Susanta Chatterji, J.
1. The Income-tax Appellate Tribunal, Ahmedabad Bench 'C' (hereinafter referred to as 'the Tribunal'), has referred the following questions, for the opinion of the High Court, at the instance of the Commissioner of Income-tax, Baroda (hereinafter referred to as 'the C. I. T. Baroda') :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee-company was engaged in manufacturing and processing activities and, therefore, should be charged to tax at the rate of 55 per cent.
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in setting aside the order of the Commissioner of Income-tax passed under section 263 of the Act ?'
2. It appears that the assessee claimed that it was a company engaged in manufacturing and that it should be charged to income-tax at the rate of 55 per cent. The Income-tax Officer allowed the claim of the assessee to be taxed at the rate of 55 per cent. under section 104(4) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). The Commissioner of Income-tax had, however, held that the activities of the assessee were only of purchase of tobacco leaves from the market, cutting them into pieces and selling them to bidi manufacturers and there was no manufacturing process involved and the assessee should be taxed at the rate of 65 per cent. Upon these facts and circumstances, the above questions have been referred to this court for opinion.
3. Mr. Shelat, learned counsel appearing for the Revenue, has made elaborate arguments by referring to various reported decisions and formulating the point that in cutting the tobacco leaves into pieces there is no manufacturing activity of processing activity involved and the Tribunal has committed an error in law.
The attention of the court has been drawn to the decision in the cases of -
CST v. Jugalkishore Badriprasad CST v. Deoki Nandan Pandey CTO v. Bikaner Gypsum Ltd. CST v. Madhu Supari Co. .
4. In all the aforesaid decisions, the definition of 'Manufacturing process' has been considered in various contexts and with the commodities concerned in different perspectives.
The attention of the court has also been drawn to the decisions reported in the cases of :
Delhi Cold Storage P. Ltd. v. CIT : [1991]191ITR656(SC) P.M. Patel and Sons v. Union of India, : (1986)ILLJ88SC Union of India v. Parle Products Pvt. Ltd., : 1994ECR359(SC) .
He has also referred to the decisions in the cases of :
CWT v. Mubarakali Khan : [1980]123ITR101(All) CIT v. Hindusthan Metal Refining Works (P.) Ltd. : [1981]128ITR472(Cal) CIT v. Lakhtar Cotton Press Co. (Pvt.) Ltd. : [1983]142ITR503(Guj) CIT v. Buhari Sons Pvt. Ltd. [1983] 144 ITR 12 CIT v. R. Narayanaswami Naicker and Sons : [1984]149ITR283(Mad) Ujagar Prints v. Union of India : [1989]179ITR317(SC) CIT v. Technico Enterprise Pvt. Ltd. : [1994]206ITR36(Cal) .
5. Mr. Shelat has taken much pains to take this court through all the aforesaid decisions for a proper appreciation of the facts of the present case and answer the questions referred to this court.
Mr. J. P. Shah, learned counsel for the assessee, has also referred to various decisions, namely :
CIT v. M. R. Gopal : [1965]58ITR598(Mad) Burmah Shell Refineries Ltd. v. G. B. Chand, ITO : [1966]61ITR493(Bom) CIT v. Commercial Laws of India Pvt. Ltd. : [1977]107ITR822(Mad) Income-tax Circular No. 347, dated July 7, 1982; 137 ITR 14 CWT v. Syed Amjad Ali : [1993]202ITR19(All) .
6. Having heard the learned lawyers of the respective parties at length and considering the materials on record in depth and in detail, we find that the point in dispute as raised in the present case is whether the activities of the assessee in cutting the tobacco leaves into small leaves or pieces and after removing the dust and unwanted stems from the tobacco leaves selling them to the bidi manufactures involved any 'processing'. In this context, we have to consider whether the activities of the assessee in dealing with the commodity as aforesaid involved any 'processing'. In the case of CST v. Madhu Supari Co. it has been observed that the word 'process' does not cover the act of mixing or adding certain ingredients like scent, menthol, sugar to raw betel nut which makes it scented supari, or mixing or adding further ingredients, namely, dhania and aniseed, to make it 'gutka'. Scented supari and gutka are nothing but mixtures of certain edible ingredients including betel nuts. A mixture, the composition of which includes betel nuts as one of its ingredients, cannot be termed 'betel nuts, raw or processed', and it was held that scented supari and gutka had to be taxed at the rate of ten per cent. under the residuary entry. This case was cited and relied upon by Mr. Shelat in support of his contention. In the aforesaid case, it was observed that in order to decide the question, it is necessary to ascertain the meaning of the word 'processed'. A reference was made to the decision of the Supreme Court in the case of Chowgule and Co. Pvt. Ltd. v. Union of India [1981] 47 STC 124 wherein the Supreme Court, while interpreting the word 'processing' which was not detained, adopted its plain natural meaning as given in Webster's Dictionary, which gives the following meaning of the word 'process' :
'to subject to some special process or treatment, to subject (especially raw material) to a process of manufacture, development or preparation for the market, etc., to convert into marketable from as livestock by slaughtering, grain by milling, cotton by spinning, milk by pestering, fruits and vegetables by sorting and repacking.'
7. This definition given in Webster's Dictionary as to the meaning of the word 'process' has consistently been followed and/or referred to in various subsequent decisions and in the case of Jugalkishore in order to appreciate the facts of each case and to consider as to whether the activities involved are manufacturing and/or processing of goods, Needless to observe, in the case of CIT v. Lakhtar Cotton Press Co. (Pvt.) Ltd. : [1983]142ITR503(Guj) this court has observed, inter alia, that the expression 'manufacture or processing of goods' has not been defined by the Finance Act, 1973, or the Finance Act, 1974. 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 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 decide on its own facts having regard to the context in which the term is used in the Act. It has been further held that the activity contemplated by the word 'process' is general, requiring only continuous and regular action or a succession of actions leading to the accomplishment of some result but it is not one of the requisites that the activity should involve some operation on some material in order to its conversion into some other stuff. Therefore, what is necessary in order to characterise an operation as processing is that the commodity must, as a result of the operation, experience some change. In the aforesaid decision, the assessee-company received cotton in bulk having lighter density which was sprinkled with water and through a mechanical device pressed into small units of convenient sizes and then packed into bales, because cotton packed in bales was commercially acceptable as merchants found it convenient to store cotton in that from because unpressed cotton would require considerable storing space which might ultimately prove uneconomical to the trades dealing in or using cotton. The assessee-company claimed that pressing of cotton fell within the expression 'processing of goods' within the meaning of Section 2(7)(c) of the Finance Act, 1973, and, therefore, it was an 'industrial company' entitled to the concessional rate of tax. This court held that loose cotton in bulk quantity with lighter density was, as a result of pressing, converted into cotton bales and to that extent it under went a change and, therefore the assessee-company fell within the definition of an 'industrial company' because it processed cotton into cotton bales and was entitled to the concessional rate of tax within the meaning of sections 2(7)(c) and 2(8)(c) of the Finance Acts, 1973 and 1974, respectively. There is also reference to the judgment of the Calcutta High Court in the case of Sri Om Parkash Gupta v. CCT [1965] 16 STC 935 where camphor cubes were just made out of camphor by application of mechanical force or pressure upon camphor powder, without addition or admixture of any other material and without application of any other process and yet the activity of converting camphor powder into camphor cubes was held to be a process within the meaning of section 2(b) of the Act. This decision of the Calcutta High Court was challenged before the Supreme Court and the Supreme Court approved the said decision in Chowgule and Co. Pvt. Ltd. v. Union of India : 1985ECR263(SC) . Reference was also made to the judgment of the Kerala High Court in CIT v. Casino (Pvt.) Ltd. : [1973]91ITR289(Ker) wherein the Division Bench, while dealing with the word 'processing' appearing in section 2(6)(d) of the Finance Act, 1968, observed that it was evident from the context in which that word was used that it was complementary to the term 'manufacture' and, therefore, would not cover manufacture also. In other words, activities of a nature in regard to goods which may not amount to manufacture but which would result in the doing of something to the goods to change or alter their from may be taken in by the term 'processing'. Processing, in that context, would, therefore, men something less than complete loss of identity of the goods because it falls short of manufacturing of goods.
8. Considering the matter in further depth, we find that in the case of CWT v. Syed Amjad Ali : [1993]202ITR19(All) the Allahabad High Court has held that in the said case the firm, Messrs. Ajmad Ali, purchased tobacco leaves which were subjected to the operation of crushing and separating stems and dust therefrom. Such operation would amount to processing. In the said decision, the definition of the word 'process' in Webster's Dictionary referred to in Chowgule and Co. Pvt. Ltd. v. Union of India : 1985ECR263(SC) was followed and it was held that the activity of crushing tobacco leaves and separating stems and dust therefrom amounts to processing and, therefore, the firm being an industrial undertaking within the meaning of the Explanation to section 5(1)(xxxii) of the Wealth-tax Act, 1957, it was entitled to exemption in respect of his interest in the firm.
9. Looking at the principle as considered in the decisions as discussed above, we find that the decision in the case of Delhi Cold Storage P. Ltd. v. CIT : [1991]191ITR656(SC) which is very much relied upon by Mr. Shelat in support of his contention is not anything to the contrary. The Supreme Court found that in common parlance, 'processing' is understood as an action which brings forth some change or alteration of the goods or material subjected to the act of processing. Considering this aspect, it was found in the aforesaid decision that in a cold storage, vegetables, fruits and several other articles which require preservation by refrigeration are stored. While, as a result of long storage, scientific examination might indicate loss of moisture content, that it not sufficient for holding that the stored articles have undergone a 'process' within the meaning of section 2(7)(c) of the Finance Act, 1973. With great anxiety we have gone through the facts of the said case and the principle of law as discussed therein. We, however, do not appreciate that the preservation of fruits in a cold storage has got any relevance to the problem as raised in the present case or helps in answering the questions referred to above.
10. We have, in the absence of any statutory definition of 'process', adopted the plain dictionary meaning therefor as given in Webster's Dictionary, which has been approved by the Supreme Court in the case of Chowgule and Co. P. Ltd. [1981] 47 STC 124 and applying the principles as discussed above, we are of the view that the activities pursued by the assessee amount to 'processing' and we accordingly answer the aforesaid questions in the affirmative, in favour of the assessee and against the Revenue.
11. This reference, accordingly, stands disposed of with no order as to costs.