Holding

The activity of blending tea amounts only to processing, not to manufacture or production, and because Section 35B(IA) does not include processing, the weighted deduction is not permissible.

Summary

The Commissioner of Income Tax, Kerala appealed against the High Court’s order allowing Tara Agencies to claim a weighted deduction under Section 35B(IA) of the Income Tax Act for export‑related expenses. Tara Agencies purchased various grades of tea, blended them, and exported the blended product. The issue was whether such blending constituted "manufacture" or "production" within the meaning of the statute, which would permit the deduction, or merely "processing", which the statute does not cover. The Court examined the statutory language, noting that unlike earlier cases (Nilgiri and Chowgule) the term "processing" is absent from Section 35B(IA). It held that the activity amounted only to processing and not to manufacture or production, and therefore the deduction was not available. Consequently, the appeal was allowed and the High Court judgment set aside.

Issues considered

Whether blending of tea for export qualifies as "manufacture" or "production" under Section 35B(IA) of the Income Tax Act, 1961.
Whether the activity falls within the ambit of "production", "manufacture" or merely "processing" for the purpose of the weighted deduction.
Whether the omission of the word "processing" from the statute precludes extending the benefit to the assessee.

Legislation cited

Bombay Sales Tax Act, 1953s. 8
Central Excise Act, 1944s. 2(f)
Central Sales Tax Act, 1956s. 8(1)(b)
Income Tax Act, 1961s. 358(1A), s. 35B(IA)
Marine Products Export Development Authority Act, 1972s. 3(1)
State Financial Corporation Act, 1951s. 2(C)

Subjects

weighted deductionsmall‑scale exportermanufactureproductionprocessingstatutory interpretationtea blendingIncome Tax Actsection 35B(IA)

Judgment

A COMMISSIONER OF INCOME TAX, KERALA
v.
MIS. TARA AGENCIES

JULY 9, 2007

B [ASHO~ BHAN AND DAL VEER BHANDARI, JJ.]

Income Tax Act, 1961: I
-<

Section 35-B(JA)-Profits and gains from business-Permissible
C deduction-Export market development allowance-Weighted deduction-
AY 1979-80-Assessee engaged in purchase of tea of diverse grades and
brands and blending the same by mixing different kinds of tea for the purpose
of export-Assessee,s claim for weighted deduction being a small-scale
exporter under S. 35-B(JA) for the expendJture incurred for its export was
D disallowed by Assessing Officer on the ground that the activity of the assessee
did not amount to manufacture-Assessee 's appeal allowed by Tribunal on
the ground that it was a small-scale industrial unit in the light of certificate
of registration granted to it by the Directorate of Industries-High Court
endorsed the decisio~orrectness of-Held: The assessee 's activity amounted
to "Processing" only and the activity did not amount to either "production"
E or "manufacture"-The term "processing" has not been included in S.
35B(J A) and, therefore, the assessee was not entitled to weighted deduction
under S. 35B(JA).

Words & Phrases:

F "Manufacture", "production" and "processing"-Meaning of -
Explained.

The respondent-assessee was a registered firm engaged in the business
of export of tea. The respondent-assessee purchased tea o( diverse grades and
brands and blended the same by mixing different kinds of tea for the purpose
G of export.

The respondent-assessee claimed weighted deduction being a small-
scale exporter under Section 35-B(lA) of the Income Tax Act, 1961 for the
expenditure incurred for its export for the assessment year 1979-80. The
H 136
.-

COMMNR. OF INCOME TAX, KERALA v. TARA AGENCIES 137
Income Tax Officer disallowed the claim of the respondent-assessee on the A
ground that the activity of the assessee did not amount to manufacture.

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. The
said decision was endorsed by the Income Tax Appellate Tribunal and the High B
Court Hence the appeal·

The following questions arose before the High Court-
\_
(I) Whether the assessee who was engaged in the purchase of
different qualities of tea and blending the same for the purpose c
of export was entitled to weighted deduction under Section 35-
B(IA) of the Income Tax Act, 1961 in respect of expenditure
incurred for its export for the assessement year 1979-80?
(2) Whether the business activity of the assessee fell within the
ambit of production, manufacturing or processing? D
Allowing the appeal, the Court

HELD: I.I. Undoubtedly, the facts of Nilgiri's case are identical to the
facts of the present case and the ratio of Nilgiri 's case is fully applicable to
this case. But it has to hew borne in mind a significant difference in the E
language employed in Section 8 of the Bombay Sales Tax Act, 1953 in Nilgiri's
case and the language of Section 35(1) (B) of the Income Tax Act, 1961 in the
present case. The difference is that the term 'processing' which has been
specifically incorporated in Nilgiri's case has been specifically omitted in the
present case. Similarly, in Chowgule's case, the term 'processing' has been
incorporated in the statute and the activities of the assessee both in Chowgule 's F
and Nilgiri 's 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 the, same benefit cannot be extended to the
respondent-assessee because the word 'processing' has been specifically
· omitted in the statute. The activities of the assessee both in Nilgiri' and
G
Chowgule 's amount to processing. The activity of the respondent-assessee in
the present case also amounts to 'processing' Section 35(1)(8) governing the
instant case incorporated the terms 'manufacture' and 'production' and
~,,
J omitted the term 'processing'. Therefore, the respondent-assessee cannot be
extended the benefit of Section 35(1)(8) of the Income Tax Act, 1961.
[Para 59) (156-C-G) H
138 SUPREME COURT REPORTS [2007) 8 S.C.R.

A 1.2. The processing is only an intermediate stage of production and/or
manufacture. The processing of tea of the respondent-assessee fails short of ·
either manufacturing or production. Therefore, because of the language of
Section 3S(t)(B) of the Income Tax Act, the respondent-assessee cannot be
extended the benefit which has been extended to the assessee in Ni/giri 's and
B Chowgu/e's cases. (Para 60) (156-G)

Chowgu/e & Co. (P) Ltd. v. Union of India, (1981) 1 SCC 653 and
Nilgiri Ceylon Tea Supplying Co. v. State of Bombay, (1959) 10 STC 500,
distinguished.

C · G.A. R~nderian Ltd. v. Commissioner ofIncome Tax, (1984) 145 ITR387,
Deputy Commissioner of Agricultural Income-tax & Sales Tax v. Mis.
Palampadam Plantations Ltd., AIR (1969) SC 930, D.D. Shah & Bros. v. Union
ofIndia (2006) 283 ITR (Raj), Deputy Commissioner ofSales Tax (law) v. Ml
s. PIO Food Packers, (19801 Supp. SCC 174, Bharat Forge and Press
Industries v. CCE, (1990) 1 SCC 532, StandardFireworks Industries, Sivakasi
D v. CCE, AIR (1987) SC 600, Union ofIndia v. J.O. Glass Industries Ltd., (1988)
2 SCC 32, Mis. Devi Das Gopal Krishan v. State of Punjab AIR (1967) SC
1895, Empire Jndustires Limited v. Union of India, (198513 SCC314, Mis.
Ujagar Prints & Ors. (III) v. Union of India, (198913 SCC 488, Mis. Saraswati
Sugar Mills v. Haryana State Board, (1992) 1 SCC 418, Gramophone Co. of
E India Ltd. v. CCE, (2000) 1 SCC 5459, CCE v. Rajasthan State Chemical Works,
(199114 SCC 473, CCE v. Techoweld Industries, (2003111SCC798, Maltex
(/) (P) Ltd. v. CCE, (2005) 1 sc;c 27, Aman Marble Industries (P) Ltd. v. CCE,
(2005) 1 SCC, Shyam Oil Cake Ltd. v. CCE, (2005) l SCC 264, South Bihar
Sugar Mills Ltd. v. Union of India, AIR (1968) SC 922, Laminated Packings
(P) Ltd. v. CCE, (1990) 4 SCC 51, Deputy Commissioner ofSales Tax v. Mis.
p COCO Fibres, (1992) Supp. (1) SCC 290, Commissioner of Sales Tax v.
Jagannath Cotton Company, (1995) 5 SCC 527, Ashirwad /spat Udyog v.
State Level Committee, (1998) 8 SCC 85, State of Maharashtra v. Mahalaxmi
Stores, (2003) 1 SCC 70, Aspinwall & Co. Ltd. v. Commissioner of Income
Tax, {2001) 7 SCC 525, Mis. J.K. Cotton Spinning & Weaving Mills Co. Ltd.
v. Sales Tax Officer, (1965) l SCR 900, CCE v. Kiran Spinning Mills, (19981
G 2 SCC 348, Park Leather Industry (P) Ltd. v. State ofU.P., (2001) 3 SCC 135
and Indian Copper Corporation Ltd. v. Commissioner of Commercial Taxes,
(1965) 16 STC, referred to.

Anheuser-Busch Brewing Assn. v. United States, (1907) 52 L. Ed. 336,
H East Texas Motor Freight Lines v. Frozen Food Express, 100 L. ED. 917 and
COMMNR. OF INCOME TAX, KERALA v. TARA AGENCIES 139
Bay Bottle Gas Co. v. Michigan Dept. of Revenue, 74 N.W. 2d 37, 39, 344 A
i Mich, 326, referred to.
j
Black's Law Dictionary 5th Edition, Halsbury's Laws of England 3rd
Ed. Vol. 29 p. 23, Oxford Dictionary, Chambers 21st Century Dictionary,
Collins Cobulid English Dictionary and New Webster's Dictionary of the
English Language (Deluxe Encyclopedia Edition), referred to. B
2. Since the legislature in its wisdom has not used the term 'processing'
)_ in Section 35(8) (lA) 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 's case and Nilgiri 's case dealt with by this Court al."e clearly C
distinguishable because of the language of the statutes.
(Para 61) (157-A)

Chowgule & Co. (P) Ltd. v. Union of India, (1981) 1 SCC 653. and
Nilgiri Ceylon Tea Supplying Co. v. State of Bombay, (1959) 10 STC 500,
distinguished. D
3.1. The intension of the legislature has to be gathered from the
·'
language used in the statute which means that attention should be paid to
what has been said as also to what has not been said.
(Para 62) (157-B)
E
3.2. 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.
(Para 67) (157-Gl
F
Union of India v. Deoki Nandan Aggarwal, (1992) Supp. I SCC 323,
State of Kera/av. Mathai Verghese, 11986) 4 SCC 746 and Gwalior Rayons
Silk Mfg. (Wvg.) Co. Ltd v. Custodian of Vested Forests, Pa/ghat, (1990( Supp.
sec 785, relied on.
Pinnerv. Everett, (1969) 3 All ER257, r~ferred to. G
4. On clear construction and interpretation of Section 358 (IA) of the
Act, it is clear that the respondent's activity amounts to "processing" only
and the activity does not amount to either "Production" or "manufacture".
The term "processing" has not been included in Section 358 (lA) of the Act H
140 SUPREME COURT REPORTS (2007) 8 S.C.R.

. A and, therefore, the respondent is not entitled to weighted deduction under
Section 358(1A) of the Act. [Para 68) [158-A]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3568 of2001.

From the Judgment and Order dated 18.1.2000 of the High Court of
B Kerala at Emakulam in ITR No. IO of 1996.
Mohan Parasaran, ASG., Arijit Prasad, K.K. Senthilvelan, Gaurav
Dhingra, Nitesh Rasa, D.L. Chidanand and Sushma Suri for the Appellant.

Bhargava V. Desai, Siddarth Chowdhary, Rahul Gupta and Reema Sharma
C for the Respondent.

The Judgment of the Court was delivered by

DALVEER BHANDARI, J. l. This appeal is directed against the judgment
dated 18th January, 2000 passed in ITR No. IO of 1996 by the High Court of
D Kerala at Emakulam.

2. The short question which arises for adjudication by this court is
whether the respondent assessee who is engaged !n purchase of different
qualities of tea and blending the same for the purpose of export is entitled
to weighted deduction under section 358 (IA) of the Income Tax Act, 1961
E (hereinafter referred to as "the Act") 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
F 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
G section 35B{IA) pf 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 358( l A) 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
H in case the goods are merely processed by the small scale industrial undertaking.
: COMMNR. OF INCOME TAX, KERALA 11. TARA AGENCIES [DALVEER BHANDARI, J.] 141

I
" In order to derive benefit under section 358 {lA) the goods have to be e~ther A
"\ manufactured or produced by the small scale industrial undertaking.

i 4. Section 358 (lA) was introduced with effect from Ol.04.1978 and the
J
t respondent assessee claimed entitlement to weighted deduction being a small
scale exporter. The Income Tax Officer disallowed the claim of the respondent
assessee. B
5. The respondent assessee aggrieved by the said 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 c
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 358 (lA) of the Act.

6. In an appeal filed by the appellant against the decision of the
' D
Commissioner of Income Tax (Appeals), the Income Tax Appellate Tribunal
endorsed the view of the Commissioner oflncome Tax (Appeals). The Tribunal
in its order relied on the decisions of the Calcutta High Court in G.A. Renderian
ltd v. Commissioner ofIncome-Tax, West Bengal-I(l984) (145) ITR 387 and
also of this court in Chowgule & Co. (P) ltd. & Anr. v. Union of India &
Ors., [1981] l SCC 653 and held that the respondent assessee was entitled to E
weighted deduction under section 358 (IA) 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. F
8. In order to properly comprehend the controversy involved in this
case, it would be proper to reproduce section 358 (IA) & (2) as introduced
by the Finance Act, 1978:

(IA) Notwithstanding anything contained in sub-section (I), no G
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:-
H
142 SUPREME COURT REPORTS (2007] 8 S.C.R.
''°"' '
A (i) the business of export of goods and is either a small scale
y
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 (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 ( l) or, as the case may be, sub-clause ~
(ii) of clause (a).
Explanation-For the purpose of this sub-section
c (a) "small-scale exporter" means a person wh.o exports goods
manufactured or produced in any small scale industrial undertaking
or undertakings owned by him;

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

(b) "Export House Certificate" means a valid Export House Certificate
issued by the Chief Controller of Imports and Exports, Government
of India;
(c) "provision of technical know-how" has the meaning a5signed to
E it in sub-section (2) of Section 80MM;
(d) "small-scale industrial undertaking" has the meaning assigned to
it in clause (2) of the Explanation below sub-sect.ion (2) of section
32A.

(2) Where a deduction under this section is claimed and allowed for
F
any assessment year in respect of any expenditure referred to in sub- \

section (l ), 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."

G 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 -\ .-I
second stage is considered manufacturing of tea. The third stage is blending
H
COMMNR. OF INCOME TAX, KERALA v. TARA AGENCIES [DAL VEER BHANDARI, J.] 143 .

1 of different qualities of tea in order to smoothen its marketability. This third A
• stage is considered processing of tea.

10. The controversy involved in this case revolves around construction
and meaning oftenns "manufacture", "production" and "process", therefore,
we deem it appropriate to de.al with these tenns in detail as enumerated in
various dictionaries and by the decided cases to properly comprehend the B
distinction in these tenns.

MANUFACTURE

11. The term manufacture has not been defined in the Income Tax Act,
1961. c::

12. The tenn manufacture has been defined in section 2(f) of the Central
Excise Act, 1944. Parts (i) and (ii) of section 2(f) read as under:-

2(t). 'Manufacture' includes any process-
D
(i) incidental or ancillary to the completion of a manufactured product;
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".
E
12A. Clause (f) gives an inclusive definition of the tenn '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 F
) '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."

13. The term "manufacture" has been defined by the Black Law
Dictionary (5th Edition) as under: ' G
'
"Manufacture : 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· H
144 SUPREME COURT REPORTS [2007] 8 S.C.R.

A by hand labor or machine."

14. The word manufacture has been defined in Halsburys Laws oi
England, 3rd Ed. Vol. 29 p.23 as under:-

"Manufacture has been defined as a manner of adapting natural
B materials by the hands of man or by man-made devices or machinery
and as "the making of an article or material by physical labour or
applied power"; but the practice is to accept as manufacture 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."

C 15. The Supreme Court of the United States of America has defined the
term "manufacture" 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:

"Manufacture implies a change, but every change is not manufacture.
D and yet every change in an article is the result of treatment, Jabour
. and manipulation. But something more is necessary ...There must be
a
transformation; new and different article must emerge, "having a
distinctive name, character or use,."

PRODUCT/ON
E
16. In Blacks.Law Dictionary (5th Edition), the term "production" has
been defined as under:

"Production. Process or act of producing. That which is produced or
made; i.e. goods. Fruit of labor, as the productions of the earth,
F 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."

17. The term "produce", as defined in the New Websters Dictionary of
the English Language (Deluxe Encyclopedic Edition), is as follows:
G
"Produce, 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."
H
COMMNR. OF INCOME TAX, KERALA v. TARA AGENCIES [DAL VEER BHANDARI, J.] J45
"
18. This Court in Deputy Commissioner of Agricultural Income-tax & A
Sales Tax, Central, Zone, Ernakulam v. Mis Palampadam Plantations Ltd.,
AIR (1969) SC 930 had considered the meaning of the term "produce" used
in the Kerala General Sales Tax Act, 1963. The expression used was the person
who sells goods produced by him by manufacture, agriculture, horticulture or
otherwise".
B
19. The expression "produced" was given a wider meaning than the
word "manufacture" pointing out that the word "produced" will include an
activity of manufacturing the materials by applying human endeavour on
some existing raw material, but the word "produce" may include securing
certain produce from natural elements, for example, by growing.plants on soil, C
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 "production" or "produce", when used in juxtaposition
with the word manufacture ~akes in bringing into existence new goods by a D
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:
·E
21. According to Oxford Dictionary one of the meanings of the word
"process" 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 "process" has been F
defined as under:

"Process: 1. a series of operations performed during manuf~cture,
etc. 2. a series of stages which a product, etc. passes through, resulting
in the development or transformation of it."
G
23. In Collins Cobuild English Dictionary, the term process has been
defined as under: ·

"A process is series of actions which are carried out in order to
achieve a particular result.
H
I

·;<

146 SUPREME COURT REPORTS (2007) 8 S.C.R.

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

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

B 24. The tenn "process" as defined in the New Websters Dictionary of
the English Language [Deluxe Encyclopedia Edition] is as under:

"Process, To treat or prepare by some particular process; to convert,
as an agricultural commodity, into marketable fonn by some special
treatment; Produced or treated by some artificial means; as, process
c 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."

25. Mr. Mohan Parasaran, learned Additional Solicitor General appearing
D 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
manufarture 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
E an intennediate stage of the final product. Therefore, the respondent assessee
is not entitled to the weighted deduction under section 358 (IA) 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
F 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.
G
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 tum chicken from agriculture commodities
into manufactured commodities. The Indian courts have been influenced by
H the definition of processing as given in this case and some other American
~
-
COMMNR OF INCOME TAX, KERALA v. TARA AGENCIES [DAL VEER BHANDARI, J.] 147

cases while dealing with the terms "manufacture", "production" and a process". A
'(

28. In Bay Bottle Gas Co. v. Michigan Dept. of Revenue 14 N.W. 2d 37,
39, 344 Mich. 326, while dealing with the term 'process', the court observed
as under:

To "process" means to subject, especially raw material, to a process B
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."

29. According to the Marine Products Export Development Authority c
Act (1972), [s.3(1)], 'processing' 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
autnority may, by notification in the Oazette of India, specify in this behalf.
According to section 2(C) of the State Financial Corporation Act 195 I, the
expression 'processing of goods' includes any art or process for producing, D
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 ofIndia & Anr., reported in (2006) 283 ITR 486 (Raj.). In this case, E
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 80-18 of the Act.

31. The High Court in the said judgment has dealt with the terms F
>
"manufacture", "production" and "process" 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 Chowgu/e case G
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) IO 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
H
148 SUPREME COURT REPORTS (2007) 8 S.C.R.

A to processing.

33. Details of relevant Statute are us under:

Section 8 of the Bombay Sales Tax Act, 1953, so far as is "subject to
the provisions of section 7, there shall be levied a sales tax on the turnover
B 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

(a) sales of goods - ..:.

(i) which have been purchased from a registered dealer on or after
c 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
D manner after such purchase."

34. This Court held that the different brands of tea which were mixed
by the assessee in Nilgiri 's 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
E 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. Mis PIO Food
F Packers, [1980] Supp. SCC 174. The court in this case also dealt with the
distinction of "manufacture" and "processing". 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 tor sale in sealed
cans is not covered by section 5-A(l)(a) of the Kerala General Sales Tax Act,
G 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 addin~
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 ·
H manufacture as no new commodity came into existence.
COMMNR. OF INCOME TAX, KERALA v. TARA AGENCIES (DAL VEER BHANDARI, J.) 149

36. In Bharat Forge and Press Industries v. CCE, (1990] l SCC 532, this A
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
a
or extruding. The expression 'pipe fittings' merely denotes that it is pipe or
B

tube of a particular length, size or shape. 'Pipe fittings' 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 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 C
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 D
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 E
Fireworks Industries, Sivakasi and Anr. v. Collector of Central Excise,
Madurai, AIR 1987 l 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 "manufacturing" has been construed and interpreted by this court in F
order to properly comprehend the subtle distinction between 'manufacturing"
and 'processing'.

40. In Union of India & Ors. v. J.G. Glass Industries Ltd. & Ors., [1998]
2 SCC 32, this Court has laid down a two-fold test for determining whether
the process is 'manufacturing'. First, whether by the said process a different G
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. H
150 SUPREME COURT REPORTS [2007) 8 S.C.R.

A 41. A Constitution Bench of this court in Mis Devi Das Gopa/ Krishnan
etc. v. State of Punjab & Ors., AIR (1967) SC 1895 observed that if by a
process a different .identity comes into existence then it can be said to be
'manufacture'. When oil is produced out of the seeds the process certainly
transforms raw material into different article for use.

B 42. In Empire Industries Limited & Ors. v. Union ofIndia & Ors., [1985]
3 sec 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.
c 43. A Constitution Bench of this court in Mis Ujagar Prints & Ors. (//)
v. Union of India & Ors., (1989] 3 SCC 488 and Mis Saraswatl Sugar Miiis
& Ors. v.rlaryanaStateBoard& Ors., [1992] 1 SCC418toq~thesameview.

44. In Gramophone Co. ofIndia Ltd. v. Collector o/Customs, Calcutta,
.D [2000] I SCC 549, this Court examined earlier cases and held that 0 manufacture"
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 'manufacture' has various shades of meanings but unl.ess defined
E 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 ~arried out. Further, such production activity must be
by an industrial undertaking."

F 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 manufacture as under:

"Manufacture implies a change but every change is not manufacture,
yet every change of an article is the result of treatment, labour and
G 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
H . a change as a result of some operation performed on it or in regard
COMMNR. OF INCOME TAX, KERALA v. TARA AGENCIES [DALVEER BHANDARI, J.] } S}

to it, such operation would amount to processing of the commodity. A '
)'
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 B
manufacture or In relation to manufacture impli~s 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 C
any particular process Is so integrally connected with the ultimate
production of go,ods that but for that process manufacture of processing
of goods would be impossible or commercially inexpedien~ that process
is one in relation to the manufacture."
D
46. In the following cases, this court has dealt with and construed the
terms "manufacturing", "production" and "processing". Collector of Central
Excise v. Technowe/d Industries, (2003] 11 SCC 798, Met/ex (I) (P) Ltd v.
Commissioner ofCentral Excise, New Delhi, (2005] I SCC 271, Aman Marble
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 E
264, South Bihar Sugar Mills Ltd. & Anr. etc. v. Union of India & Anr. 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. Mis COCO Fibres, [1992) Supp I
SCC 290, Commissioner of Sales Tax: Orissa & Anr. v. Jagannath Cotton F
Company & Anr., [1995) 5 SCC 527, Ashirwad /spat Udyog & Ors. v. State
Level Committee & Ors., [1998) 8 SCC 85, State ofMaharashtra v. Maha/axmi
Stores, [2003) 1 SCC 70, Aspinwall & Co. ltd v. Commissioner ofIncome Tax,
Ernakulam, [200 I] 7 SCC 525, Mis J.K. Cotton Spinning & Weaving Mills Co.
Ltd v. Sales Tax Officer, Kanpur & Anr., [1965] 1 SCR 900, Collector of
Central ExCise v. Kiran Spinning Mills, [198) 2 SCC 348, Park leather G
Industry (P) Ltd & Anr. v. State of UP & Ors., [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
p~cked 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 H
152 SUPREME COURT RE.PORTS (2007) 8 S.C.R.

A other characteristics of tea. The respondent assessee has to make purchases
in order to m~et the requirement of blending to achieve the same quality, taste
and fonn 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
B to manufacture the required quantity for the "Standard tea" 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
C 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;
D (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
E mixing and the entire mixture is blended by:
(a) manual hanct mixing

(b) by shoveling; and

(c) sometimes by machine, depending on the need, quantity and
urgency.
F
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
G 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 blen4ed tea in respect of colour,
texture, liquor, appearance, characteri~tic and even pricing. The said final
product cannot be marketed unless manufactured and produced by this process.
H After the process of manufacture and production of the final tea by blending,
COMMNR. OF INCOME TAX, KERALA v. TARA AGENCIES [DAL VEER BHANDARI, J.) 153

the entire originality of the different varieties of tea is Jost and a new product A
. of tea is produced. This is entirely experts 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 B
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 reli~d on the judgment of this court in Chowgule 's case and submitted
that in view of the clear findings in the said judgment, the controversy C
involved in this case is no longer res integra. According to Mr. Desai, the
present case is squarely covered by the decision in Chowgule 's case and
consequently the respondent assessee is entitled to the weighted deduction
under section 35B (IA) of the Act.

51. The respondent has also relied upon the decision in G.A. Renderian D
Ltds 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 E
same and the entire process was manual. The High Court while placing
reliance on the decision in Chowgules 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:

"The nature and extent of processing may vary from one case to F
another and indeed there may be several stages of processing 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 G
original commodity but instead is recognis~d 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?';
52. In G.A. Renderian Ltd (supra), while relying upon the decision of H
154 SUPREME COURT REPORTS [2007) 8 S.C.R.

A this court in Indian Copper Corporation Ltd v. Commissioner ofCommercial
Taxes, Bihar & Ors., [196S] 16 STC 259, this court observed as under:

"In this light, the Supreme Court observed that th~ operation conducted
by the assessec in that case should be considered to be "processing".
In the instant case before us this observation fully applies and if the
B 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."
S3. According to the respondent assessee, the controversy involved in
•
this case is squarely covered by a three Judge Bench judgment of this court
C in Chowgule 's case (supra). The learned coµnsel for the appellant also placed
reliance on 'chowgu/e 's case in support of'hls 'submissions. It may be pertinent
to mention that a number of subsequgnt judgments have either relied upon,
referred to, or distinguished the said judgment of Chowgule 's ease (supra)
without properly appreciating the facts of this case, therefore, we deem it
D 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.

E SS. The entire activity of the assessee in Chowgu/e 's 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
F 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
G said to be goods 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:

"8. (I) Every dealer, who is in the course of inter-State trade or
H commerce-
COMMNR. OFINCOME TAX, KERALA v. TARA AGENCIES [DALVEER BHANDARI, J.] 155
A
(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. B
(3) The goods referred to in clause (b) of sub-section (I)
(b) ..... 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 C
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 !!=lectricity or any other form of
power."

56. Chowgu/e & Co. in the aforementioned case made an application D
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 'manufacture' and
'processing'. Therefore, when the Chowgule & Co. did not get the desired
relief from the courts below, then the company ultimately approached this E
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 Chow'gules case.
F
57. In Chowgules case the court specifically examined a case decided
by a Division Bench of the Bombay High Court in Nilgiri's 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 Nilgiris judgment. Jhis court in G
Chowgules case comprehensively examined Nilgiris judgment and observed
as under:

"Now 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 H
in the Nilgiri Tea Company case as laying down the correct law.
156 SUPREME COURT REPORTS [2007) 8 S.C.R. ,

A When different brands of tea were mixed by the assesses in Nilgiri
Tea Company case for the purpose of producing a tea mixture of a · ·
different kind and quality according to a fonnula 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
B was of different quality and flavour than the different brands of tea
which went into the mixture."

58. In view of the specific language of the Statutes in Ni/giri's case
(supra) and Chowgu/e's case (supra), the term 'processing' has been specifically
C incorporated in the statute, therefore, the assessees were justi.fiably ·held to
be entitled to the benefit.

59."Undoubtedly, the facts of Nilgiri's case are identi"cal to the facts of
the present case and the ratio of Nilgiri's case is fully applicable to this case.
But we have to bear in mind a significant difference in the language employed
D in section 8 of the Bombay Sales Tax Act, 1953 in Nilgiri's case and the
language of section 35(1)(8) of the Income Tax in the present case. The
difference is that the tenn 'processing' which has been specifically incorporated
in Nilgiri 's case has been specifically omitted in the present case. Similarly,
in Chowgule's case, the tenn 'processing' has been incorporated in the
statute and the activities of the assessees both in Chowgule 's and Nilgiri 's
E 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 'processing' has been specifically omitted in the statute..
The activities of the assessees both in Nilgiri 's and Chowgule 's cases amount
F to processing. The activity of the respondent assessee in the present case
also amounts to processing. Section 35(I)(b) governing the instant case
incorporated the terms 'manufacture' and 'production' and omitted the tenn
'processing'. Therefore, the respondent assessee cannot be extended the
benefit of section 35(1 )(B) of the Income Tax Act.

G 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)(8) of the Income Tax Act~ the respondent assessee cannot be
extended the benefit which has been extended to the assessees in Nilgiri 's
and Chowgule 's cases.
H
COMMNR. OF INCOME TAX, KERALA v. TARA AGENCIES (DAL VEER BHANDARI, J.] 157

61. Since the legislature in its wisdom has not used the term 'processing' A
'r
in section 35(l)(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 's case and Nilgiri 's case dealt with by this court in Chowgule 's
case are clearly distinguishable because of the language of the statutes.

62. The intention of the legislature has to be gathered from the language B
used in the statue which means that attention should be paid to what has
been said as also to what has not been said.

63. In Union of India & Anr. 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 c
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 collferred on the courts. The court cannot
add words to a statute or read words into it which are not there.
D
64. In State ofKera/av. Mathai Verghese & Ors., [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 legislate E
have not been conferred on the court.

65. In Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd v. Custodian of Vested
Forests, Pa/ghat & Anr., [ 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. F

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.
G
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
J 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.
H
158 SUPREME COURT REPORTS (2007) 8 S.C.R.

A 68. On clear construction and interpretation of section 358(1 A) of the
Act, we are clearly of the opinion that the respondents activity amounts to
"processing" only and th.e activity does not amount to either "production"
or "manufacture". The term "processing" has not been included in section 35·
B(IA) of the Act, therefore, the respondent is not entitled. for weighted
B deduction under section 358(1 A) 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.

v.s.s. Appeal allowed.

'