I.T.AS. NOS.66/KB TO 70/KB OF 1999-2000 VS I.T.AS. NOS.66/KB TO 70/KB OF 1999-2000, 2000 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 874 (1999)

(a) Income-tax---

----Manufacturing---Definition of word "manufacturing" contained in Sales Tax Act, 1990 could not be adopted for purpose of Income Tax Ordinance, 1979.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss.66-A, 62 & 80-C---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Tax on income of certain contractors and importers---"Manufacturing"---Assessee was a tea company---Business of assessee consisted of import of dust and tea leaves, mixing, blending, colouring, processing, flavouring and packing thereof by making the same marketable under various names and then selling the same---Assessment was finalized under S.62 of the Income Tax Ordinance, 1979---Inspecting Additional Commissioner cancelled the assessment and charged tax under S.80-C of the Income Tax Ordinance, 1979 being importer on the ground that activities of assessee were not covered by the definition of "manufacturing" and production but were regarded as processing ---Validity- Assessee was an industrial undertaking and the tea leaves and dust were imported for its consumption---Finding of Inspecting Additional Commissioner that import purchase should be assessed under S.80-C of the Income Tax Ordinance, 1979 being erroneous his order under S.66-A, Income Tax Ordinance, 1979 was cancelled while that of Assessing Officer was restored by the Appellate Tribunal.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss.66-A & 80-C---Second Sched., Part I, cl.118-E---C.B.R. Circular No.4(17)/TP/I-91, dated 15-7-1995---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Tax on income of certain contractors and importers ---Exemption---Manufacturing---Assessee was a tea company importing dust and tea leaves ---Assessee was mixing, blending and packing the tea and then selling the same in market---Assessing Officer assigned the assessee status of a manufacturer and allowed exemption under clause 118-E'of Part I of Second Sched. of Income Tax Ordinance, 1979---Inspecting Additional Commissioner cancelled the assessment and charged the tax under S.80-C of Income Tax Ordinance, 1979 as an importer on the ground that assessee was neither industrial undertaking nor engaged in the process of production and manufacturing as he was dealing in import and then sale of tea by mixing, blending and packing the same, thus, activities of the assessee were not covered by definition of "manufacturing and production"---Validity---Meaning of the word "manufacture" had been expanding with the passage of time and had now expanded to the extent that mixing, blending, colouring and flavouring of tea amounted to "manufacture" because not only that required a sophisticated process but an art and skill which was not very common ---Assessee was an industrial undertaking and was engaged in the manufacture of finished tea out of imported raw leaves and dust after subjecting same to a manufacturing process---Exemption allowed by the Assessing Officer was not interfered with but was declared to be in consonance with the view expressed by the Central Board of Revenue in Circular No.4 of 1995, dated 15-7-1995-- Orders of Inspecting Additional Commissioner under S.66-A were quashed and original orders of Assessing Officer were restored by the Appellate Tribunal.

1998 PTD 3835; 1995 PTD 813; Nilgiri Ceylon Teas Supplying Co. v. State of Bombay (1959) 10 STC 500 (Bom.); Chowgule & Co. (Pvt.) Ltd. v. Union of India (1981) 47 STC 24 (SC); Assistant Collector of Central Excise and Land Custom v. Orient Straw Board and Paper Mills Limited PLD 1991 SC1992; Central Insurance Company v. C.B.R. 1993 PTD 766 = 1993 SCMR 1232; 1993 PTD (Trib.) 939; G. A. Renderian Limited v. CIT (1984) 145 ITR 387 (Cal.); Chriestian Mica Industries Ltd. v. State of Bihar (1961) 12 STC 150 (SC); Chowgule & Co. (Pvt.) Ltd. v. Union of India (1981) 47 STC 124(SC); Badrinarayan v. State of Madhya Pradesh (1988) 70 STC 12; Tarai Development Corporation v. CIT (1979) 120 ITR 342 (All.); CIT v. 1.B. Kharwar & Sons (1987) 163 ITR 394 (Guj.); Brooke Bond India Limited v. Union of India (1984) Tax LR 2595 (Cal.); East India Cotton Manufacturing Company (Private) Limited v. Assessing Authority-cum-Excise and Taxation Officer (1972) 30 STC 489 (P&H); Empire Industrial Limited v. Union of India (1986) 162 ITR 846; CIT v. Union Carbide India Limited (1987) 165 ITR 550 (Cal.); Collector of Central Excise v. Eastend Paper Industries Limited (1990) 186 ITR 105 (SC); Deputy Commissioner of Sales Tax v. Pio Food Packers (1980) 46 STC 63; CIT v. N.V. Budharaja & Co.204 ITR 412 and 1985 PTD 94 ref.

The Black's Law Dictionary; The Stroud's Judicial Dictionary; The Legal Theasarus by William C. Bertin and The New Shorter Oxford English Dictionary, 1993 Edn. rel.

(d) Income-tax---

----Central Board of Revenue---Interpretation by---Judgment in the case of General Insurance Company v. C.B.R. reported as 1993 PTD 766 regarding interpretation of law/clarification by the Central Board of Revenue explained.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss.8 & 66-A---All Officers to follow the orders of-the Central Board of Revenue---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Inspecting Additional Commissioner while revising Deputy Commissioner's order ignored the clarification issued by the Central Board of Revenue on the ground that these were not binding according to the judgment pronounced by the Supreme Court of Pakistan in respect of interpretation by C.B.R.---Validity---Inspecting Additional Commissioner was not one of the Judicial Authorities as mentioned in the judgment of Supreme Court reported as 1993 PTD 766---In order to maintain discipline the subordinate Administrative Officer should not make such observations in respect of Central Board of Revenue---Inspecting Additional Commissioner was basically an administrative officer, and therefore, barring very exceptional circumstances, the instructions, directions and clarifications issued by the Central Board of Revenue should not be lightly ignored by the Inspecting Additional Commissioners or Commissioners.

(f) Words and phrases--

----"Manufacturing"---Meaning of word "manufacturing" elaborately discussed.

The Black's Law Dictionary; The Stroud's Judicial Dictionary; The Legal Theasarus by William C. Bertin and The New Shorter Oxford English Dictionary, 1993 Edn. rel.

Qumaruddin Manji, C.A. for Appellant.

Zaki Ahmed, D.R. for Respondent.

Date of hearing: 3rd November, 1999.

ORDER

MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---All the above appeals at the instance of assessee are directed against the order under section 66-A by the learned I.A.C. of Income Tax Range-III, Cos-IV, Karachi.

2. Common question of facts and law is involved in all the appeals and, therefore, the appeals have been heard together and are disposed of by this single consolidated order.

3. The relevant facts are that the appellant is tea company and in the original assessment orders for assessment years 1993-94 to 1997-98, the appellant/assessee was given status of a manufacturer and assessments were made accordingly.

4. Subsequently the learned I.A.C. examined record and formed opinion that the assessments were erroneous in so far as they were prejudicial to the interest of Revenue. The learned I.A.C. observed that the appellant is neither industrial undertaking nor is engaged in the process of production and manufacture. According to learned I.A.C. the appellant was dealing in import and then sale of tea by mixing, blending and packing the same. The learned I.A.C. was of the view that these activities are not covered by the definition of manufacturing and production. He, therefore, issued show cause notice to explain as to why the assessment order may not be cancelled and tax may not be charged under section 80-C on imports which were of commercial nature.

5. Explanation was furnished on behalf of the appellant contending that appellant was an industrial undertaking exclusively dealing in the business of import of dust and raw tea leaves and processing, grinding, mixing, grading, blending, colouring, packing, and selling under different tradenames as "Mehak" 'Kundan' Jhomar' and Danedar' within the meaning of manufacture. It was pleaded that Federal Government was pleased to examine goods produced or manufactured in Pakistan and falling under the heading in First Schedule, Customs Act, 1969 which includes the manufacture of tea. The Federal Government was pleased to exempt the raw material imported for sale of the manufactured as above from the levy of sales tax. The appellant further referred to C.B.R. Circular No.4 (17)TP/1 91, dated 15-7-1995 in which it was stated by C.B.R. that the tea companies enjoy status of manufacturer for the purpose of applicability of provision of section 80-C. The appellant further stated that other tea companies such as Tapal and M.M. Isphani were also being treated as manufacturers by the department. It was contended that according to the definition of manufacture cited by the learned I.A.C. himself it means the process or operation of making goods or any material produced by hand, machinery or by other agency or anything made from raw materials by hand by machinery or by any act. According to said definition of the production of article for use from raw or prepared material by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine amounts to manufacturing. It was submitted that the quality and property of imported dust and raw tea in form of leaves is improved by long process. The qualities and taste of product is developed in rich flavour for the benefit of the consumer. The learned I.A.C. did not accept the contention end held that in view of definition of manufacture in various judicial pronouncement, the plea taken was not acceptable. According to the learned I.A.C. the appellant was neither an industrial undertaking nor producer or manufacturer and, therefore, exemption allowed under clause (118-E) of part I of the Second Schedule to the Income Tax Ordinance, 1979 ,for the assessment years 1993-94, 1994-95, 1995-96 and part of assessment year 1996-97 was erroneous and likewise the assessment made under section 62 in the assessment year 1997-98 was also erroneous. He reiterated his view that the appellant company is not engaged in the manufacture of any goods and simply imports tea ~'and sells the same. He held that the activities of the appellant can never be termed to constitute the manufacturing activity or production. He observed that the term manufacture has not been defined in the Income Tax Ordinance, 1979, and therefore, its Dictionary meaning has to be relied upon. He referred to the definition of manufacture in Black-Law Dictionary which was cited with approval by the Lahore High Court in the judgment reported as (1998) Tax 88, PLJ (1999) LHA 381, 1999 Tax 88 has been wrongly cited. The correct citation is 1998 PTD 3835). The definition of work manufacture from the Black's Law Dictionary is as follows:---

"...Manufacture means the process or operation of making goods or any material produced by hand, by machinery or by other agency anything made from raw material by the hand, machine or by arts. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine."

"In patent law, any useful produce made directly by human labour, or by the aid of machinery directed and controlled by human power, and either from raw materials or from materials worked up into a new from. Also the process by which such products are made or fashioned."

7. On the basis of above definition the learned I.A.C. held that the manufacture would mean any process whereby the new shape. or form different from the original one comes into existence. He further observed that in the case of assessee, tea remains tea despite growing through the process of mixing, blending, and packing. In support of this view, the learned I.A.C. placed reliance on a judgment of Calcutta High Court reported as 1995 PTD 813. He placed reliance on the following finding "assessee merely mixed up and blended tea and sold them in the market. The processing of tea did not involve manufacture of any article or thing. The input and output of the assessee's business remained tea i.e. the thing produced by the assessee was tea and end product sold by the assessee was also tea".

8. He further placed reliance on another judgment from Indian jurisdiction in the case of Nilgiri Ceylon Teas Supplying Co. v. State of Bombay (1959) 10 STC 500 (Bom.). According to the learned I.A.C. it was held in that case that tea blending was neither processing nor alteration in any manner. According to the learned I.A.C. the mixing or blending of different verities of tea should be regarded as processing.

9.He has further placed reliance on a judgment from the, Indian jurisdiction in the case of Chowgule & Co. (Pvt.) Ltd. v. Union of India (1981) 47 STC 24(SC). .

10. The learned I.A.C. further placed reliance on the judgment of Supreme Court of Pakistan in the case of Assistant Collector of Central Excise and Land Custom v. Orient Straw Board and Paper Mills Limited PLD 1991 SC 992. Following observation was cited .

....From the above cited cases, it is evident that the basic question in issue is, whether the process of pasting and cutting of the paper board is carried out with the object to complete the produce or in other words whether the case of the above process results into a finished product marketable under a separate trade name. If proper board remains paper board in spite of the fact that two thin paper boards are pasted with each other to make it thicker or it is cut to bring it to the required size, in our view, the same remains paper board and not a different item warranting the levy of excise duty second time."

11. The learned I.A.C. concluded that the appellant was not engaged in the manufacturing process because in-put and out-put was tea. He further observed that the example of Tapal Company and M.M. Isphani is of no help to the assessee because the wrong interpretation if made in a case cannot be applied to the other case. The learned I.A.C. further held that the S.R.Os. in respect of custom duty and sales tax, wherein the importers of tea have been held to be manufacturers is of no help to the appellant as those S.R.Os. have been issued keeping in view the definition of manufacture and production in the Sales Tax Act. According to the learned I.A.C. the definition contained in Sales Tax Act are not to be employed for the purpose of Income Tax Ordinance, 1979. The learned I.A.C. further referred to the clarification given by C.B.R. vide latter No.4 (17) TPI/91, dated 15-7-1993 whereby tea companies were held to be manufacturer for the purpose of section 80-C and observed that the clarification issued by the C.B.R. was without examining the definition of manufacturer, production and judicial pronouncement of the Superior Court and he further held that interpretation given by C.$.R. was not binding. In this regard he referred to judgment of Supreme Court of Pakistan in the case of Central Insurance Company v. C.B.R. 1993 PTD 766 = 1993 SCMR 1232.

12. The learned I.A.C. ultimately held that the appellant was not manufacturer and, therefore, the exemption under clause (118-E) of Part-I Second Schedule of the Income Tax Ordinance was wrongly allowed. He further held that in the assessment year 1997-98 the assessment was wrongly completed under section 62. He, therefore, determined the tax liability of the appellant in the assessment years 1993-94, 1994-95, 1995-96 and 1996-97, under section 80-C read with section 50(50), of the Income Tax Ordinance, 1979 and after cancelling the assessment for the assessment year 1997-98 directed the D.C.I.T. to finalize assessment afresh in accordance with law.

13. Feeling aggrieved the appellant has preferred these direct appeals before us.

14. Heard Mr. Qumaruddin Manji, C.A. learned representative for the appellant and Mr. Zaki Ahmed learned representative for the department.

15. The learned representative for the parties have reiterated their respective contentions reproduced above. Mr. Qumaruddin Manji has produced copies of various S.R.Os. issued by the Federal Government in pursuance of the Sales Tax Act, 1990 whereby exemption from levy of Sales Tax was allowed to various producers and manufactures which include tea. He has further produced letter, dated 15-7-1993 from C.B.R addressed to commissioner of Income Tax Co III, Karachi containing clarification that tea companies enjoy status of manufacturer and for the purpose of section 80-C they shall be considered as manufacturer. Mr. Qumaruddin Manji has further submitted that the learned I.A.C. has not correctly applied the ratio of judgment on which he has placed reliance. On the other hand, the learned D.R. has supported the impugned order of learned I.A.C. and has submitted that the terms industrial undertaking and manufacturer or manufacturing process are not defined in the Income Tax Ordinance, 1979. The attention of learned representatives for the parties was drawn to the provision contained in section 48(2) in which the conditions required to be fulfilled by industrial undertaking have been given. The learned counsel for the appellant thereafter produced necessary details in respect of the plant installed by the appellant for the purpose of converting raw dust and tea leaves into finished tea for sale in market. On perusal of said material the learned D.R. was-not able to deny that the plant installed by the appellant fulfilled all those conditions of industrial undertaking which were given in subsection (2) of section 48.

16. Mr. Qamarudding Manji has explained the nature of job performed by the appellant. He has produced documents to show that the plant consist of Feed Hopper, Feed 'Storage Hopper, Conveyor 1, Sifter, Dust Extraction, Mixing Drum, Conveyor 2, Bucket Elevator, Blended Tea Storage Hoppor and Blended Tea Mobile Hopper in blending/mixing section. There are other machineries also in packing section. He has further submitted, that manufacturing process means any process for, or incidental to making or packing or otherwise treating any article or substance with a view to its use, sale, transport, delivery or disposal. He has further contended that the manufacturing process 'includes any process for making altering, repairing, finishing, packing, oiling, washing, cleaning, breaking up, demolishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal. He has further placed reliance on a Division Bench judgment of this Tribunal reported as 1993 PTD (Trib.) 939 wherein it has been held that calendaring is a process ancillary to the completion of the manufactured product. It has been further held that the process of dyeing and glazing tanned leather of sheep skins are calculated to produce goods.

17. We have very carefully considered the contentions raised by the learned representative for the parties and the, material placed on record. A perusal of the impugned order shows that the learned I.A.C. has mainly placed reliance on .the judgment of Calutta High Court reported as 1995 PTD 813. The other cases to which reference has been made by the learned I.A.C. have been discussed in the above judgment of Calcutta High Court We have gone through the judgment of Calcutta High Court referred to above and the other cases from Indian jurisdiction. We have found that there are provisions in India granting benefits to new industrial undertaking and the expressions manufacture, production and processing came for consideration before various High Courts and the Supreme Court of India. On perusal of a large number of judgements from Indian jurisdiction we have found that the judgments are not consistent and diverse views have been taken by various High Courts and even by Supreme Court Indian in different judgments. One of the reasons may be that they expressions manufacture, production and processing have been considered in the context of various provisions and enactments. The expressions have not been defined in Indian enactments also as it has not been done in Pakistan, particularly in Income-tax Ordinance. So far the definitions contained in the Sales Tax Act are concerned we are of the opinion that it cannot be adopted for the purpose of Income-tax Ordinance. Since main emphasis of the learned I.A.C. in the impugned order is on the ratio of Calcutta High Court judgment in the case of Appeejay (Pvt.) Limited v. Commissioner of Income-tax (1995 PTD 813), wherein it has been held that if the input and output is the same it does not mean to manufacture, and it was also in case of tea company, therefore, first we will consider the said judgment. In the said case the assessee was inter alia engaged in buying different types of tea from market, blending them in different proportion and sale the tea so blended in the market. The assessee contended before the Income-tax Officer that it was engaged in the manufacture and production of articles within the meaning of section 80-J(4)(iii) of the Indian Income Tax Act, 1961 and was, therefore, entitled to relief envisaged under the said section. The Income Tax Officer held that the assessee was not an industrial undertaking, manufacturing and producing any article as it was engaged only in blending the different types of tea and selling the tea so blended. The issue was ultimately referred to Calcutta High Court. In the said case, the Indian Tribunal had held that the business of purchasing tea of different qualities and selling them after mixing was an activity of processing and not an activity of manufacture. The Tribunal had placed reliance on the judgment in the case of Nilgiri Ceylon Tea Supplying Co. v. State of Bombay (1959) 10 STC 500 (Bom.) and G. A. Renderian Limited v. CIT (1984) 145 ITR 387 (Cal.). It was contended before the Calcutta High Court that the process by which tea is blended after manufacture and comes into category -of new mixture of tea or tea mixture as a production or manufacture and is a commercially new and distinct commodity. Reliance was placed in this behalf on a large number of cases which have been considered by the Calcutta High Court. It was pleaded on behalf of Revenue that the assessee was merely mixing anal blending tea and that it was merely processing of tea which does not involve manufacture of any article or thing. It was pleaded that the input and output of assessee's business remains same and, therefore, it does not amount to manufacture or production and, therefore, relief under section 80-J in Indian Income Tax Act, 1961 was not available.

18. The first case considered was Chriestian Mica Industries Ltd. v. State of Bihar (1961) 12 STC 150 (SC).-In this case the Supreme Court of India held in the context of section 2(g) of Bihar Sales Tax Act, 1947 that mica mining operations by which crude mica is taken out of the mine and processed into split mica, which is a commercial commodity was an act of production. The second case was Nilgiri Ceylon Tea Supplying Co. v. State of Bombay (1959) 10 STC 500 (Bom.) wherein it was held that tea blending was neither processing nor alteration in any meaning of the work. Diversed brands of tea purchased by the assessee were mixed. The brands of tea so purchased were sold as tea mixture. The relevant law for consideration was section 8(a) of the Bombay Sales Tax Act, 1953. In the said case the plea of department was that mixing or blending of different varieties of tea should not be regarded as process. The Bombay High Court held that there has been nothing but a manual application of energy to the different qualities of tea purchased by the assessee in certain proportion so as to evolve a mixture of tea which was sold as tea mixture of the assessee. There is not even application of mechanical force so as to subject the commodity to a process manufacture, development or preparation. According to Bombay High Court the commodity has remained in the same condition and although the preparation of tea mixture which was marketed involved some skill but it was not processing within the meaning of the proviso of the Bombay Sales Tax Act. The third case was Chowgule & Co. (Pvt) Ltd. v. Union of India (1981) 47 STC 124 (SC). In the said case it was held by the Supreme Court of India that blending of different qualities of ore does not involve the process of manufacture but it amounted to processing of the ore within the meaning of section 8(3)(b) of the Central Sales Tax Act and Rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957. While deciding the above case the Supreme Court of India considered the judgment of Bombay High Court in Nilgiri Ceylon Tea Supplying Co. v. State of Bombay (1959) 10 STC 500 (Bom.) and held as follows:---

"(i) When different brands of tea were mixed by the assessee as in Nilgirl Ceylon Tea Supplying Company's case (1959) 10 STC 500 (Bom.) for the purpose of producing a tea mixture of a different kind and quality according to a formula evolved by them. there was plainly and indubitably processing of the different brands of tea, because these brands of tea experienced, as a result of mixing a qualitative change, in that the tea mixture which came into existence was of a different quality and flavour than the different brands of the tea which went into the mixture;

(ii) There are, it is true, some observations in the judgment of the Bombay High Court which seem to suggest that if instead of manual application of energy in mixing the different brands of tea. there had been application of mechanical force in producing the tea mixture, the Court might have come to a different conclusion and these observations were relied upon by the assessee, since, in the present case, the blending was done by application of mechanical force, but that is not the correct test to be applied for the purpose of determining whether there is processing;

(iii) The question is not whether there is any manual application of energy or there is application of mechanical force. Whatever be the means employed for the purpose of carrying out the operation it is the effect of the operation in the commodity that is material for the purpose of determining whether the operation constitutes processing."

19. The Supreme Court of India ultimately held that if any commodity is subject to a process or treatment with a view to its 'development or preparation for the market' it would amount to processing of the commodity within the meaning of the Central Sales Tax -Act, 1956. In this case the Supreme Court of India did not consider the expression manufacture since the question was decided only on the expression processing.

20. Following the above judgment of the Supreme Court of India the Madhya Pradesh High Court in the case of Badrinarayan v. State of Madhya Pradesh (1988) 70 STC 12 held that the process of blending of tea leaves amounts to manufacture and the petitioner was engaged in the production of an article which is commercially new and distinct commodity after processing comes into existence.

21. In the case of Tarai Development Corporation v. CIT (1979) 120 ITR 342 (All.), the processing of seeds was held to be a process of manufacture or production for the purpose of section 80-J of the Indian l-come Tax Act, 1961.

22. In the case of CIT v. J.B. Kharwar & Sons (1987) 163 ITR 394 (Guj.) while considering the expression 'manufactures' or 'producers' occurring in clause (iii) of subsection (4) of section 80-J of the Indian Income Tax Act, 1961 it was held that when the assessee subjects grey cloth in the process of dyeing and printing. it manufactures or produces an article which is used as a raw material.

23. In the case of Brooke Bond India Limited v. Union of India (1984) Tax LR 2595 (Cal.); it was held that the process by which tea is packed after manufacture and comes into the category of package, tea will be deemed to have been considered by the legislature to amount by itself, to a production or manufacture which makes the article excisable to duty.

24. In the case of G.A. Renderian Limited v. CIT (1984) 145 ITR 387 (Cal.) while considering the claim of the assessee for treating it as an industrial company within the meaning of section 2(7)(c) of the Indian Finance Act, 1978 for allowing the benefit of concessional rate of tax, it was held that blending tea amounts to processing and, therefore, the assessee was an industrial company.

25. In the case of East India Cotton Manufacturing Company (Private) Limited v. Assessing Authority-cum-Excise and Taxation Officer (1972) 30 STC 489 (P&H) it was held that sizing, bleaching or dyeing of raw cloth turns it into a different marketable commodity and as such amounts 1 to manufacture of a commercially new product. This view was approved by the Supreme Court of India in the case of Empire Industries Limited v. Union of India (1986) 162 ITR 846.

26. In the case of CIT v. Union Carbide India Limited (1987) 165 ITR 550 (Cal.) it was held that the material produced i.e. the shrimps caught from the deep sea, were converted into frozen fish and fish product. The operations consisted of cleaning, peeling, packing and freezing the shrimps without which the same were not marketable and as a result of such processing a new commercial product came into existence and, therefore, the processed fish and fish products were the result of production or manufacture and the assessee was an industrial undertaking.

27. In the case of Collector of Central Excise v. Eastend Paper Industries Limited (1990) 186 ITR 105 (SC) it was held that the manufacture is a process or activity which brings into existence new, identifiable and distinct goods. Goods are identifiable articles known in the market as goods and marketed or marketable in the market as such. Anything required to make the goods marketable must form part of the manufacture and any raw material or any materials used for the same would be a component part of the end product.

28. After considering the above and some other judgments the Calcutta High Court referred to section 80-J(4)(iii) and considered the expression 'manufactures and produces articles' and held that the Tribunal was correct in holding that the assessee was not entitled to any relief under section 80-J of the Income-tax Act as it is not an industrial undertaking which manufactures or produces any articles since the assessee is engaged only in blending of tea which may amount to processing but not manufacture or production of an article within the meaning of section 32-A or section 80-J of the Indian Income Tax Act, 1961. It was ultimately held that since in-put and output remained tea, therefore, no manufacture or production was involved.

29. The Supreme Court of India in the case of Deputy Commissioner of Sales Tax v. Pio Food Packers (1980) 46 STC 63 considered the meaning of manufacture and evolved test for determining whether manufacture can be said to have taken place. The test laid down was whereby commodity which is subjected to process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. This principle was cited with approval by Supreme Court of India in the case of CIT v. N.V. Budharaja & Co. (204 ITR 412 = 1985 PTD 94).

30. A perusal of judgments from the Indian jurisdiction' shows that there is no unanimous connotation of the expression manufacture. The reason appears that the expression has been considered in the context of the provisions of law in different enactments. The expression manufacture requiring consideration in the present appeal by us is with reference to the omitted clause (118-E) in Part-I of the Second Schedule to the Income-tax Ordinance, 1979 and secondly with reference to the expression industrial undertaking used in the said clause and in section 80-C (2)(a)(ii). Here we would like to point out that so far the appeal for the assessment year 1997-98 is concerned, the meaning and connotation of expression 'manufacture' is not relevant because this expression has not been used in section 80-C(2)(a)(ii). The expression used in this provision is, 'not being goods imported by an industrial undertaking as raw material for its own consumption'. There is no dispute that the appellant is importing dust and tea leaves for its own consumption. We have also referred that after production of details in respect of the plant in which the appellant is processing, mixing, blending and packing the tea, the learned D.R. has not denied the fact that it is an industrial undertaking. Thus, in view of the admitted facts before us that the appellant is an industrial undertaking and the tea leaves and dust are imported for its own consumption, the issue so far the assessment year 1997-98 is concerned, stands resolved in favour of appellant. For the purpose of deciding appeal for the assessment year 1997-98 the meaning of expression manufacture is not required to be considered and, therefore, it is held that the assessment completed under section 62 for the assessment year 1997-98 was according to law. The assessment was not erroneous either on facts or on law and, therefore, the finding given by the learned I.A.C. in the impugned order that the import .purchases should be assessed under section 80-C in the assessment year 1997-98 is itself erroneous and is hereby vacated. The Assessing Officer rightly made assessment order under section 62. The impugned order under section 66-A for the assessment year 1997-98 is hereby cancelled with the result that the assessment order for the assessment year 1997-98 under section 62 of the Income Tax Ordinance, 1979 is hereby restored.

31. This brings us to the common issue in the appeals pertaining to the assessment years 1993-94, 1994-95, 1995-96 and 1996-97. In all these appeals, the question for consideration is whether the business activity of the appellant which consisted of import of dust and tea leaves, mixing, blending, colouring, processing, flavouring, and packing thereof making the same marketable under various brand names and then selling the same in the market locally and exporting the same amounts to manufacture of goods or material or subjection of goods or material to a manufacturing process. As already observed it is admitted position that the expressions manufacture or manufacturing process has not been defined in the Income-tax Ordinance. The judgments cited at bar from the Indian jurisdiction show that lot of consideration has been given to these expressions by the Supreme Court of India and various High Courts but no consensus has arrived on the meaning connotation of the expression manufacture. The lack of unanimity appears-to be because of different context in which the expression has been used in various enactments in India, which came for consideration before the Superior Courts. While referring to various judgments from the Indian jurisdiction we have found that the very business which is under consideration in these appeals came for consideration before various Courts in Indian jurisdiction. In the case of Nilgiri Ceylon Tea Supplying Company v. State of Bombay, the issue came for consideration with reference to the provision contained in Bombay Sales Tax Act, 1953 and it was held that although the preparation of tea mixture which was marketed involved some skill but it was not processing within the meaning of relevant provision in the Bombay Sales Tax Act as the commodity remained same. The reasoning was not approved by Supreme Court of India in the case of Chowgule & Co. (Pvt.) Limited v. Union of Indian while considering the provision contained in Central Sales Tax Act (Indian) 1956. The Supreme Court of India held that when different brands of tea were mixed for the purpose of producing a tea mixture of different kind and quality according to a formula involved by them, there was plainly and indubitably processing of different brands of tea, because these brands of tea experienced, as a result of mixing a qualitative change, in that the tea mixture which came into existence was a different quality and flavour than the different brands of tea which were blended into the mixture. The Madhya Predesh High Court in the case of Badrinarayan v. State of Madhya Pradesh held that process of blending of tea leaves amounts to manufacture and the petitioner is engaged in the production of an article which is a commercially new and distinct commodity after processing comes into existence. The Calcutta High Court in the case of Brooke Bond India Limited held that the process by which tea is packed after manufacture amounts to production or manufacture. Again in the case of G.A. Randerian Limited Calcutta High Court held that the assessee engaged in the blending of tea was an industrial company. After considering the above conflicting judgments the Calcutta High Court held in the case of Appeejay (Pvt.) Limited (1995 PTD 813) that since the input and out-put in the case of mixing and blending of tea was same, therefore, it does not amount to manufacture or production of an article. In view of the above circumstances, we are of the considered opinion that the meaning and connotation of the appellant which consisted of import of dust and tea leaves, mixing, blending, colouring, processing, flavouring, and packing thereof making the same marketable under various brand names and then selling the same in the market locally and exporting the same amounts to manufacture of goods or material or subjection of goods or material to a manufacturing process. As already observed it is admitted position that the expressions manufacture or manufacturing process has not been defined in the Income-tax Ordinance. The judgments cited at bar from the Indian jurisdiction show that lot of consideration has been given to these expressions by the Supreme Court of India and various High Courts but no consensus has arrived on the meaning and connotation of the expression manufacture. The lack of unanimity appears to be because of different context in which the expression has been used in various enactments in India, which came for consideration before the Superior Courts. While referring to various judgments from the Indian jurisdiction we have found that the very business which is under consideration in these appeals came for consideration before various Courts in Indian jurisdiction. In the case of Nilgiri Ceylon Tea Supplying Company v. State of Bombay, the issue came for consideration with reference to the provision contained in Bombay Sales Tax Act, 1953 and it was held that although the preparation of tea mixture which was marketed involved some skill but it was not processing within the meaning of relevant provision in the Bombay Sales Tax Act as the commodity remained same. The reasoning was not approved by Supreme Court of India in the case of Chowgule & Co. (Pvt.) Limited v. Union of Indian while considering the provision contained in Central Sales Tax Act (Indian) 1956. The Supreme Court of India held that when different brands of tea were mixed for the purpose of producing a tea mixture of different kind and quality according to a formula involved by them, there was plainly and indubitably processing of different brands of tea, because these brands of tea experienced, as a result of mixing a qualitative change, in that the tea mixture which came into existence was a different quality and flavour than the different brands of tea which were blended into the mixture. The Madhya Predesh High Court in the case of Badrinarayan v. State of Madhya Pradesh held that process of blending of tea leaves amounts to manufacture and the petitioner is engaged in the production of an article which is a commercially new and distinct commodity after processing comes into existence. The Calcutta High Court in the case of Brooke Bond India Limited held that the process by which tea is packed after manufacture amounts to production or manufacture. Again in the case of G.A. Randerian Limited Calcutta High Court held that the assessee engaged in the blending of tea was an industrial company. After considering the above conflicting judgments the Calcutta High Court held in the case of Appeejay (Pvt.) Limited (1995 PTD 813) that since the input and out-put in the case of mixing and blending of tea was sane, therefore, it does not amount to manufacture or production of an article. In view of the above circumstances, we are of the considered opinion that the meaning and connotation of the expression manufacture is to be taken in its ordinary sense and for that purpose guidance can be taken from the meanings and definitions given in various Dictionaries. The learned I.A.C. has referred to the definition of word 'manufacture, in the Black's Law Dictionary which has been reproduced on page 5 para. 4 of this order. On the basis of definition from the Black's Law Dictionary, the learned I.A.C. held that the manufacture would mean any process whereby a new shape or form different from original one comes into existence. He has further observed that in the case of appellant the tea remains tea despite going the process of mixing, blending and packing and, therefore, it does not amount to manufacture. A perusal of Black's Law Dictionary shows that the learned I.A.C. has cited one meaning only of word 'manufacture'. In the Black's Law Dictionary the other meaning is as follows:---

"Now it means the process of making products by hand, machinery or other automated means. Meaning of word 'manufacture', which is defined as making of goods or wares by manual labour or by machinery, especially on a large scale, has expanded as workmanship and art have advanced, so that now nearly all artificial products of human industry, nearly all such material as have to acquired changed conditions or new and specific combination, whether from the direct action of the human hand, from chemical processes devised and directed by human skill, or by the employment of machinery, are commonly designated as 'manufactured'."

The above definition shows that the meaning of the word 'manufacture' has expended with the passage of time and now covers many fields and activities which were originally outside the scope of the word 'manufacture. Now the manufacture means to all such materials as have acquired changed conditions or new and specific combinations.

32. In the Stroud's Judicial Dictionary it is stated as follows with reference to the findings by the superior Courts:---

"The word 'manufacture' has been generally understood to denote, either a thing made which is useful for its own sake and vendible as such, as a medicine, a stove, a telescope, and may others; or to mean an engine or instrument, or some part of an engine or instrument, to be employed either in the making of some previously known article, or in some other useful purpose, as a stocking frame, or a steam engine for raising water from mines; or, it may perhaps extend also to a new process to be carried on by known implements or elements acting upon known substances, and ultimately producing some other known substance but producing it in a cheaper or more expeditious manner, or of a better or more: useful kind. No. mere philosophical or abstract principle can answer to the word 'manufactures'. Something of a corporeal and substantial nature, something that can be made by man from the matters subjected to his art and skill, or at the least some new mode of employing practically his art and skill, is required to satisfy the word."

33. In the Legal Theasarus by William C. Benin the word manufacture has been defined as follows:---

"Manufacture, noun: assemblage, assembly, composition, construction, creation, development, execution, fabrica, fabrication, fashioning, forging, formation, forming, making, moulding, orgination, preparation, production, synthesis."

The above meanings show that the word manufacture includes a process whereby use of art and skill a better or more useful substance is brought into existence. The new substance may be by putting together by way of process and synthesis a new marketable material which is considered to be new, modified, improved and better marketable substance.

34. In the New Shorter Oxford English Dictionary, 1993 Edition the following meanings have been assigned to the word manufacture.

"Refashioning, an article trade by hand, a product of mere mechanical labour, an article produced merely to supply the demand of the market. Production involving mere mechanical labour, as contrasted with 'hat requiring intellect or imagination. Bring (material) into a form suitable for use. Make or fabricate from material."

35. In this Dictionary ' various examples of the use of the word manufacture by the known authors in their books have also been given. A sentence has been cited from the Books Language by L. Langley as dried tea leaves from which he manufactured reconditioned tea".

36. From a perusal of the various Dictionary meanings of the word manufacture and its uses shows that the meaning of word manufacture has been expanding with the passage of time and has now expanded to the extent that we do not feel any hesitation in holding that mixing, blending, colouring and flavouring of tea amounts to manufacture because not only it requires a sophisticated process but an art and skill which is not very coon. In addition to the fact that the assessee has installed an industrial undertaking whereby the tea leaves and dust by a mechanical process resulting in the end product of various flavours which is considered as a new marketable product, the job of tea testing is a highly specialised and technical job. This skill is not common. In this age of specialization the processing of tea has become art. We are of the opinion and it should not be lost sight of, that the life, law and language are all dynamic and not static. In interpreting the laws the Courts are not supposed to be oblivious of the progress and acquiring of new meanings by the words used in the enactments.

37. For the foregoing reasons it is held that the appellant is an industrial undertaking and has engaged in the manufacturing of finished tea out of the imported raw leaves and dust, after subjecting them to a manufacturing process. Consequently we hold that the Assessing Officer rightly allowed exemption under clause (118-E) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979 to the appellant in the assessment years 1993-94, 1994-95, 1995 96 and part of assessment year 1996-97 to which no interference was required. The exemption so allowed was not erroneous and, therefore, it was not prejudicial to the interest of revenue.

38. Before patting with this order we would like to observe that the beneficial view taken by the C.B.R. which is not violative of any statutory enactment requires all respect and the tendency on the part of departmental officers in ignoring the view of C.B.R. by referring to the judgment of Hon'ble Supreme Court of Pakistan in the case of Central Insurance Company v. C.B.R. reported as 1993 PTD 766=1993 SCMR 1232 is not desirable. The Hon'ble Supreme Court of Pakistan in this case has held that the C.B.R. does not find place in the hierarchy of judicial authorities under the Income-tax Ordinance and, therefore, any interpretation of law given by the C.B.R. v-as not binding. The Hon'ble Supreme Court of Pakistan has not held that the C.B.R. is not empowered to give guide lines to the departmental officers and to express its view in the matters pertaining to the direct and indirect taxes and the treatment to be given to the incomes or classes of incomes or persons or classes of persons. The C.B.R. is the apex administrative authority in the tax administration of the Federation, and thus, occupies very important position. The C.B.R. by virtue of the position occupied by it and the duties assigned to it, is not only supposed to implement and execute the revenue laws of the Federation and to supervise the tax administration but is further supposed to over-see and watch that the law is justly and properly applied and implemented. In performance of this duty the C.B.R. is supposed to issue clarifications, circulars and guide lines. The Hon'ble Supreme Court of Pakistan has held in the case of Central Insurance Co. that under section. 8 of the Income Tax Ordinance all officers and persons employed in the execution of this Ordinance shall observe to follow. the orders, instructions, and directions of the C.B.R. The Supreme Court of Pakistan has taken note of the fact that no such orders, instructions and directions shall be given so as to interfere with the discretion of the Appellate Additional Commissioner in the exercise of his appellate function or any valuer in the exercise of his function under the Ordinance. For the' sake of convenience, the relevant finding of Hon'ble Supreme Court of I Pakistan is reproduced below:---

"It is evident from the above provisions that though the Central Board of Revenue has administrative control over the functionaries discharging their functions under the Ordinance, but it does not figure in the hierarchy of the forums provided for adjudication of assessee's liability as to the tax. In this view of the matter, any interpretation placed by the Central Board of Revenue on a statutory provisions cannot be treated as a pronouncement by a forum competent to adjudicate upon such a acquisition judicially or quasi judicially. We may point out that the Central Board of Revenue cannot issue any administrative direction of the nature which tray interfere with the judicial or quasi judicial functions entrusted to the various functionaries under statute. The instructions and directions of the Central Board of Revenue are binding on the functionaries discharging their functions under the Ordinance in view of section 8 so long as they are confined to the administrative matters. The interpretations of any provisions of the Ordinance can be rendered by the hierarchy of the forums provided for under the above provisions of the Ordinance; namely, the Income-tax Officer, Appellate Assistant Commissioner, Appellate Tribunal the High Court and this Court, and not by the Central Board of Revenue. In this view of the matter, the interpretation placed by the Central Board of Revenue on the relevant provisions of the Ordinance in the Circular, can be treated as administrative, interpretation and not judicial interpretation."

39. We further deprecate the tenancy as demonstrated on the part of I.A.C. in this case, whereby he has observed that, "the clarification issued by the C.B.R. was without examining the definition of manufacture/production and judicial pronouncement of the Supreme Court." In order to maintain better discipline, the subordinate Administrative Officers should not make such observations in respect of C.B.R. It should always be kept in view that the I.A.C. himself is not one of the judicial authorities enumerated in the judgment of Hon'ble Supreme Court of Pakistan. The I.A.C. is basically an Administrative Officer and, therefore, barring very exceptional circumstances, the instructions, directions and clarifications issued by the C.B.R. should not be lightly ignored by the I.A.Cs. or Commissioner. In this case the exemption allowed by the Assessing Officer was in consonance with the view held by the C.B.R. and, therefore, the I.A.C. was not justified in invoking the revisional jurisdiction under section 66-A cancelling the assessment orders which were in consonance with the views expressly held by the C.B.R.

40. Consequent to our above findings the impugned orders under section 66-A for the assessment years 1993-94 to 1996-97 are hereby quashed and the original assessment orders stand restored. We have already allowed the appeal pertaining to the assessment year 1997-98. All the appeals stand disposed of accordingly.

C.M.A./M.A.K./113/Tax(Trib.) Order accordingly.