CIT vs. Emptee Poly-Yarn (Supreme Court)

DATE: (Date of pronouncement)
DATE: January 25, 2010 (Date of publication)

Click here to download the judgement (emptee_poly_yarn_manufacture_80IA.pdf)

Twisting and texturising POY is “manufacture”. Department must examine process. Opinion of expert must be considered

The assessee was engaged in twisting and texturising POY and the question arose whether this amounted to ‘manufacture’ for purposes of s. 80IA. The assessee provided an opinion from Mumbai University which stated that the activity was ‘manufacture’ and the same was not controverted by the revenue. HELD deciding in favour of the assessee:

(i) Though the Court has repeatedly asked the department to examine the process applicable to the product in question and not to go only by dictionary meanings, the recommendation is not being followed. Even when the assessee gives an opinion on a given process, the Department does not submit any counter opinion.

(ii) Applying the test laid down in Oracle Software India Ltd, as POY simplicitor is not fit for being used in the manufacture of a fabric and it becomes usable only after it undergoes the operation/process which is called as thermo mechanical process which converts POY into texturised yarn, the said process is “manufacture”.