RAJESH BALIA, J. - (1.) IN this special appeal, a short but interesting question that arises for consideration is whether the blending of different types of tea by the assessee amounts to production of a thing or an article by an industrial undertaking within the meaning of expression as used in Section 80IB of the IT Act, 1961, though it may not amount to manufacture of goods in the sense of bringing into existence altogether a new and different thing as known differently in the commercial parlance in the market where tea is transacted.
(2.) THE appellant -assesses has set up a small -scale industrial unit in the backward industrial area of Banswara. The appellant's case is that it purchased tea leaves powder/granules and these tea leaves are collected by marking the name of garden and lot number. The samples of available quality are dispatched to the 'Blend Master' who after going through his own process, suggests the mixing ratio and process of mixing for making the perfect blend of tea. The activity of blending of different types of leaves obtained from different gardens in a definite ratio results in production of a commodity having its own identity and though may not amount to manufacture, it amounts to production, which is a word of wider connotation. Therefore, it being an industrial undertaking set up in the backward industrial area and fulfilling all other conditions, is entitled to avail the benefit of deduction equal to 100 per cent of its profits derived from its business of producing of and trading in blended tea under the specific brand name of 'Maa Betee Tea'. The AO has found that the assessee purchases different types of tea, blends them in different proportion and thereafter sells the tea. The mixing of different types of tea in no way can be said to be manufacture or production of article or thing for the purpose of claiming benefit of deduction under Section 80IA/80IB of the IT Act of 1961. The activity of the assessee does not involve any manufacturing but only a processing. There is no element of manufacture in this case. The commodity continues to remain in its original identity even after blending of different kinds of tea in certain proportion. The assessing authority placed reliance on Dy. CST v. Pio Food Packers 46 STC 63 (SC) for holding that even after blending, tea remained tea and blending does not bring out a distinct marketable commodity and it does not amount to manufacture.
(3.) THE assessee before preferring an appeal against the order of assessment dt. 4th Dec., 2003, relating to asst. yr. 2001 -02 had approached this Court by way of writ petition being S.B. Civil Writ Petn. No. 161 of 2004. He has relied on a decision of this Court in case of Dhanseri Tea Industries v. State of Rajasthan (S.B. Civil Writ Petn. No. 3102 of 1999, decided on 31st Aug., 2001) which had arisen under the Rajasthan Sales -tax Act, wherein this Court has held that process of blending tea amounts to manufacture and has held M/s Dhanseri Tea Industries eligible to avail benefit of incentive scheme under the Rajasthan Sales -tax Act, 1954. He has also relied on a circular of Government of India under the Department of Industries, dt. 20th Nov., 1996, wherein the industries engaged in manufacture of made tea or in the process of packing or repacking were held to be eligible for registration under the Small Scale Industries Development Scheme.;