Commissioner of Income Tax vs Shri Swasan Chemicals (M) Pvt. Ltd.

K. Raviraja Pandian, J.—The Assessee Company is engaged in manufacturing plastic powder out of plastic granules. During the relevant

assessment year is 2002-03, the assessee company claimed deduction u/s 80IB of the Income Tax Act, 1961, on the premise that the goods

produced by the Assessee company is a product of manufacturing activities, which was rejected by the Assessing Officer on the ground that the

activities undertaken by the Assessee in producing the plastic powder would not amount to manufacture. On appeal, the Commissioner of Income

Tax Appeals, after elaborately considering the process carried out by the assessee/appellant in producing the end product plastic Alloy powder

has held that the assessee is entitled to the benefit of Section 80IA as the goods produced by the assessee/appellant is the outcome of the

manufacturing process. The appeal filed by the Revenue before the Tribunal is ended in dismissal. The correctness of the same is now canvassed

before this Court on formulating the following question of law:

Whether in the facts and circumstances of the case, the Tribunal was right in holding that conversion of polymer granules into powder amounts to

manufacture entitling the assessee to the benefit of Section 80IB?

We heard the Senior Standing Counsel for the Revenue.

The ultimate fact finding authority, the Tribunal has recorded a finding that the assessee is manufacturing various products of polymer powders.

The polymer powders were manufactured using the combination of various polymers like LDPE, LLDPE, HDPE, EVA of different technical

parameters viz., Melting point, MFI (Specific gravity etc.) along with speciality chemicals. The products manufactured by the assessee are not

plastic powders, but they are specialised polymer alloys in powder form. The manufactured polymer alloys has been used in different industries.

Each product is different in nature, character and use and technically different and could be used only in a specific application. The raw materials

used for the above product were of different grades, specifications and are having different melting point, specific gravity etc. The raw materials

used could not be characterised as a single product as plastic granules. Plastic granules were generic term and only imply the form of the material.

The assessee used various polymers as their raw material with specialised chemicals for producing the polymer alloy powder. In manufacturing

process, different materials in different ratios and proportions, based on the scientific formulations and specifications, requirement, usage and

application were put to manufacture along with special chemicals. The manufacturing process of each product is designed to avoid agglomeration

and also to maintain technical parameters required for the finished products like bulk density, moisture content, micron size etc. Pulverising is only

one of the many processes of manufacture. The products pass through mechanical meshes and seivers which are provided based on the end use

for which the product is required. The finished products are completely different from the raw materials. The technical aspects viz., basic polymer,

melting point, MFI, Specific gravity, etc., of the finished products are different from that of the raw material. The product range itself is wide and

the products carry different technical nomenclature and even in common parlance, they bear different names like fishing powder, micro dot

powder, scatter powder, low profile additives, upfilter filtration media. The process employed is a complex one and not merely limited to

pulverisation or crushing. Having regard to the process employed and the finished product which is stated to be completely a different one than the

raw material and after taking the aid of the Supreme Court decisions right from the case of Commissioner of Income Tax, Orissa and Others Vs.

N.C. Budharaja and Company and Others, , ASPINWALL and CO. LTD. Vs. Commissioner of Income Tax, to that of ASPINWALL and CO.

LTD. Vs. Commissioner of Income Tax, and the decisions of this Court in the case of Commissioner of Income Tax Vs. Taj Fire Works

Industries, and in the case of Commissioner of Income Tax-III Vs. Premier Tobacco Packers Pvt. Ltd., has held in favour of the assessee.

From the facts narrated, we find that the Tribunal has come to the correct conclusion which regards no interference in this appeal and as such

the appeal is dismissed.