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CASE NO.: Appeal (civil)  3568 of 2001

PETITIONER: Commissioner of Income Tax,  Kerala

RESPONDENT: M/s Tara Agencies

DATE OF JUDGMENT: 09/07/2007

BENCH: Ashok Bhan & Dalveer Bhandari

JUDGMENT: J U D G M E N T

Dalveer Bhandari, J. 1.      This appeal is directed against the judgment  dated 18th January, 2000 passed in ITR No. 10 of 1996  by the High Court of Kerala at Ernakulam.  

2.      The short question which arises for adjudication  by this court is whether the respondent assessee who  is engaged in purchase of different qualities of tea and  blending the same for the purpose of export is entitled  to weighted deduction under section 35B (1A) of the  Income Tax Act, 1961 (hereinafter referred to as \023the  Act\024) in respect of expenditure incurred for its export  for the assessment year 1979-80.

3.      Brief facts which are necessary to dispose of this  appeal are as under:

       The assessee is a registered firm engaged in the  business of export of tea.  The respondent assessee  purchases tea of diverse grades and brands and blends  the same by mixing different kinds of tea.   In this  appeal, we are called upon to examine whether the  business activity of the respondent assessee falls  within the ambit of production, manufacturing or  processing?  The respondent assessee would be  entitled to weighted deduction under section 35B(1A)  of the Act in case the goods exported were   manufactured or produced in small scale industrial  undertaking but, in case it falls short of production or  manufacture, then the respondent would not be  entitled to the benefit under section 35B(1A) of the Act.   The said benefit, according to the relevant statute, is  restricted to only goods produced or manufactured in  the small scale industrial undertaking for export.  The  benefit cannot be extended in case the goods are  merely processed by the small scale industrial  undertaking.  In order to derive benefit under section  35B (1A) the goods have to be either manufactured or  produced by the small scale industrial undertaking.

4.      Section 35B (1A) was introduced with effect from  01.04.1978 and the respondent assessee claimed  entitlement to weighted deduction being a small scale  exporter.  The Income Tax Officer disallowed the claim  of the respondent assessee.

5.      The respondent assessee aggrieved by the said

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order preferred an appeal before the Commissioner of  Income Tax (Appeals).  The appeal filed by the  respondent assessee was allowed on the ground that  the respondent assessee was a small scale industrial  unit in the light of certificate of registration granted to  it by the Directorate of Industries, Kerala State.  The  respondent was engaged in purchasing different kinds  of tea and blending the same for the purpose of export  and was entitled to the weighted deduction under  section 35B (1A) of the Act.   

6.      In an appeal filed by the appellant against the  decision of the Commissioner of Income Tax (Appeals),  the Income Tax Appellate Tribunal endorsed the view  of the Commissioner of Income Tax (Appeals).  The  Tribunal in its order relied on the decisions of the  Calcutta High Court in G.A. Renderian Ltd. v.  Commissioner of Income-Tax, West Bengal-I 1984  (145) ITR 387 and also of this court in Chowgule &  Co. (P) Ltd. & Another v. Union of India & Others  (1981) 1 SCC 653 and held that the respondent  assessee was entitled to weighted deduction under  section 35B (1A) of the Act.     

7.      The Revenue challenged the judgment of the  Tribunal before the High Court.  The High Court  upheld the judgment of the Tribunal.  The Revenue,  aggrieved by the impugned judgment of the High  Court, has preferred this appeal. 8.      In order to properly comprehend the controversy  involved in this case, it would be proper to reproduce  section 35B (1A) & (2) as introduced by the Finance  Act, 1978: \023(1A)                Notwithstanding anything  contained in sub-section (1), no deduction  under this section shall be allowed in  relation to any expenditure incurred after  the 31st day of March, 1978, unless the  following conditions are fulfilled, namely:-

a)      the assessee referred to in that sub- section is engaged in:-

(i)     the business of export of goods  and is either a small scale  exporter or a holder of an Export  House Certificate; or

(ii)    the business of provision of  technical know-how, or the  rendering of services in  connection with the provision of  technical know how, to persons  outside India; and

b)      the expenditure referred to in that sub- section is incurred by the assessee  wholly and exclusively for the purpose  of the business referred to in sub- clause (1) or, as the case may be, sub- clause (ii) of clause (a).

Explanation\027For the purpose of this sub- section \026

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(a)     \023small-scale exporter\024 means a person  who exports goods manufactured or  produced in any small scale industrial  undertaking or undertakings owned by  him;

       Provided that such persons do not  own any industrial undertaking which  is not a small-scale industrial  undertaking.

(b)     \023Export House Certificate\024 means a  valid Export House Certificate issued  by the Chief Controller of Imports and  Exports, Government of India;

(c)     \023provision of technical know-how\024 has  the meaning assigned to it in sub- section (2) of Section 80MM;

(d)     \023small-scale industrial undertaking\024  has the meaning assigned to it in  clause (2) of the Explanation below  sub-section (2) of section 32A.

(2)     Where a deduction under this section  is claimed and allowed for any assessment  year in respect of any expenditure referred  to in sub-section (1), deduction shall not be  allowed in respect of such expenditure  under any other provision of this Act for the  same or any other assessment year.\024

        9.      All the three stages, namely, production,  manufacturing and processing of tea can be  enumerated as under.  The tea is produced in the tea  gardens.  This first stage is called production of tea.   The second stage is manufacture of tea.  In this stage,  the tea leaves are plucked from the tea bushes and by  mechanical process, tea leaves are converted to tea.   This second stage is considered manufacturing of tea.   The third stage is blending of different qualities of tea  in order to smoothen its marketability.  This third  stage is considered processing of tea.

10.     The controversy involved in this case revolves  around construction and meaning of terms  \023manufacture\024, \023production\024 and \023process\024, therefore,  we deem it appropriate to deal with these terms in  detail as enumerated in various dictionaries and by the  decided cases to properly comprehend the distinction  in these terms.  

MANUFACTURE

11.     The term \021manufacture\022 has not been defined in  the Income Tax Act, 1961.

12.     The term \021manufacture\022 has been defined in  section 2(f) of the Central Excise Act, 1944.  Parts (i)  and (ii) of section 2(f) read as under:- \0232(f). ’Manufacture’ includes any process- (i)     incidental or ancillary to the     completion of a manufactured product;

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and (ii)    which is specified in relation to any  goods in the Section    or Chapter notes  of the Schedule to the Central Excise  Tariff Act, 1985 as amounting to  manufacture". 12A.    Clause (f) gives an inclusive definition of the term  ’manufacture’. According to the dictionary, the term  ’manufacture’ means a process which results in an  alteration or change in the goods which are subjected  to the process of manufacturing leading to the  production of a commercially new article. In  determining what constitutes ’manufacture’ no hard  and fast rule can be applied and each case must be  decided on its own facts having regard to the context  in which the term is used in the provision under  consideration.\024

13.     The term \023manufacture\024 has been defined by the  Black Law Dictionary (5th Edition) as under: \023Manufacture : The process or operation of  making goods or any material produced by  hand, by machinery or by other agency;  anything made from raw materials 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 labor or  machine.\024           14.     The word \021manufacture\022 has been defined in  Halsbury\022s Laws of England, 3rd Ed. Vol. 29 p.23 as  under:- \023Manufacture has been defined as a  \021manner of adapting natural materials by  the hands of man or by man-made devices  or machinery\022 and as \021the making of an  article or material by physical labour or  applied power\022; but the practice is to accept  as \021manufacture\022 a wider range of industrial  activities than such a definition would  suggest.  It includes articles made in situ as  well as articles made in a factory.\024

15.     The Supreme Court of the United States of  America has defined the term \023manufacture\024 a century  ago in Anheuser-Busch Brewing Assn. v. United  States (1907) 52 L Ed. 336.  The definition has been  followed in subsequent American, English and Indian  cases.  The definition reads as under: \023Manufacture implies a change, but every  change is not manufacture, and yet every  change in an article is the result of  treatment, labour and manipulation.  But  something more is necessary. ..There must  be transformation; a new and different  article must emerge, \021having a distinctive  name, character or use\022.\024

PRODUCTION 16.     In Black\022s Law Dictionary (5th Edition), the term  \023production\024 has been defined as under: \023Production. Process or act of producing.  

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That which is produced or made; i.e.  goods.  Fruit of labor, as the productions of  the earth, comprehending all vegetables  and fruits; the productions of intellect, or  genius, as poems and prose compositions;  the productions or art, as manufactures of  every kind.\024

        17.     The term \023produce\024, as defined in the New  Webster\022s Dictionary of the English Language (Deluxe  Encyclopedic Edition), is as follows: \023Produce, To bring forth into existence; to  bring about; to cause or effect, esp.  intellectually or creatively; to give birth to; to  bear, furnish, yield; to make accrue; to bring  about the performance of, as a movie or  play; to extend, as a line.- v.i. To bring forth  or yield appropriate offspring, products, or  consequences.\024

18.     This Court in Deputy Commissioner of  Agricultural Income-tax & Sales Tax, Central,  Zone, Ernakulam v. M/s Palampadam Plantations  Ltd. AIR 1969 SC 930 had considered the meaning of  the term \023produce\024 used in the Kerala General Sales  Tax Act, 1963.  The expression used was \023the person  who sells goods produced by him by manufacture,  agriculture, horticulture or otherwise\024.            19.     The expression \023produced\024 was given a wider  meaning than the word \023manufacture\024 pointing out  that the word \023produced\024 will include an activity of  manufacturing the materials by applying human  endeavour on some existing raw material, but the word  \023produce\024 may include securing certain produce from  natural elements, for example, by growing plants on  soil, or by operating mines and the like or for example,  by milching the cow the milkman produce milk though  he has not applied any process on any raw material for  the purpose of bringing into existence the thing known  as milk.          20.     The word \021production\022 or \021produce\022, when used in  juxtaposition with the word \021manufacture\022 takes in  bringing into existence new goods by a process which  may or may not amount to manufacture.  It also takes  in all the by-products, intermediate products and  residual products which emerge in the course of  manufacture of goods.

PROCESS: 21.     According to Oxford Dictionary one of the  meanings of the word \021process\022 is "a continuous and  regular action or succession of actions taking place or  carried on in a definite manner and leading to the  accomplishment of some result." 22.     In Chambers 21st Century Dictionary, the term  \021process\024 has been defined as under:         \023Process:  1. a series of operations  performed during manufacture, etc. 2. a  series of stages which a product, etc. passes  through, resulting in the development or

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transformation of it.\024

23.     In Collins Cobuild English Dictionary, the term  \021process\022 has been defined as under:         \023A process is series of actions which  are carried out in order to achieve a  particular result.   

       A process is a series of things which  happen naturally and result in a biological  or chemical change.

       When raw materials or foods are  processed, they are treated chemically or  industrially before they are used or sold.\024

24.     The term \021process\022 as defined in the New  Webster\022s Dictionary of the English Language  [Deluxe Encyclopedia Edition] is as under: \023Process, To treat or prepare by some  particular process; to convert, as an  agricultural commodity, into marketable  form by some special treatment; Produced or  treated by some artificial means; as, process  sugar; of or pertaining to photographic  reproduction that involves photo-engraving  or photomechanical means; relating to  special effects obtained in motion pictures  through the use of special filming  techniques.\024

25.     Mr. Mohan Parasaran, learned Additional  Solicitor General appearing on behalf of the appellant  submitted that the activity of the respondent, namely,  blending of tea, packaging and selling the same does  not amount to manufacture or production of a  commercially new and different product.  According to  Mr. Parasaran, the activity of the respondent assessee  can at the most amount to processing of tea.   According to him, the processing is an intermediate  stage of the final product.  Therefore, the respondent  assessee is not entitled to the weighted deduction  under section 35B (1A) of the Act because under the  said section, the benefit has been confined to the  exporters engaged in the export of goods manufactured  or produced in any small scale industrial undertaking  owned by them.  According to Mr. Parasaran, there is  no doubt that the assessee has a small scale  undertaking but its activity does not fall either in the  category of manufacturing or producing.  The benefit  under this section can be extended to the assessee if  the goods exported are either manufactured or  produced and not when the goods are merely  processed. 26.     Mr. Parasaran in support of his arguments relied  on various decided cases of this court and the other  courts. 27.     In East Texas Motor Freight Lines v. Frozen  Food Express 100 L Ed. 917, the Supreme Court of  United States of America held that the processing of  chicken in order to make them marketable, but  without changing their substantial identity, did not  turn chicken from agriculture commodities into  manufactured commodities.   The Indian courts have

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been influenced by the definition of processing as given  in this case and some other American cases while  dealing with the terms \023manufacture\024, \023production\024  and \023process\024.

28.     In Bay Bottle Gas Co. v. Michigan Dept. of  Revenue 74 N.W. 2d 37, 39, 344 Mich. 326, while  dealing with the term \021process\022, the court observed as  under:         To \023process\024 means to subject,  especially raw material, to a process of  manufacturing, development, preparation  for the market, etc.; to convert into  marketable form, as livestock by  slaughtering, grain by milling, cotton by  spinning, milk by pasteurizing, fruits and  vegetables by sorting and repacking.\024

        29.     According to the Marine Products Export  Development Authority Act 1972, [s.3(1)],  \021processing\022  in relation to marine produces includes  the preservation of such products such as canning,  freezing, drying, salting, smoking, peeling or filleting  and any other method of processing which the  authority may, by notification in the Gazette of India,  specify in this behalf.  According to section 2(C) of the  State Financial Corporation Act 1951, the expression  \021processing of goods\022 includes any art or process for  producing, preparing or making an article by  subjecting any material to a manual, mechanical,  chemical, electrical or any other like operation.     

30.     Mr. Parasaran placed reliance on the decision in  D.D. Shah & Bros. v. Union of India & Another  reported in (2006) 283 ITR 486 (Raj.).  In this case,  similar question arose for consideration before the  Rajasthan High Court 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 the expression as used in  section 80-1B of the Act.   

31.     The High Court in the said judgment has dealt  with the terms \023manufacture\024, \023production\024 and  \023process\024 in great detail.  The High Court in the said  judgment arrived at a definite finding that blending  though does not amount to manufacturing of goods  but it clearly amounts to processing of goods in the  sense that it brings some change in the goods.           32.     It may be pertinent to mention that reference of  Chowgule\022s case acquires greater significance  because, in that case, this Court dealt with a Division  Bench judgment of the Bombay High Court in the case  of Nilgiri Ceylon Tea Supplying Co. v. State of  Bombay (1959) 10 STC 500.   This Court observed that  the judgment of the Bombay High Court did not lay  down the correct law because it held that the activity  of the assessee did not amount to processing.         33.     Details of relevant Statute are as under:            Section 8 of the Bombay Sales Tax Act, 1953, so

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far as is \023subject to the provisions of section 7, there  shall be levied a sales tax on the turnover of sales of  goods specified in column I of Schedule B at the rate, if  any, specified against them in column 2 of the said  Schedule, after deducting from such turnover \026       (a)        sales of goods -       (i)     which have been purchased from a  registered dealer on or after the  appointed day, or

(ii)    on the purchase of which the dealer  has paid or is liable to pay the  purchase tax :                  Provided that the goods have not been processed  or altered in any manner after such purchase.\024       34.     This Court held that the different brands of tea  which were mixed by the assessee in Nilgiri\022s case for  the purpose of producing a tea mixture of a different  kind and quality according to the formula evolved by  them, there was plainly and indubitably processing of  different brands of tea, because these brands of tea  experienced, as a result of mixing, qualitative change,  in that the tea mixture which came into existence was  of different quality and flavour than the different  brands of tea which went into the mixture.   

35.     Mr. Parasaran has also placed reliance on  Deputy Commissioner of Sales Tax (Law), Board of  Revenue (Taxes), Ernakulam v. M/s PIO Food  Packers 1980 Supp. SCC 174.   The court in this case  also dealt with the distinction of \023manufacture\024 and  \023processing\024.  In the said case, the appeals were filed  against the order of the Kerala High Court holding that  the turnover of pineapple fruits purchased for  preparing pineapple slices for sale in sealed cans is not  covered by section 5-A(1)(a) of the Kerala General Sales  Tax Act, 1963.  This court after examining the relevant  cases reached the conclusion that while preparing  pineapple slices from the original fruit (pineapple), the  commodity continues to possess its original identity,  notwithstanding the removal of inedible portions, the  slicing, and thereafter canning it on adding sugar to  preserve it.  The court was of the opinion that in  canning the pineapple, the processing is definitely  involved but it would not amount to manufacture as  no new commodity came into existence.

36.     In Bharat Forge and Press Industries vs. CCE  (1990) 1 SCC 532, this court observed that tariff item  26-AA(iv) encompasses all sorts of pipes and tubes.  It  calls for no distinction between pipes and tubes  manufactured out of sheets, rods, bars, plates or  billets and those turned out from larger pipes and  tubes.   It is of no consequence whether the pipes and  tubes are manufactured by rolling, forging, spinning,  casting, drawing, annealing, welding or extruding.    The expression \021pipe fittings\022 merely denotes that it is a  pipe or tube of a particular length, size or shape.  \021Pipe  fittings\022 do not cease to be pipes and tubes, they are  only a species thereof.  They are merely intended as  accessories or supplements to the larger pipes and

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tubes.   They are pipes and tubes made out of pipes  and tubes.   There is no change in their basic physical  properties and there is no change in their end use.  It  cannot be said that pipe fittings, though they may have  a distinctive name or badge of identification in the  market, are not pipes and tubes.            37.     The court in this case observed that the  "processing" may be an intermediate stage in  manufacture and until some change has taken place  and the commodity retains a continuing substantial  identity through the processing stage, we cannot say  that it has been manufactured. That does not,  however, mean that any operation in the course of  such process is not in relation to the manufacture.  38.     While interpreting the same exemption  notification in Standard Fireworks Industries,  Sivakasi and another v. Collector of Central  Excise, Madurai AIR 1987 1 SC 600, this Court held  that cutting of steel wires and the treatment of paper is  a process for the manufacture of goods in question.  

39.     Now, we deem it appropriate to deal with some  cases  in which the term \023manufacturing\024 has been  construed and interpreted by this court in order to  properly comprehend the subtle distinction between  \021manufacturing\022 and \021processing\022.    

40.     In Union of India & Others v. J.G. Glass  Industries Ltd. & Others (1998) 2 SCC 32, this Court  has laid down a two-fold test for determining whether  the process is \021manufacturing\022. First, whether by the  said process a different commercial commodity comes  into existence or whether the identity of the original  commodity ceases to exist. Secondly, whether the  commodity which was already in existence will serve  no purpose but for the said process.  Applying the two- fold test, it was held that printing on bottles does not  amount to manufacture.

41.     A Constitution Bench of this court in M/s Devi  Das Gopal Krishnan etc. v. State of Punjab &  Others AIR 1967 SC 1895 observed that if by a  process a different identity comes into existence then it  can be said to be \021manufacture\022.  When oil is produced  out of the seeds the process certainly transforms raw  material into different article for use.                  42.     In Empire Industries Limited & Others v.  Union  of India & Others (1985) 3 SCC 314, it was  observed that manufacture is complete as soon as by  the application of one or more processes, the raw  material undergoes some change and a new article is  brought into existence having a distinct name and  character would amount to manufacture.

43.     A Constitution Bench of this court in M/s Ujagar  Prints & Others (II) v. Union of India & Others  (1989) 3 SCC 488 and M/s Saraswati Sugar Mills &  Others v. Haryana State Board & Others (1992) 1  SCC 418 took the same view.

44.     In Gramophone Co. of India Ltd. v. Collector of  Customs, Calcutta (2000) 1 SCC 549, this Court  examined earlier cases and held that  \023manufacture\024

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implies a change, but every change is not manufacture  and yet every change of an article is the result of  treatment, labour and manipulation.  But something  more is necessary and there must be transformation; a  new and different article must emerge having a  distinctive name, character and use.  In this case, the  word \021manufacture\022 has various shades of meanings  but unless defined under the Act, it is to be interpreted  in the context of the object and the language used in  the section.  It would not be applicable in cases where  only processing activity is carried out.  Further, such  production activity must be by an industrial  undertaking.\024

45.     In Collector of Central Excise, Jaipur etc. v.  Rajasthan State Chemical Works, Deedwana,  Rajasthan etc. (1991) 4 SCC 473, the court had  defined the word \021manufacture\022 as under:         \023Manufacture 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 the end result of  one or more processes through which the  original commodities are made to pass. The  nature and extent of processing may vary  from one class 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 on it or in  regard to it, such operation would amount  to processing of the commodity. But it is  only when the change or a series of changes  take 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.         Manufacture thus involves series of  processes. Process in manufacture or in  relation to manufacture implies not only the  production but the 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 to,  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 manufacture  of processing of goods would be impossible  or commercially inexpedient, that process is  one in relation to the manufacture.\024           46.     In the following cases, this court has dealt with  and construed the terms \023manufacturing\024,  \023production\024 and \023processing\024.  Collector of Central  Excise v. Technoweld Industries (2003) 11 SCC 798,  Metlex (I) (P) Ltd. v. Commissioner of Central  Excise, New Delhi (2005) 1 SCC 271, Aman Marble

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Industries (P) Ltd. v. Collector of Central Excise,  Jaipur (2005) 1 SCC 279 and Shyam Oil Cake Ltd. v.  Collector of Central Excise, Jaipur (2005) 1 SCC  264, South Bihar Sugar Mills Ltd. & Another etc. v.  Union of India & Another etc. AIR 1968 SC 922,   Laminated Packings (P) Ltd. v. Collector of Central  Excise, Guntur (1990) 4 SCC 51, Deputy  Commissioner of Sales Tax (Law), Board of  Revenue (Taxes), Ernakulam v. M/s COCO Fibres  1992 Supp (1) SCC 290, Commissioner of Sales Tax,  Orissa & Another v. Jagannath Cotton Company &  Another  (1995) 5 SCC 527, Ashirwad Ispat Udyog  & Others v. State Level Committee & Others (1998)  8 SCC 85, State of Maharashtra v. Mahalaxmi  Stores (2003) 1 SCC 70, Aspinwall & Co. Ltd. v.  Commissioner of Income Tax, Ernakulam (2001) 7  SCC 525, M/s J.K. Cotton Spinning & Weaving Mills  Co. Ltd. v. Sales Tax Officer, Kanpur & Another   (1965) 1 SCR 900, Collector of Central Excise v.  Kiran Spinning Mills (198) 2 SCC 348, Park Leather  Industry (P) Ltd. & Another v. State of UP & Others  (2001) 3 SCC 135. 47.     Mr. Bhargava Desai, learned counsel appearing  on behalf of the respondent assessee submitted that  the respondent buys various varieties of packed tea of  different grades and prices in public auction covering  various tea gardens.  These diverse varieties of tea are  all different in size, liquor and other characteristics of  tea.  The respondent assessee has to make purchases  in order to meet the requirement of blending to achieve  the same quality, taste and form of tea which the  respondent has to sell to its customers.   

48.     The respondent further submitted that once  enough quantity is available of the required types of  tea for blending and the respondent is able to  manufacture the required quantity for the \023Standard  tea\024 or approved sample, the respondent produces a  small sample in required proportions on the table and  subsequently a blend sheet is prepared indicating the  measure of proportion of each variety of tea and the  said blend sheet is given to the manufacturing  warehouse of the respondent where a large blend is  manufactured and produced.  The respondent further  contended that after receipt of the blend sheet, the  workers at the warehouse gather the required variety  of tea and the required quantities as set out in the  blend sheet.  The process undergoes is as under: (i)     Spread out in the warehouse by  opening;

(ii)    Chest (Boxes) and emptied first few in  full and then balance in half by  rotation (Spreading & Bulking).  After  the bulking, the entire quantity of  different variety of tea is gathered at  one place in a tomb structure and then  the bulk is broken in a circle with the  central shell empty for movement by  workers in rounds for mixing and the  entire mixture is blended by:

a)      manual hand mixing

b)      by shoveling; and

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c)      sometimes by machine,  depending on the need, quantity  and urgency.

49.     It is further contended that the blending workers  are trained to blend tea uniformly.  After the process of  mixing and blending of tea is complete, the samples  are drawn and sent for testing and matching with the  buyers approved samples of tea.  Manually blended tea  and the finished product is required to match the type  of samples given to the surveyors.  Once the surveyor  approves the tea both in liquor and appearance, only  then is the respondent permitted to pack the tea in the  required packs as approved by the buyers.  This  finished product is totally different from the various  blended tea in respect of colour, texture, liquor,  appearance, characteristic and even pricing.  The said  final product cannot be marketed unless  manufactured and produced by this process.  After the  process of manufacture and production of the final tea  by blending, the entire originality of the different  varieties of tea is lost and a new product of tea is  produced.   This is entirely experts\022 job and cannot be  done by anybody.  The experts have the knowledge,  experience and expertise in blending and the  proportions based on tastes, colour, size, texture and  the source and origin of the tea garden etc.  It is  further contended that the packing of tea is done  manually and also by machines.  Electrical packing  and weighing is also carried out.  The automation to a  great extent was not available at the relevant time and  as such this was also carried out partly manually.   

50.     Mr. Desai, appearing on behalf of the respondent  assessee also strongly relied on the judgment of this  court in Chowgule\022s case and submitted that in view  of the clear findings in the said judgment, the  controversy involved in this case is no longer res  integra.  According to Mr. Desai, the present case is  squarely covered by the decision in Chowgule\022s case  and consequently the respondent assessee is entitled  to the weighted deduction under section 35B (1A) of  the Act.         51.     The respondent has also relied upon the decision  in G.A. Renderian Ltd.\022s case (supra).   In the said  case, the assessee carried on the business of  purchasing tea of different qualities, blending the same  by mixing one type with another and selling it.  The  assessee claimed that it was an industrial company  within the meaning of section 2(7)(c) of the Finance  Act, 1978 and was entitled to concessional rate of tax.    The Tribunal disallowed the claim on the ground that  there was no processing as the end product remained  the same and the entire process was manual.   The  High Court while placing reliance on the decision in  Chowgule\022s case (supra) came to the conclusion that  the activity of the assessee amounted to processing.   The court while setting aside the judgment of the  Tribunal, observed as under:  \023The nature and extent of processing may  vary from one case to another and indeed  there may be several stages of processing

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and perhaps a different kind of processing at  each stage. With each process suffered, the  original commodity experiences a change.  But it is only when the change, or a series of  changes take 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’. The test that is required to be  applied is: does the processing of the  original commodity bring into existence a  commercially different and distinct  commodity?\024

52.     In G.A. Renderian Ltd (supra), while relying  upon the decision of this court in Indian Copper  Corporation Ltd. v. Commissioner of Commercial  Taxes, Bihar & Others (1965) 16 STC 259, this court  observed as under: \023In this light, the Supreme Court observed  that the operation conducted by the  assessee in that case should be considered  to be \023processing\024.  In the instant case  before us this observation fully applies and  if the operation conducted by the assessee  in that case before the Supreme Court  amount to processing then in this case also  the operation which is conducted by the  assessee would also amount to processing.\024

         53.     According to the respondent assessee, the  controversy involved in this case is squarely covered by  a three Judge Bench judgment of this court in  Chowgule\022s case (supra).   The learned counsel for the  appellant also placed reliance on Chowgule\022s case in  support of his submissions. It may be pertinent to  mention that a number of subsequent judgments have  either relied upon, referred to, or distinguished the  said judgment of Chowgule\022s case (supra) without  properly appreciating the facts of this case, therefore,  we deem it appropriate to deal with the facts of this  case in extenso from the judgment.     54.     The assessee, Chowgule & Co., was a private  limited company carrying on business of mining iron  ore and selling it in the export market after dressing,  washing, screening and blending it. 55.     The entire activity of the assessee in Chowgule\022s  case can broadly be classified into seven different  operations, one following upon the other, namely, (i)  extraction of ore from the mine; (ii) conveying the ore to  the dressing plant; (iii) washing, screening and  dressing the ore; (iv) conveying of the ore from the  mine site to the river side; (v) transport of the ore from  the river side to the harbour by means of barges; (vi)  stacking of the ore at the harbour in different stock  piles according to its physical and chemical  composition, and (vii) blending of the ore from different  stock piles with a view to produce ore of the required  specifications and loading it into the ship by means of  the mechanized ore handling plant. The question was  whether goods purchased by the assessee for use in  the above operations could be said to be goods

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purchased for use "in the manufacture or processing of  goods for sale or in mining" so as to attract the lower  rate of sales tax under section 8(1)(b) of the Central  Sales Tax Act, 1956.  The relevant part of section  8(1)(b) at the material time is as under:      \0238. (1) Every dealer, who is in the  course of inter-State trade or commerce-       (a) sells to the government any goods;  or (b) sells to a registered dealer other  than the government goods of the  description referred to in sub- section (3); shall be liable to pay tax under this Act,  which shall be 3 per cent of his turnover. (3) The goods referred to in clause (b) of sub- section (1) \026  (b) \005.. are goods of the class or classes  specified in the certificate of  registration of the registered dealer  purchasing the goods as being  intended for resale by him or subject  to any rules made by the Central  Government in this behalf, for use  by him in the manufacture or  processing of goods for sale or in  mining or in the generation or  distribution of electricity or any  other form of power.\024

56.     Chowgule & Co. in the aforementioned case  made an application to get benefit of section 8(3)(b)  and Rule 13 of the Central Sales Tax Act, 1956.   According to the ratio of this case, blending of ore in  the course of loading through the mechanical ore  handling plant amounted to processing.  In section  8(3)(b), the legislature in its wisdom had incorporated  terms \021manufacture\022 and \021processing\022.  Therefore, when  the Chowgule & Co. did not get the desired relief from  the courts below, then the company ultimately  approached this court.  This court examined the case  in great detail and came to a definite conclusion that  the activity of Chowgule & Co. amounted to  processing and consequently, the assessee was found  to be entitled to the benefit only because the term  processing was incorporated in section 8(3)(b) of the  statute in Chowgule\022s case.       57.     In Chowgule\022s case the court specifically  examined a case decided by a Division Bench of the  Bombay High Court in Nilgiri\022s case.  In this case, the  Division Bench of Bombay High Court held that  blending of different kinds of tea does not amount to  processing.  The Revenue, in support of its arguments,  placed reliance on the said Nilgiri\022s judgment. This  court in Chowgule\022s case comprehensively examined  Nilgiri\022s judgment and observed as under:      \023Now undoubtedly there is a close  analogy between the facts of Nilgiri Tea  Company case and the facts of the present  case, but we do not think we can accept the  decision of the Bombay High Court in the  Nilgiri Tea Company case as laying down the  correct law.  When different brands of tea  were mixed by the assesses in Nilgiri Tea  

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Company case 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, qualitative change, in that the tea  mixture which came into existence was of  different quality and flavour than the  different brands of tea which went into the  mixture.\024          58.     In view of the specific language of the Statutes in  Nilgiri\022s case (supra) and Chowgule\022s case (supra),  the term \021processing\022 has been specifically incorporated  in the statute, therefore, the assessees were justifiably  held to be entitled to the benefit. 59.     Undoubtedly, the facts of Nilgiri\022s case are  identical to the facts of the present case and the ratio  of Nilgiri\022s case is fully applicable to this case.  But  we have to bear in mind a significant difference in the  language employed in section 8 of the Bombay Sales  Tax Act, 1953 in Nilgiri\022s case and the language of  section 35(1)(B) of the Income Tax in the present case.   The difference is that the term \021processing\022 which has  been specifically incorporated in Nilgiri\022s case has  been specifically omitted in the present case.     Similarly, in Chowgule\022s case, the term \021processing\022  has been incorporated in the statute and the activities  of the assessees both in Chowgule\022s and Nilgiri\022s  cases were held to be processing and, in these  respective cases, the assessees were held to be entitled  to the benefit under the respective statutes.  In the  present case, same benefit cannot be extended to the  respondent assessee because the word \021processing\022 has  been specifically omitted in the statute.  The activities  of the assessees both in Nilgiri\022s and Chowgule\022s  cases amount to processing.  The activity of the  respondent assessee in the present case also amounts  to \021processing\022.  Section 35(1)(b) governing the instant  case incorporated the terms  \021manufacture\022 and  \021production\022 and omitted the term \021processing\022.   Therefore, the respondent assessee cannot be extended  the benefit of section 35(1)(B) of the Income Tax Act.   60.     The processing is only an intermediate stage of  production and/or manufacture.  The processing of tea  of the respondent assessee falls short of either  manufacturing or production, therefore, because of the  language of section 35(1)(B) of the Income Tax Act, the  respondent assessee cannot be extended the benefit  which has been extended to the assessees in Nilgiri\022s  and Chowgule\022s cases. 61.     Since the legislature in its wisdom has not used  the term \021processing\022 in section 35(1)(B) of the Act, it  would be erroneous to incorporate the word in the  section and then interpret the Statute.  In this view of  the matter Chowgule\022s case and Nilgiri\022s case dealt  with by this court in Chowgule\022s case are clearly  distinguishable because of the language of the  statutes.            62.     The intention of the legislature has to be gathered  from the language used in the statue which means  that attention should be paid to what has been said as  also to what has not been said.

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     63.     In Union of India & Another v. Deoki Nandan  Aggarwal 1992 Supp (1) SCC 323, a three-Judge  Bench of this court held that it is not the duty of the  court either to enlarge the scope of legislation or the  intention of the legislature, when the language of the  provision is plain.  The court cannot rewrite the  legislation for the reason that it had no power to  legislate.  The power to legislate has not been conferred  on the courts.  The court cannot add words to a  statute or read words into it which are not there.       64.     In State of Kerala v. Mathai Verghese &  Others (1986) 4 SCC 746, this court has reiterated the  well settled position that the court can merely interpret  the section; it cannot re-write, recast or redesign the  section.  In interpreting the provision the exercise  undertaken by the court is to make explicit the  intention of the legislature which enacted the  legislation.  It is not for the court to reframe the  legislation for the very good reason that the powers to  \021legislate\022 have not been conferred on the court.       65.     In Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v.  Custodian of Vested Forests, Palghat & Another  1990 (Supp) SCC 785, the court rightly observed that  in seeking legislative intention judges not only listen to  the voice of the legislature but also listen attentively to  what the legislature does not say.       66.     House of Lords in Pinner v. Everett (1969) 3 All  ER 257 aptly observed that we have been warned again  and again that it is wrong and dangerous to proceed by  substituting some other words for the words of the  statute.       67.     Therefore, the legal position seems to be clear and  consistent that it is the bounden duty and obligation of  the court to interpret the statute as it is.  It is contrary  to all rules of construction to read words into a statute  which the legislature in its wisdom has deliberately not  incorporated.       68.     On clear construction and interpretation of  section 35B(1A) of the Act, we are clearly of the opinion  that  the respondent\022s activity amounts to \023processing\024  only and the activity does not amount to either  \023production\024 or \023manufacture\024.   The term \023processing\024  has not been included in section 35 B(1A) of the Act,  therefore, the respondent is not entitled for weighted  deduction under section 35B(1A) of the Act.       69.     Consequently, this appeal is allowed and the  impugned judgment is set aside and, in the facts and  circumstances of the case, we direct the parties to bear  their own costs.