Case Law Details
RELEVANT PARAGRAPH
6. We have considered the rival contentions and gone through the records carefully. Honourable Supreme Court in the case of India Cine Agencies (supra) has considered various judgements of Honourable High Court as well of Honourable Supreme Court, while. construing the meaning of expression, manufacture and production. Honourable Court has also considered the judgement in the case of N.C. Budhjraja & Co. (supra) has been relied upon by the Assessing Officer. The Honourable Court has considered the dictionary meaning of expression “manufacture” as well as how this term has been construed and expounded by the courts in various judgements. The authoritative observations of the Honourable Court are worth to note for understanding the meaning of word “manufacture” :
“2., As noted above, the core issue is whether the activity undertaken was manufacture or production.
3. In Black’s Law Dictionary (5th edition), the word , “the “manufacture” has been defined as, “the-process or operation of 1 makings goods or any material produced by hand, by machinery or by other agency; by the hand, by machinery, or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or I machine”. Thus, by a process of manufacture something is I produced and brought into existence which is different from that, out of which it is made in the sense that the thing produced from that, out of which it is made in the sense that the thing | produced is by itself a commercial commodity capable of being sold or supplied. The material from which the thing or product is manufactured may necessarily lose its identity or may become transformed into the basic or essential properties £see JI “Dy. Commissioner of Sales-tax (Law), Board of Revenue (Taxes) Coco Fibres (1992) Supp (1) SCC 290:)
4. Manufacture implies a change but every change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is 1 the end result of one or more process through which the original commodities are made to pass. The nature and extent of processing may vary from one case to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. Whenever a commodity undergoes a . change as a result of some operation performed o it or ^regard . to it, such operation would amount the processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point-where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. Process in manufacture or in relation to manufacture implies not only the production but also various stages through which the raw material is subjected to change by different operations. It is the cumulative effect of the various processes to which the raw material is subjected that the manufactured product emerges. Therefore, each step towards such production would be a process in relation to the manufacture. Where any particular process is so integrally connected with the ultimate production of goods that but for that process processing of goods would be impossible or commercially inexpedient, that process is one in relation to the manufacture. Collector of Central Excise. Vs Rajasthan State Chemical Works 1991 4 SCC 473.
5. “Manufacture” is a transformation of an article, which is commercially different from the one, which is converted. The essence of manufacture is the change of one object to another for the purpose of making it marketable. The essential point thus is that in manufacture something is brought into existence, which is different from that which originally existed in the sense that the thing produced is by itself a commercially different commodity whereas in the case of processing it is not necessary to produce a commercially different article. (83% Saraswati Sugar Mills Vs Haryana State Board |1992J 1 SCC 418
6. The prevalent and generally accepted test to ascertain that there is “manufacture” is whether the change or the series of change brought about by the application of processes take the commodity to the point where, commercially, it can no longer be regarded as the original commodity but is, instead, recognised as a distinct and new article that has emerged as a result of the process. There might be borderline cases where either conclusion with equal justification can be reached. Insistence on any sharp or intrinsic distinction between “processing and manufacture” , results in an oversimplification^ of both and tends to blur their interdependence. Ujagar Prints Vs Union of India 1989 3 SCC 488
7, To put it differently, the test to determine whether a particular activity amounts to “manufacture” or not is : Do new and different goods emerge having distinctive name, use and character. The moment there is transformation into a new commodity commercially known as a distinct and separate commodity having its own character, use and name, whether it be the result of one process or several processes “manufacture’ ‘ _ takes place and liability to duty is attracted Etymologically the word “manufacture” properly construed would doubtless cover I the transformation. It is the transformation of a matter into something else and that something else is a question of degree whether that something else is a different commercial commodity having its distinct character, use and name and I commercially known as such from that point of view, is a question depending upon the facts and circumstances of the case. Empire Industries Ltd. Vs. Union of India 1985 3 SCC 314)”
7. In the light of above judgement, if we examine the activity of the assessee then it would reveal that preparation of RMC is not as simple as construed by the learned QT(Appeals). The assessee has been carrying out this activity in an organised manner with the help of heavy machinery and computer. Its activity is not as simply as mixing of sand, cement etc. by a labourer on the right side. Though in the common parlance, sometime it does not sound logic to say that mixing of R.M.C. is a manufacturing activity but if we look into this activity carried out by the assessee from the point of an expert who has laid down BIS standard placed on the paper book then it would indicate that it is a complicated affairs. The mixing of four products in prescribed ratio would result a different identifiable product which cannot be reconverted to its original shape. Honourable Supreme Court in the case of India Cine Agencies (supra) has considered cutting of a jumbo films rolls into small piece of films a manufacturing activity. If we analysis the facts of assessee’s case, as per the ratios of Honourable Supreme Court’s decision then its case is on a better footings. Therefore, we are of the opinion that Learned Revenue Authority have erred in holding that assessee is not carrying out any manufacturing activity. We allow the first issue raised by the assessee and pleaded in ground Nos. 3 to 5. We direct the Assessing Officer to allow additional depreciation on machinery used for the production of ready mixed concrete.g
