is doing is to import CCGL sheets cut them to particular size, repack those sheets and, thereafter, export it at particular place in accordance with order. According to Mr. Patel, by doing so, it cannot be said that new and different article having distinct name, character or use has emerged. According to Mr. Patel, CCGL sheets retain continuing substantial identity through process stage and it cannot be said that CCGL Page 5 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT sheets have been manufactured. Mr. Patel, in support of his aforesaid submissions, has placed reliance on following decisions; (I) In case of Deepkiran Foods (P.) Ltd. vs. ACIT, reported in (2014) 361 ITR 437; (II) In case of Hindustan Poles Corporation vs. Commissioner of C. Ex., Calcutta, reported in 2006 (196) E.L.T 400; (III) In case of Commissioner of Commercial Tax vs. A.R. Thermosets (Pvt.) Ltd., reported in 2016 (339) E.L.T. 500; (IV) In case of Nishant Export vs. ACIT, reported in (2018) 401 ITR 401; (V) In case of Lucky Minerals (P.) Ltd. vs. Commissioner of Income Tax, reported in (2000) 245 ITR 830; (VI) In case of Aman Marble Industries Pvt. Ltd. vs. Collector of C. Ex. Jaipur, reported in 2003 (157) E.L.T 393; 7. In such circumstances, referred to above, Mr. Patel prays that there being merit in this appeal, same be allowed and substantial questions of law, formulated by this Court, may be answered in favour of Revenue and against assessee. Submissions on behalf of Respondent-Assessee 8. On other hand, this appeal and connected Page 6 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT appeals have been vehemently opposed by Mr. B.S. Soparkar, learned senior counsel appearing for assessee. Mr. Soparkar would submit that no error, not to speak of any error of law, could be said to have been committed by ITAT in passing impugned order. 9. Mr. Soparkar gave us fair idea as regards process of manufacture of CCGL. According to Mr. Soparkar, CCGL sheets undergoes following process; (i) Receipt of purchase order from customers; (ii) Issuance of Job Travel Card for manufacturing, which would include instructions for manufacture as per specific design and production process to be deployed. (iii) Job Card goes to Store Department for identity and issuance of required material to production department viz. Copper Gladded Glass Epoxy Laminates. (iv) Raw Material is sent to Shearing Department. (v) shearing machine is set for desired size and laminates are cut into specified sizes decided by customer. (vi) After shearing, production inspection takes place where laminates are checked for oxidation effect. (vii) thorough surface clearing is done to remove oxidation. (viii) cut pieces of laminates are checked by Quality Control Department for final inspection. This department verifies various quality parameters like thickness of material, thickness of copper using Alco Meter (Copper thickness guage), Micrometer, Measuring Tape, Verifier Caliper and Magnifying glass. (ix) Such inspected laminates are packed by Packing Department. At this stage, product is called Page 7 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT as CCGL. same is registered under Excise and Kandla Economic Zone as Sorting/Checking/Clearing/Packing/repacking of Copper Gladded Laminates. 10. Mr. Soparkar further submitted that his client is paying excise on manufacturing of CCGL on domestic sales. He would submit that if it is case of Revenue that activity, referred to above, does not amount to manufacture or production for purpose of Section 10B of Act, then assessee would be free to plead that he is not liable to pay excise duty etc. because activity does not constitute manufacture. 11. Mr. Soparkar submits that, by process of manufacture, something is produced and brought into existence which is different from that, out of which, it is made, in sense that thing produced is, by itself, commercial commodity capable of being sold or supplied. He would submit that manufacture is end result of one or more process through which original commodities are made to pass. essence of manufacture is change from one object to another for purpose of making it marketable. According to Mr. Soparkar, process through which CCGL undergoes is clear indicator that at end of process, new and different commodity could be said to emerge. 12. In such circumstances, referred to above, Mr. Soparkar prays that there being no merit in appeals preferred by Revenue, those be dismissed. 13. Mr. Soparkar, in support of his submissions, has placed reliance on following decisions; Page 8 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT (I) In case of Mrs. Delna Rushtam Boyce, (2009) 318 ITR 455;185 Taxman 180 (AAR) New Delhi, wherein assessee was deriving profit from business of squeezing of juice from fruits and vegetables and etc. was eligible for deduction u/s.80IB of Act to be holding same to be manufacturing. (II) In case of CIT vs. Esquire Translam Industries, (2012) 344 ITR 308; 25 Taxmann.com 98 (Mad.), wherein conversion of electric steel into lamination was held to be manufacturing for purpose of section 80IB of Act. (III) In case of CIT vs. Innovative Industries, (2012) 207 taxman 189 (Mag.); 19 taxmann.com 140 (Guj.), wherein this Court has held that process undertaken by assessee in producing air freshner would amount to manufacturing. (IV) In case of CIT vs. Business Information Processing Services, (2012) 345 ITR 548; (2013) 33 taxmann.com 549 (Raj.), wherein Rajasthan High Court took view that computer data processing and sale of computer stationary amounts to manufacturing. (V) Punjab & Harayan High Court, in case of CIT vs. HSED Corporation Ltd., has held that activity of manufacturing of voter identity card amounts to manufacture. (VI) In case of CIT vs. Zainab Trading (P.) Ltd., (2011) 333 ITR 144; 200 Taxmann.com 91 (Mag.); 11 taxmann.com 355 (Mad.), Madras High Court has held that conversion of paper corrugated sheets into paper boxes was Page 9 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT held to be manufacturing. (VII) Supreme Court, in case of CIT vs. Vinbros & Co., (2012) 210 Taxman 252; 25 taxmann.com 367, has held that blending and bottling Indian manufacture foreign liquor would amount to manufacturing. (VIII) In case of CIT vs. Emptee PolyYarn (P.) Ltd., (2010) 188 Taxman 188; Apex Court has held that twisting of yarn amounts to manufacturing. (IX) Madras High Court, in case of CIT vs. Balaji Hotels & Enterprises Ltd. (2009) 311 ITR 389; has held that printing of paper labels constitute manufacturing. (X) In case of India Cine Agencies vs. Dy. CIT, (2012) 210 taxman 253; 25 taxman.com 366; Supreme Court has held that even cutting of jumbo film roles into small marketable sizes amounts to manufacturing. (XI) Allahbad High Court, in case of CIT vs. Shiv Oil & Dal Mill, (2006) 281 ITR 221; 153 Taxman 27; has held that refining of oil amounts to manufacturing. (XII) This High Court, in case of CIT vs. Prabhudas Kishordas Tobacco Products (P.) Ltd., (2006) 282 ITR 568; 154 taxman 404 (Guj.), took view that even buying tendu lives and tobacco and thereafter making bid amounts to manufacturing. (XIII) Madras High Court, in case of CIT vs. Premier Tobacco Packets (P.) Ltd., (2006) 284 ITR 222 (Mad.); has held that Tobacco curing was held to be manufacturing. Page 10 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT (XIV) Madras High Court, in case of CIT vs. P. Damodaran, (2006) 282 ITR 466; has held that cable joining kit is manufacturing. (XV) Supreme Court, in case of Vijay Ship Breacking Corpon. vs. CIT, (2009) 314 ITR 309;175 Taxman 77; has held that even ship breaking activity would entitle to deduction u/s.80HH & 80IA of Act. (XVI) Karnataka High Court, in case of CIT vs. Darshak Ltd., (2001) 247 ITR 489; 118 Taxman 863; has held that conversion of plain glass ware into decorative glass were amounts to manufacture. (XVII) Calcutta High Court, in case of Addl. CIT vs. A. Mukherjee & Co. (P.) Ltd., (1978) 113 ITR 718; has held that book publishing activity amounts to manufacturing. (XVIII) Bombay High Court, in case of CIT vs. Tata Locomotive & Engg. Co. Ltd. (1968) 68 ITR 325 (Bom.); has held that assembling works amounts to manufacturing. (XIX) In case of CIT vs. Kanam Latex Industries (P.) Ltd., (1996) 221 ITR 1; 86 Taxman 466 (Ker.), Court has held that conversion of natural latex into preserved latex amounts to manufacturing. (XX) Allahbad High Court, in case of CIT vs. Tarai Development Corpn., (1979) 120 ITR 342; 2 Taxman 359; has held that processing of seeds is process which amounts to manufacture or production. Page 11 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT (XXI) Supreme Court, in case of ITO vs. Arihant Tiles & Marbels (P.) Ltd., (2010) 320 ITR 79; 186 Taxman 439; has held that conversion of marvels blocks into slabs and tiles amounts to manufacturing. (XXII) Himachal Pradesh High Court, in case of CIT vs. Janakraj Bansal, (2010) 329 ITR 417 (HP); has held that conversion of lime stone into lime powder was held to be manufacturing activity. (XXIII) Madras High Court, in case of CIT vs. M.R. Gopal, (1965) 58 ITR 598 (Mad.); has held that conversion of boulders into stones is manufacturing. (XXIV) Rajasthan High Court, in case of Poonam Chand Prem Raj vs. CIT, (1994) 207 ITR 895; 74 Taxman 521 (Raj.) has held that ginning of cotton is process, thus entitled to deduction. ANALYSIS 14. We have already given fair idea of process through which CCGL undergoes. Supreme Court in India Cine Agencies vs. Commissioner of Income-Tax, Madras, (2009) 308 ITR 98 (SC) has, in details, clarified position of law on subject. In case before Supreme Court, assessee was carrying on business of conversion of jumbo Rolls of photographic films into small flats and rolls in desired sizes. assessee claimed deductions under Section 32AB, 80HH and 80-I of Act. lower authorities disallowed claim of assessee on ground that Page 12 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT activity undertaken by it was neither manufacture nor production. High Court of Madras also held that in any event because of Item 10 of Eleventh Schedule of Act, no deduction was permissible. Supreme Court has observed as under; 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 by other agency; by hand, by machinery, or by art. production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine". Thus by process of manufacture something is produced and brought into existence which is different from that, out of which it is made in 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 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 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 Page 13 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT manufacture or in relation to 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 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. Where any particular process is so integrally connected with ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to manufacture. (See Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works, Deedwana, Rajasthan (1991 (4) SCC 473). 5. `Manufacture' is transformation of article, which is commercially different from one, which is converted. essence of manufacture is change of one object to another for 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 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 different good emerge having distinctive Page 14 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT name, use and character. moment there is transformation into new commodity commercially known as distinct and separate commodity having 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' 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 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 circumstances of case. (See Empire Industries Ltd. v. Union of India (1985 (3) SCC 314). 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 `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", contrary to what has been pleaded in these cases. This Court held that it amounted to manufacture. 9. matter can be looked at from another angle. In Commissioner of Income Tax v. Sesa Goa Ltd. (2004 (271) ITR 331) 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 Page 15 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT "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, 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.) 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. 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 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 has also been held by this court in CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412 that word "production" is much wider than word "manufacture". It was said (page 423) : "The 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: Page 16 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT "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 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 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 Ors. (1994 Supp 1 SCC 280). Production or produce- 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 byproducts, intermediate products and residual products, which emerge in course of manufacture of goods. expressions `manufacture' 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 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). 11. In Advanced Law Lexicon, 3rd Edn. by P. Ramanatha Aiyar, expressions `production' and `manufacture' are described as under: "'Production' with its grammatical variations and cognate expressions; includes- (i) packing, labeling, relabelling of containers. (ii) re-packing from bulk packages to retail packages, and (iii) 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 Page 17 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT 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 produced by manufacture. (Patent and Designs Act (2 of 1911), S.2(10). `Manufacture' includes any process- (i) incidental or ancillary to completion of manufactured product; and (ii) which is specified in relation to any goods in section or 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 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. (iii) which is specified in relation to any goods by Central Government by notification in Official Gazette as amounting to manufacture. (Central Excise Act (1 of 1944) S.2(f)) 12. matter can yet be looked from another angle. If there was no manufacturing activity, then question of referring to Item 10 of Eleventh Schedule for purpose of exclusion does not arise. Eleventh Schedule, which was inserted by Finance (No.2) Act, 1977 w.e.f. 1.4.1978 has reference to Sections 32A, 32AB, 80CC (3)(a)(i), 80-I(2), 80J(4) and 88A (3)(a)(i) of Act. 15. aforesaid decision of Supreme Court is complete answer to principal argument of Mr. Patel, learned counsel appearing on behalf of Revenue. essence of manufacture is change of one object to another for purpose of making it marketable. As held by Supreme Court in India Cine Agencies (supra) that essential point is that, in manufacture, something is brought into existence which is different from that which originally Page 18 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT existed, in sense that thing produced is, by itself, commercially different commodity, whereas in case of processing, it is not necessary to produce commercially different article. It is cumulative effect of various 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. 16. It appears that in case on hand, raw material is first sent to shearing department. shearing machine is set for desired size and laminates are cut into specified sizes as required by customer. laminates are, thereafter, checked for oxidation effect. thorough surface clearing is done to remove oxidation. Quality Control Department, thereafter, would verify quality parameters like thickness of material, thickness of copper using Alco Meter etc.. At end of entire process, final product is called as CCGL. 17. At this stage, we may also look into findings recorded by ITAT in its impugned order. facts of case ITAT, Ahmedabad vide combined order dated 25.06.2013 for A.Y.2004-05, 2005-06, 2006- 07, 2007-08 & 2008-09 discussed issue of 'manufacture' at length and has restored issue of sale of CCGL to file AO to examine afresh exact position of Excise Department in respect of CCGL Export. relevant portion of ITAT order is reproduced under: We have heard both sides. We have also perused material place before us. According to us, this technical Page 19 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT question about manufacturing activity cannot be decided merely on basis of certain documentation. To appreciate correct factual position, it is always advisable to personally watch process of manufacturing, if possible. Due to certain procedural duplicates as also paucity of time, it is not possible for Revenue Officer to personally visit and in respect manufacturing unit so as to understand manufacturing activity. Therefore, this type of issue remains matter of controversy, however, while looking at second stage of appeal we have to depend factual findings of lower authorities as also document place before us. In present case on analyzing all these materials. We have noticed that CCGL has been purchased by assessee stated to be in long sheet. CCGL sheets were cleaned by removing Oxidization effect. Upto this stage mere cleaning process thus can not be termed as manufacturing activity, therefore, we are with argument of learned DR that removing of oxidation effect was nothing but 'processing'. Therefore, as per assessee's claim, those CCGL sheets have been cut into various small sizes. That fact has not been clearly established even through documents provided by assessee. reason of ambiguity is description mentioned in sales invoices. sale invoices have mentioned product sold as Copper Clodded Glass Epoxy Laminates . Simultaneously finding of A0 on inquiry was that raw material was also same i.e.. Copper Clodded Glass Epoxy Laminates . A0 has also examined description of alleged raw material purchased by assessee. He has found that purchases were made from ISOLA Laminate System Co. Ltd., China and Nauya Plastic Co,, Taiwan. CCGL was, therefore, imported and as per description, as also, as per allegation of A0, there was no change in product purchased and thereafter sold. 0n other hand, assessee has vehemently contested that after manufacturing process said product was subjected to excise duty. In respect of this contention now before us-Form A.R.E-I is placed. This is application or removal of excisable goods for export. AR has therefore contested that because of manufacturing activity excise was levied on goods exported. However, basis on which excise was levied on product exported has not been Page 20 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT clarified. In fact, assessee is required to clearly specify specification of CCGL sheets purchased. specification such as size of sheets surface of sheets and thickness of sheets are subject matter of scrutiny. In this regard, Inspection report can also be procured from specialized person. Inspection report which is not part at matter book only mentioned that oxidation was done on sheet. Meaning thereby product in question has only passed test of cleanliness As we have opined, process of oxidization can only be held as processing and not manufacturing . another argument has been raised that, Central Excise Department has given registration certificate to assessee. It has also been mentioned that certificate has been issued by Kandla Special Zone, Gandhinagar. In this regard, we have noted that there is no denial of fact that assessee as whole in manufacturing unit because deduction was claimed in respect of items manufactured of Rs. 1,67,47,045/-. But dispute is only in respect of those sale which have not undergone manufacturing process. Even this argument is not very convincing that product in question was intermediary product manufactured by assessee. In this regard, Hon ble Kerala High Court (supra) has examined process of Lyre manufacturing and then arrived at finding of fact that said intermediary was manufactured from which lyres were manufactured. As far as present factual position is concerned we are unable to give such finding unless and until correct factual position in respect of assessee, is placed on record. Even in case of National Laminate Industries (supra), respected third member has identified original commodity and commodity found to be manufactured by said appellant. clear cut finding was given that there was transformation into new commodity which was commercially known as distinct and separate commodity having its own character, use and name, rather, respected third member has given finding that identity of original commodity had ceased to exist. It was also held that commodity which was manufactured and came into existence had meant for separate purpose. As per said judgment; in manufacturing procedure, certain changes take place and original commodity thus no longer be regarded as manufacture commodity. 0n other Page 21 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT hand, main case of Revenue Department is that allegedly no such change had taken place, therefore, original commodity remain unchanged. However, question has yet to be answered that how another Government Department has treated sale of CCGL? For this limited purpose, we deem it proper, as also justifiable, to restore this issue back to stage of AO to examine afresh exact position of Excise Department in respect of CCGL export. 18. It goes without saying that change or series of changes brought about by application of process explained above, commodity in form of CCGL can no longer be regarded as original commodity but is, instead, recognized as distinct and new article that is emerged as result of process. 19. Supreme Court, in Income Tax Officer, Udaipur vs. Arihant Tiles & Marbles (P.) Ltd., (2010) 320 ITR 79 (SC), has observed as under; 13. In case of Aman Marble Industries Pvt. Ltd. vs. Collector of Central Excise, reported in 157 ELT 393 (SC), question that arose for consideration was whether cutting of marble blocks into marble slabs amounted to manufacture for purposes of Central Excise Act. At outset, we may point out that in present case, we are not only concerned with word "manufacture", but we are also concerned with connotation of word "production" in Section 80IA of Income Tax Act, 1961, which, as stated herein-above, has wider meaning as compared to word "manufacture". Further, when one refers to word "production", it means manufacture plus something in addition thereto. word "production" was not under consideration before this Court in case of Aman Marble Industries Pvt. Ltd. (supra). Be that as it may, in that case, it was held that "cutting" of marble blocks into slabs per se did not amount to "manufacture". This conclusion was based on observations made by this court in case of Rajasthan State Electricity Board (supra). In our view, Page 22 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT judgment of this Court in Aman Marble Industries Pvt. Ltd. (supra) also has no application to facts of present case. One of most important reasons for saying so is that in all such cases, particularly under Excise law, Court has to go by facts of each case. In each case one has to examine nature of activity undertaken by assessee. Mere extraction of stones may not constitute manufacture. Similarly, after extraction, if marble blocks are cut into slabs per se will not amount to activity of manufacture. 14. In present case, we have extracted in detail process undertaken by each of respondents before us. In present case, we are not concerned only with cutting of marble blocks into slabs. In present case we are also concerned with activity of polishing and ultimate conversion of blocks into polished slabs and tiles. What we find from process indicated herein- above is that there are various stages through which blocks have to go through before they become polished slabs and tiles. In circumstances, we are of view that on facts of cases in hand, there is certainly activity which will come in category of "manufacture" or "production" under Section 80IA of Income Tax Act. As stated herein- above, judgment of this Court in Aman Marble Industries Pvt. Ltd. was not required to construe word "production" in addition to word "manufacture". One has to examine scheme of Act also while deciding question as to whether activity constitutes manufacture or production. Therefore, looking to nature of activity stepwise, we are of view that subject activity certainly constitutes "manufacture or production" in terms of Section 80IA. In this connection, our view is also fortified by following judgments of this Court which have been fairly pointed out to us by learned counsel appearing for Department. In case of Commissioner of Income Tax vs. Sesa Goa Ltd., reported in (2004) 271 ITR 331 (SC), meaning of word "production" came up for consideration. question which came before this Court was whether ITAT was justified in holding that assessee was entitled to deduction under Section 32A of Income Tax Act, 1961, in respect of machinery used in mining activity ignoring fact that assessee was engaged in extraction and processing of iron ore, not amounting to Page 23 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT manufacture or production of any article or thing. High Court in that case, while dismissing appeal preferred by Revenue, held that extraction and processing of iron ore did not amount to "manufacture". However, it came to conclusion that extraction of iron ore and various processes would involve "production" within meaning of Section 32A(2)(b)(iii) of Income Tax Act, 1961 and consequently, assessee was entitled to benefit of investment allowance under Section 32A of Income Tax Act. In that matter, it was argued on behalf of Revenue that extraction and processing of iron ore did not produce any new product whereas it was argued on behalf of assessee that it did produce distinct new product. view expressed by High Court that activity in question constituted "production" has been affirmed by this Court in Sesa Goa's case saying that High Court's opinion was unimpeachable. It was held by this Court that word "production" is wider in ambit and it has wider connotation than word "manufacture". It was held that while every manufacture can constitute production, every production did not amount to manufacture. 16. In our view, applying tests laid down by this Court in Sesa Goa's case (supra) and applying it to activities undertaken by respondents herein, reproduced herein-above), it is clear that said activities would come within meaning of word "production". 17. One more aspect needs to be highlighted. By said judgment, this Court affirmed decision of Karnataka High Court in case of Commissioner of Income Tax vs. Mysore Minerals Ltd, (2001) 250 ITR 725 (Kar). 18. In case of Commissioner of Income Tax Vs. N.C. Budharaja & Co., reported in (1993) 204 ITR 412 (SC), question which arose for determination before this Court was whether construction of dam to store water (reservoir) can be characterised as amounting to manufacturing or producing article. It was held that word "manufacture" and word "production" have received extensive judicial attention both under Income Tax as well as under Central Excise and Sales Tax laws. test for determining whether "manufacture" can be said to have taken place is Page 24 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT whether commodity, which is subjected to process can no longer be regarded as original commodity but is recognised in trade as new and distinct commodity. word "production", when 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 byproducts, intermediate products and residual products which emerge in course of manufacture of goods. 19. Applying above tests laid down by this Court in Budharaja's case (supra) to facts of present cases, we are of view that blocks converted into polished slabs and tiles after undergoing process indicated above certainly results in emergence of new and distinct commodity. original block does not remain marble block, it becomes slab or tile. In circumstances, not only there is manufacture but also activity which is something beyond manufacture and which brings new product into existence and, therefore, on facts of these cases, we are of view that High Court was right in coming to conclusion that activity undertaken by respondents-assessees did constitute manufacture or production in terms of Section 80IA of Income Tax Act, 1961. 20. Before concluding, we would like to make one observation. If contention of Department is to be accepted, namely that activity undertaken by respondents herein is not manufacture, then, it would have serious revenue consequences. As stated above, each of respondents is paying excise duty, some of respondents are job workers and activity undertaken by them has been recognised by various Government Authorities as manufacture. To say that activity will not amount to manufacture or production under Section 80IA will have disastrous consequences, particularly in view of fact that assessees in all cases would plead that they were not liable to pay excise duty, sales tax etc. because activity did not constitute manufacture. Keeping in mind above factors, we are of view that in present cases, activity undertaken by each of respondents constitutes manufacture or production and, therefore, they would be entitled to benefit of Section 80IA of Income Tax Act, 1961. Page 25 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT 20. Supreme Court in Aspinwall & Co. Ltd. vs. Commissioner of Income Tax, (2001) 251 ITR 323 (SC), has observed as under; 11. short point for consideration is whether High Court was right in coming to conclusion that assessee was not involved in any manufacturing or production activity in process of curing coffee. 12. word manufacture has not been defined in Act. In absence of definition of word manufacture it has to be given meaning as is 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, qualities or combinations whether by hand labour or machines. If change made in article results in new and different article then it would amount to manufacturing activity. 13. This Court while determining as to what would amount to manufacturing activity held in Deputy Commissioner of Sales Tax v. M/s. Pio Food Packers, 1980 Supp. SCC 174: 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: 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. 14. Adverting to facts of present case, assessee after plucking or receiving raw coffee berries makes it undergo nine processes to give it shape of coffee Page 26 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT beans. net product is absolutely different and separate from input. change made in article results in new and different article which is recognized in trade as new and distinct commodity. coffee beans have independent identity distinct from raw material from which it was manufactured. distinct change comes about in finished product. 15. Submission of learned counsel for Revenue that assessee was doing only processing work and was not involved in manufacture and producing of new article cannot be accepted. process is manufacturing process when it brings out complete transformation in original article so as to produce commercially different article or commodity. That process itself may consist of several processes. different processes are integrally connected which results in production of commercially different article. If commercially different article or commodity results after processing then it would be manufacturing activity. assessee after processing raw berries converts them into coffee beans which is commercially different commodity. Conversion of raw berry into coffee beans would be manufacturing activity. 16. For reasons stated above, we are of opinion that High Court was wrong in its opinion that processing of raw berries into coffee beans ready for consumption would not be manufacturing activity disentitling assessee to investment allowance provided under Section 32A of Act. 21. Coordinate Bench of this Court in case of Commissioner of Income Tax vs. Alfa Lamination, (2010) 329 ITR 348 (Guj.), has observed as under; There is no dispute on facts, in as much as it is accepted position between parties that assessee Company is engaged in making CRGO Core Lamination or Transformer Core, vital component of various kinds and types of transformers used in power distribution. As already noted, Core Lamination is made by using raw material known as CRGO/CRNO. majority has recorded following processes as being involved in making of Core Lamination after purchasing CRGO/CRNO coils and/or sheets. Page 27 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT I SITTING : Slitting process high precision computerized constitutes first important manufacturing activity and fundamental in order to obtain final product. quality and accuracy of process, largely determines quality of final product. slitting is done on slitting lines (machines) maintaining 'two loops' system which ensures that grains are not strained or stretched during process. loop before and after slitting also ensure paralleblity of slits and minimum edge camber to prevent roughness on edges. All slitting blades are made of fully hardened and ground alloy steel to ensure sharpness and durability particularly to remove camber (waviness), is taken to keep edge burr under control, within specific tolerances. II SHEARING : second stage of process is Shearing at 45' or 90' as required by customers. Strict tolerances are maintained and unique three point location method to ensure accuracy in dimension in terms of angle and length. Burrs are controlled by ensuring blades are always sharp. Continues line inspection exists to ensure that all parameter are strictly maintained within acceptable limits. III-V NOTCHING : third and important step of manufacturing process is requirement of V-Notch which is per customer's design and position of centre limbs. Accuracy is of utmost importance during individual V-Notching operations. During step lap, size and position of V-Notch will differ due to different sizes of plates. IV-PUNCHING AND HOLDING: fourth step of process is known as Punching and Holing of limbs and plates. As per customer's drawings and cutting instructions holes are punched on to yoke plates. yoke plates are kept under holing power press machines to achieve desired position of holes. position of holes may even be off centre with respect to longitudinal axis of limb. During step lap, punching of holes varies according to different sizes of plates. These holes are utilized during bolting and assembling core lamination. All Limbs/Plates or Laminations: After above processes, physically all limbs or plates are prepared, however every single and individual plate is yet to be further processed to restore or improve its quality characteristics. V-ANNEALING : fifth and one of most important step of process is annealing process. This process is undertaken to de-burr and relieve stress and strains on Page 28 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT limbs / plates through roller hearth annealing furnace, CRGO electrical steel and core laminations develop stress, strains and burrs during shipment transit and processing which affects its quality. Annealing process is down as per mill's specification at temperature of 820' for 72 to 90 seconds depending upon thickness and grade of material. This process of annealing is to restore and improve magnetic and electrical properties of lamination. VI-TESTING OF LAMINATION : After annealing, laminations are physically inspected for technical details. They are verified to ensure that they are as per customer's drawings and specifications. Key aspects like length, width, thickness, mitering, holing, notching and physical appearances are verified and examined during this process. verification is done by experienced and skilled quality executives. To certify and verify that annealing process has restored or improved magnetic and electrical properties of lamination, test is conducted. Franklin power supply unit measures surface insulation of lamination and Epstein tester iron loss tester measures core/iron loss in lamination. quality and technical staff ensures that lamination is as per its technical details. Certificates are prepared and issued by quality department as per results. VII-CORE STACKING : core laminations are stacked as per customer's specification. laminations are stacked in such fashion that minimum manhandling is occurred while assembling / packaging or transporting core. Due to large sizes of core laminations of power transformers, they stacked and directly sent to packaging department for packaging and forwarding. VIII-CORE ASSEMBLY : transformer laminations for distribution transformers are assembled and built to form assembled transformer core. Drawings, specifications and details are provided by customers. supporting utilities to build core lamination are also supplied by customers which include iron channels, iron rods of various sizes, nuts and bolts, insulation tape, craft paper, resins etc. All limbs/plates are interleaved in mitered joints in order to facilitate passage of magnetic/electrical flux and to avoid hot spots and reduce no load losses, no load current and low noise level. Highly experienced, professional and trained personnels are employed to assemble transformer core. personnels practice utmost care during building core and ensure that stacking factor, building, window height, air gapping and other technical aspects are within technical limitations / details. Page 29 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT IX-TESTING OF ASSEMBLED CORE : After assembling and building core, it is mandatory to test and certify no load losses of built core. EMCO no load tester measures and ensures that its technical results are within standard limits specified in customer's drawings. technical staff and testing laboratory are fully equipped to detect and rectify any lapse in built core. Certificates are prepared by quality department. X-PACKAGING AND FORWARDING : For packing assembled cores, whole core is horizontally laid down onto wooded skids then securely wrapped with jute cloth and plastic covers. core is then strapped tightly to skids/pallets with steel straps. For packing stacked core laminations, individual limbs/ laminations are packed separately with jute cloth and plastic wrappers, further they are strapped tightly onto wooden skids/pallets. Strapping final product onto wooden skids ensures and prevents any damaged or disturbance to material during transportation. Packing lists provided to customers. Packaging department follows Pyramid style of packing laminations which is advantageous during core assembly. 9. Admittedly, majority opinion has recorded that aforesaid activities in cases of some assessees are without process of annealing but said fact by itself does not make any difference. majority opinion, as expressed by Third Member, in his order, reads as under: .... Looking to these facts, there cannot be two opinions that shape of lamination has undergone complete change after performing various processes. I also find that there was no dispute that raw material from which core is made is called CRGO coils whereas item which has emerged after various processes is called transformer core. It is also undisputed position that CRGO coils even with few processes cannot be used in transformer unless all processes were complete. It is transformer core only which is end product which could be used in manufacturing of transformer. Thus there cannot be any dispute that due to various processes product has distinct name, shape and uses. By these processes raw material loses its identity and new product comes into existence which is commercially recognized as new product. 45. I have, therefore, examined as to whether out of various processes performed by assessees it could be said that manufacture of transporter core has taken place. I find Page 30 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT that during course of assessment proceedings as well as appellate proceedings, experts opinion from SAIL, VJTI & ERDA was filed. These institutions are well recognized institutions in technical fields. Once technical opinion from them was filed same should have been considered on its merits. Though opinion expressed by them was not sacrosanct yet once same was filed, same should be accepted or rejected on merits. I have also perused opinion given by them in forms of question and answer also. In their opinion they have confirmed that various activities performed by assessees for making transformer core was manufacturing activity. Nothing has been brought to my notice to take different view in this regard. 10. Thus, findings of facts, after appreciation of evidence on record, by Tribunal are that CRGO coils even with few processes, out of all processes enumerated hereinabove, cannot be used in transformer unless all processes were completed. That after completion of all processes, CRGO/CRNO coils get converted into transformer core which is end product which can be used in manufacture of transformer. There is no dispute that due to various processes, end product, which is input for purpose of manufacturing transformer, has distinct name, shape and use. After raw-material in form of CRGO/CRNO Coils and/or sheets goes through all aforesaid processes, raw-material looses its identity and new product comes into existence which is commercially distinct from raw-material on which processes have been performed. Tribunal has further referred to various opinions of different experts on subject and recorded that such technical opinions should be considered on merits, and though not sacrosanct, either same should be accepted or rejected on merits, but cannot be ignored. That experts have opined that various activities performed by assessee for making transformer core amount to manufacturing activities and nothing was pointed out to take different view, i.e. different from view expressed by experts. 11. In light of aforesaid findings of facts recorded by majority of members of Tribunal, Court is of opinion that it cannot be said that any substantial question of law is involved. Whether particular activity amounts to manufacture or not would always be question dependent upon facts and evidence on record and would be based on facts of each case. only issue which would call for inquiry is as to whether correct tests have been applied after finding facts on record. tests to ascertain whether Page 31 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT activity amounts to manufacture or production of article or thing have been laid down and reiterated by various decisions of Apex Court and this High Court. Broadly, requirement is that raw material must be, in first instance, subjected to process of such nature that it cannot be termed to be same as end-product after raw material undergoes process of manufacture. In other words, goods purchased as raw material should go in as inputs in process of manufacture and result must be manufacture of other goods. article produced must be regarded by trade as new and distinct article having identity of its own, independent market after commodity is subjected to process of manufacture. nature and extent of process would vary from case to case, and in given case, there may be only one stage of processing, while in another case, there may be several stages of processing, and perhaps, different kind of process at every stage. That with every process, commodity would experience change, but ultimately, it is only when change, or series of changes, bring about result so as to produce new and distinct article, that it can be said that commodity used as raw material has been consumed in manufacture of end-product. To put it differently, final product does not retain identity of raw material after it has undergone process or processes of manufacture. [(2006) 282 ITR 568 (Guj.). 12. Applying aforesaid tests to facts found by Tribunal, it is not possible to come to conclusion that any legal infirmity exists in impugned order of Tribunal so as to give rise to substantial question of law. Court is also of opinion that in case where subject matter involves technical issue and opinion of technical experts in field have been placed on record, unless and until such opinion of expert is dislodged by placing on record contrary opinion and giving opportunity to expert to deal with such contrary opinion, and thereafter examining expert on said issue, it would not be correct to discard such opinion summarily. In fact, Court and Tribunal, or any other forum for that matter, would be wholly ill-equipped to deal with such technical opinion on merits and should refrain from undertaking such exercise without following aforesaid procedure. Tribunal has in circumstances rightly, while recording majority opinion, given due credence to opinion of technical experts of field. 22. We have also looked into six decisions relied upon on behalf of Revenue. However, all six decisions are Page 32 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 C/TAXAP/460/2019 JUDGMENT distinguishable on facts. In our opinion, they are of no avail to Revenue. 23. Having regard to concurrent findings of fact recorded by two revenue authorities, and also in view of aforesaid discussion, we are of view that no error, not to speak of any error of law, could be said to have been committed by Appellate Tribunal in passing impugned order. We would not like to disturb order passed by ITAT. 24. In result, all appeals fail and are hereby dismissed. questions of law, as framed, are answered against Revenue and in favour of assessee. (J. B. PARDIWALA, J) (A. C. RAO, J) Vahid Page 33 of 33 Downloaded on : Sat Oct 26 11:02:47 IST 2019 Principal Commissioner of Income-tax, Vadodara 1 v. Fine Line Circuits Company