The Commissioner of Income Tax Vs. Alfa Lamination - Court Judgment

SooperKanoon Citationsooperkanoon.com/738949
SubjectDirect Taxation
CourtGujarat High Court
Decided OnMar-30-2009
Case NumberTax Appeal No. 363 of 2008
Judge D.A. Mehta and; S.R. Brahmbhatt, JJ.
Reported in(2009)225CTR(Guj)212
ActsIncome Tax Act, 1961 - Sections 80IB, 80IB(2) and 255(4)
AppellantThe Commissioner of Income Tax
RespondentAlfa Lamination
Appellant Advocate Manish Bhatt,; S. Mauna and; M. Bhatt, Advs.
Respondent Advocate SN Soparkar, Sr. Adv.,; Swati Soparkar,; Tushar Hemani
DispositionAppeal dismissed against Department
Excerpt:
- - ' [b] 'whether on the facts and circumstances of the case and in law was the appellate tribunal right in holding that assessee is engaged in manufacturing article or thing and is entitled to deduction under section 80ib of the income-tax act, 1961 though assessee failed to fulfill the condition laid down under section 80ib(2)(iii) of the act? in support of the submissions, learned counsel has placed reliance on number of judgments of the apex court as well as various high courts. key aspects like length, width, thickness, mitering, holing, notching and physical appearances are verified and examined during this process. i find that during the course of assessment proceedings as well as appellate proceedings, the experts opinion from sail, vjti & erda was filed. these institutions are well recognized institutions in the technical fields.d.a. mehta, j.1. the appellant revenue has proposed following three questions:[a] 'whether on the facts and circumstances of the case and in law was the appellate tribunal right in holding that assessee was engaged in carrying on the activity of manufacturing though it has been categorically held by the assessing officer in the assessment order that activity carried on by assessee tantamounts to cutting and not manufacturing or production.'[b] 'whether on the facts and circumstances of the case and in law was the appellate tribunal right in holding that assessee is engaged in manufacturing article or thing and is entitled to deduction under section 80ib of the income-tax act, 1961 though assessee failed to fulfill the condition laid down under section 80ib(2)(iii) of the act?'[c] 'whether on the facts and circumstances of the case and in law was the appellate tribunal right in holding that assessee is engaged in manufacturing article or thing when one of the member dissented and decision is taken on the basis of opinion of majority?'2. the assessment year in question is 2001-2002. though, this appeal has not been admitted, at the request of learned counsel for the contesting parties this appeal has been heard along with group of tax appeals, being tax appeal no. 532 of 2008 and cognate matters, as according to learned counsel for appellant revenue, the issue involved is identical in terms.3. the matters have therefore been heard at length. after hearing the learned counsel for the parties, the court is of the opinion that no substantial question of law is involved, the only dispute between the parties being as to whether respondent assessee manufactures a product known as 'transformer core' or not. according to revenue, there is no manufacturing activity involved, while according to assessee the activity in question amounts to manufacture.4. the assessee, is engaged in the business of making transformer core from cold rolled grain oriented/cold rolled non-grain oriented (crgo/crno) coils involving series of processes. the assessee claimed deduction under the provisions of section 80ib of the income tax act, 1961 (the act). the assessing officer disallowed the claim and matter was carried in appeal before commissioner (appeals). commissioner (appeals) for the reasons recorded in his order did not agree with the assessing officer and upheld the claim of the assessee.5. the matter was carried by the department in appeal before the tribunal. the tribunal after hearing the parties, and after a site visit to the factory of the assessee, along with site visit to factory of another assessee, came to the conclusion that the claim of the assessee was allowable. this finding was recorded by majority opinion. initially the accountant member, the vice president of the tribunal accepted the claim, whereas the judicial member disagreed with the opinion recorded by the vice president. the matter was therefore referred to third member under the provisions of section 2555(4) of the act on the following question:whether, on the facts and in the circumstances of the case, the assessee is engaged in manufacturing article or thing entitled to deduction under section 80ib of the income tax act, 19616. the president of the tribunal sitting as a third member agreed with the view expressed by the vice president. it is this order of the majority which is under challenge in the present appeal.7. the learned senior standing counsel appearing on behalf of the appellant - revenue has primarily referred to and relied upon the opinion expressed by judicial member, which is in favour of the revenue, and adopted such opinion as his arguments. in brief, the common thread running through the submissions was that the nature of process which is undertaken by the assessee is such that no new article has come into existence, and the end use of the produced article is not a relevant test for the purpose of determining whether the activity amounts to manufacture or not. in support of the submissions, learned counsel has placed reliance on number of judgments of the apex court as well as various high courts.8. on the other hand, learned counsel for the respondent assessee submitted that in fact no substantial question of law arose and the difference of opinion amongst the members, who constituted the bench originally, was only on the question as to whether on facts, the activity of the assessee amounted to manufacture of an article or a thing or not. the learned counsel also placed reliance on various decisions of the apex court and this high court to point out that the tests formulated by the said decisions have been applied by the tribunal while recording the majority opinion.9. there is no dispute on facts, in as much as it is an accepted position between the parties that the assessee company is engaged in making crgo core lamination or transformer core, a vital component of various kinds and types of transformers used in power distribution. as already noted, the core lamination is made by using the raw material known as crgo/crno. the majority has recorded the following processes as being involved in making of core lamination after purchasing crgo/crno coils and/or sheets. i - slitting : slitting process a high precision computerized constitutes the first important manufacturing activity and fundamental in order to obtain the final product. the quality and accuracy of the process, largely determines the quality of the final product. the slitting is done on the slitting lines (machines) maintaining 'two loops' system which ensures that the grains are not strained or stretched during the process. the loop before and after slitting also ensure the paralleblity of the slits and minimum edge camber to prevent roughness on the edges. all the slitting blades are made of fully hardened and ground alloy steel to ensure sharpness and durability particularly to remove camber (waviness), is taken to keep the edge burr under control, within the specific tolerances.ii - shearing : the second stage of the process is 'shearing' at 45' or 90' as required by the customers. strict tolerances are maintained and a unique three point location method to ensure accuracy in dimension in terms of angle and length. burrs are controlled by ensuring the blades are always sharp. continues line inspection exists to ensure that all parameter are strictly maintained within the acceptable limits. iii-v notching : the third and important step of the manufacturing process is the requirement of 'v-notch' which is per the customer's design and position of centre limbs. accuracy is of utmost importance during individual v-notching operations. during step lap, the size and position of v-notch will differ due to different sizes of plates.iv-punching and holding: the fourth step of the process is known as punching and holing of limbs and plates. as per customer's drawings and cutting instructions holes are punched on to the yoke plates. the yoke plates are kept under the holing power press machines to achieve the desired position of holes. the position of holes may even be off centre with respect to the longitudinal axis of the limb. during step lap, punching of holes varies according to different sizes of plates. these holes are utilized during bolting and assembling the core lamination.all limbs/plates or laminations: after the above processes, physically all the limbs or plates are prepared, however every single and individual plate is yet to be further processed to restore or improve its quality characteristics.v-annealing : the fifth and one of the most important step of the process is the annealing process. this process is undertaken to de-burr and relieve the stress and strains on the limbs / plates through a roller hearth annealing furnace, crgo electrical steel and core laminations develop stress, strains and burrs during shipment transit and processing which affects its quality. annealing process is down as per the mill's specification at a temperature of 820' for 72 to 90 seconds depending upon the thickness and grade of material. this process of annealing is to restore and improve the magnetic and electrical properties of lamination. vi-testing of lamination : after annealing, the laminations are physically inspected for technical details. they are verified to ensure that they are as per customer's drawings and specifications. key aspects like length, width, thickness, mitering, holing, notching and physical appearances are verified and examined during this process. the verification is done by experienced and skilled quality executives. to certify and verify that the annealing process has restored or improved the magnetic and electrical properties of the lamination, a test is conducted. the franklin power supply unit measures the surface insulation of the lamination and the epstein tester iron loss tester measures the core/iron loss in the lamination. the quality and technical staff ensures that the lamination is as per its technical details. certificates are prepared and issued by quality department as per the results.vii-core stacking : the core laminations are stacked as per customer's specification. the laminations are stacked in such a fashion that minimum manhandling is occurred while assembling / packaging or transporting the core. due to the large sizes of core laminations of power transformers, they stacked and directly sent to packaging department for packaging and forwarding.viii-core assembly : the transformer laminations for distribution transformers are assembled and built to form an assembled transformer core. drawings, specifications and details are provided by the customers. the supporting utilities to build the core lamination are also supplied by the customers which include iron channels, iron rods of various sizes, nuts and bolts, insulation tape, craft paper, resins etc. all the limbs/plates are interleaved in mitered joints in order to facilitate the passage of the magnetic/electrical flux and to avoid hot spots and reduce no load losses, no load current and low noise level. highly experienced, professional and trained personnels are employed to assemble the transformer core. the personnels practice utmost care during building the core and ensure that stacking factor, building, window height, air gapping and other technical aspects are within technical limitations / details.ix-testing of assembled core : after assembling and building the core, it is mandatory to test and certify the no load losses of the built core. emco no load tester measures and ensures that its technical results are within standard limits specified in customer's drawings. the technical staff and testing laboratory are fully equipped to detect and rectify any lapse in the built core. certificates are prepared by quality department.x-packaging and forwarding : for packing the assembled cores, the whole core is horizontally laid down onto wooded skids then securely wrapped with jute cloth and plastic covers. the core is then strapped tightly to the skids/pallets with steel straps. for packing stacked core laminations, individual limbs/ laminations are packed separately with jute cloth and plastic wrappers, further they are strapped tightly onto wooden skids/pallets. strapping the final product onto wooden skids ensures and prevents any damaged or disturbance to the material during transportation. packing lists provided to customers. the packaging department follows the pyramid style of packing the laminations which is advantageous during core assembly.10. admittedly, the majority opinion has recorded that the aforesaid activities in cases of some assessees are without the process of annealing but the said fact by itself does not make any difference. the majority opinion, as expressed by the third member, in his order, reads as under:.looking to these facts, there cannot be two opinions that the shape of lamination has undergone a complete change after performing various processes. i also find that there was no dispute that the raw material from which the core is made is called crgo coils whereas the item which has emerged after various processes is called transformer core. it is also undisputed position that the crgo coils even with few processes cannot be used in a transformer unless all the processes were complete. it is the transformer core only which is end product which could be used in the manufacturing of transformer. thus there cannot be any dispute that due to various processes the product has distinct name, shape and uses. by these processes the raw material loses its identity and new product comes into existence which is commercially recognized as a new product.45. i have, therefore, examined as to whether out of various processes performed by the assessees it could be said that the manufacture of transporter core has taken place. i find that during the course of assessment proceedings as well as appellate proceedings, the experts opinion from sail, vjti & erda was filed. these institutions are well recognized institutions in the technical fields. once technical opinion from them was filed the same should have been considered on its merits. though the opinion expressed by them was not sacrosanct yet once the same was filed, the same should be accepted or rejected on merits. i have also perused the opinion given by them in the forms of question and answer also. in their opinion they have confirmed that various activities performed by the assessees for making the transformer core was manufacturing activity. nothing has been brought to my notice to take a different view in this regard.11. thus, the findings of facts, after appreciation of evidence on record, by the tribunal are that crgo coils even with a few processes, out of all the processes enumerated hereinabove, cannot be used in a transformer unless all the processes were completed. that after completion of all the processes, crgo/crno coils get converted into transformer core which is the end product which can be used in manufacture of transformer. there is no dispute that due to various processes, the end product, which is an input for the purpose of manufacturing transformer, has a distinct name, shape and use. after the raw-material in the form of crgo/crno coils and/or sheets goes through all the aforesaid processes, the raw-material looses its identity and a new product comes into existence which is commercially distinct from raw-material on which the processes have been performed. the tribunal has further referred to various opinions of different experts on the subject and recorded that such technical opinions should be considered on merits, and though not sacrosanct, either the same should be accepted or rejected on merits, but cannot be ignored. that the experts have opined that various activities performed by the assessee for making the transformer core amount to manufacturing activities and nothing was pointed out to take a different view, i.e. different from the view expressed by the experts.12. in light of the aforesaid findings of facts recorded by majority of the members of the tribunal, the court is of the opinion that it cannot be said that any substantial question of law is involved. whether a particular activity amounts to manufacture or not would always be a question dependent upon the facts and evidence on record and would be based on the facts of each case. the only issue which would call for an inquiry is as to whether correct tests have been applied after finding the facts on record. 'the tests to ascertain whether an activity amounts to manufacture or production of an article or thing have been laid down and reiterated by various decisions of the apex court and this high court. broadly, the requirement is that the raw material must be, in the first instance, subjected to a process of such a nature that it cannot be termed to be the same as the end-product after the raw material undergoes the process of manufacture. in other words, the goods purchased as raw material should go in as inputs in the process of manufacture and the result must be manufacture of other goods. the article produced must be regarded by the trade as a new and distinct article having an identity of its own, an independent market after the commodity is subjected to the process of manufacture. the nature and extent of the process would vary from case to case, and in a given case, there may be only one stage of processing, while in another case, there may be several stages of processing, and perhaps, a different kind of process at every stage. that with every process, the commodity would experience a change, but ultimately, it is only when the change, or a series of changes, bring about a result so as to produce a new and distinct article, that it can be said that the commodity used as raw material has been consumed in the manufacture of the end-product. to put it differently, the final product does not retain the identity of the raw material after it has undergone the process or processes of manufacture. (2006) 282 itr 568 (guj.).13. applying the aforesaid tests to the facts found by the tribunal, it is not possible to come to the conclusion that any legal infirmity exists in the impugned order of the tribunal so as to give rise to substantial question of law. the court is also of the opinion that in a case where the subject matter involves technical issue and opinion of technical experts in the field have been placed on record, unless and until such opinion of an expert is dislodged by placing on record a contrary opinion and giving an opportunity to the expert to deal with such contrary opinion, and thereafter examining the expert on the said issue, it would not be correct to discard such an opinion summarily. in fact, the court and the tribunal, or any other forum for that matter, would be wholly ill-equipped to deal with such technical opinion on merits and should refrain from undertaking such an exercise without following the aforesaid procedure. the tribunal has in the circumstances rightly, while recording majority opinion, given due credence to the opinion of the technical experts of the field.14. accordingly, the appeal is dismissed in absence of any substantial question of law.
Judgment:

D.A. Mehta, J.

1. The appellant Revenue has proposed following three questions:

[A] 'Whether on the facts and circumstances of the case and in law was the Appellate Tribunal right in holding that assessee was engaged in carrying on the activity of manufacturing though it has been categorically held by the Assessing Officer in the assessment order that activity carried on by assessee tantamounts to cutting and not manufacturing or production.'

[B] 'Whether on the facts and circumstances of the case and in law was the Appellate Tribunal right in holding that assessee is engaged in manufacturing article or thing and is entitled to deduction under Section 80IB of the Income-Tax Act, 1961 though assessee failed to fulfill the condition laid down under Section 80IB(2)(iii) of the Act?'

[C] 'Whether on the facts and circumstances of the case and in law was the Appellate Tribunal right in holding that assessee is engaged in manufacturing article or thing when one of the member dissented and decision is taken on the basis of opinion of majority?'

2. The Assessment Year in question is 2001-2002. Though, this appeal has not been admitted, at the request of learned Counsel for the contesting parties this appeal has been heard along with group of Tax Appeals, being Tax Appeal No. 532 of 2008 and cognate matters, as according to learned Counsel for appellant revenue, the issue involved is identical in terms.

3. The matters have therefore been heard at length. After hearing the learned Counsel for the parties, the Court is of the opinion that no substantial question of law is involved, the only dispute between the parties being as to whether respondent assessee manufactures a product known as 'Transformer Core' or not. According to revenue, there is no manufacturing activity involved, while according to assessee the activity in question amounts to manufacture.

4. The assessee, is engaged in the business of making transformer core from Cold Rolled Grain Oriented/Cold Rolled Non-grain Oriented (CRGO/CRNO) Coils involving series of processes. The assessee claimed deduction under the provisions of Section 80IB of the Income Tax Act, 1961 (the Act). The Assessing Officer disallowed the claim and matter was carried in appeal before Commissioner (Appeals). Commissioner (Appeals) for the reasons recorded in his order did not agree with the Assessing Officer and upheld the claim of the assessee.

5. The matter was carried by the Department in Appeal before the Tribunal. The Tribunal after hearing the parties, and after a site visit to the factory of the assessee, along with site visit to factory of another assessee, came to the conclusion that the claim of the assessee was allowable. This finding was recorded by majority opinion. Initially the Accountant Member, the Vice President of the Tribunal accepted the claim, whereas the Judicial Member disagreed with the opinion recorded by the Vice President. The matter was therefore referred to Third Member under the provisions of Section 2555(4) of the Act on the following question:

Whether, on the facts and in the circumstances of the case, the assessee is engaged in manufacturing article or thing entitled to deduction under Section 80IB of the Income Tax Act, 1961

6. The President of the Tribunal sitting as a Third Member agreed with the view expressed by the Vice President. It is this order of the majority which is under challenge in the present appeal.

7. The learned Senior Standing Counsel appearing on behalf of the appellant - revenue has primarily referred to and relied upon the opinion expressed by Judicial Member, which is in favour of the revenue, and adopted such opinion as his arguments. In brief, the common thread running through the submissions was that the nature of process which is undertaken by the assessee is such that no new article has come into existence, and the end use of the produced article is not a relevant test for the purpose of determining whether the activity amounts to manufacture or not. In support of the submissions, learned Counsel has placed reliance on number of judgments of the Apex Court as well as various High Courts.

8. On the other hand, learned Counsel for the respondent assessee submitted that in fact no substantial question of law arose and the difference of opinion amongst the members, who constituted the Bench originally, was only on the question as to whether on facts, the activity of the assessee amounted to manufacture of an article or a thing or not. The learned Counsel also placed reliance on various decisions of the Apex Court and this High Court to point out that the tests formulated by the said decisions have been applied by the Tribunal while recording the majority opinion.

9. There is no dispute on facts, in as much as it is an accepted position between the parties that the assessee Company is engaged in making CRGO Core Lamination or Transformer Core, a vital component of various kinds and types of transformers used in power distribution. As already noted, the Core Lamination is made by using the raw material known as CRGO/CRNO. The majority has recorded the following processes as being involved in making of Core Lamination after purchasing CRGO/CRNO coils and/or sheets.

I - SLITTING : Slitting process a high precision computerized constitutes the first important manufacturing activity and fundamental in order to obtain the final product. The quality and accuracy of the process, largely determines the quality of the final product. The slitting is done on the slitting lines (machines) maintaining 'two loops' system which ensures that the grains are not strained or stretched during the process. The loop before and after slitting also ensure the paralleblity of the slits and minimum edge camber to prevent roughness on the edges. All the slitting blades are made of fully hardened and ground alloy steel to ensure sharpness and durability particularly to remove camber (waviness), is taken to keep the edge burr under control, within the specific tolerances.

II - SHEARING : The second stage of the process is 'Shearing' at 45' or 90' as required by the customers. Strict tolerances are maintained and a unique three point location method to ensure accuracy in dimension in terms of angle and length. Burrs are controlled by ensuring the blades are always sharp. Continues line inspection exists to ensure that all parameter are strictly maintained within the acceptable limits.

III-V NOTCHING : The third and important step of the manufacturing process is the requirement of 'V-Notch' which is per the customer's design and position of centre limbs. Accuracy is of utmost importance during individual V-Notching operations. During step lap, the size and position of V-Notch will differ due to different sizes of plates.

IV-PUNCHING AND HOLDING: The fourth step of the process is known as Punching and Holing of limbs and plates. As per customer's drawings and cutting instructions holes are punched on to the yoke plates. The yoke plates are kept under the holing power press machines to achieve the desired position of holes. The position of holes may even be off centre with respect to the longitudinal axis of the limb. During step lap, punching of holes varies according to different sizes of plates. These holes are utilized during bolting and assembling the core lamination.

All Limbs/Plates or Laminations: After the above processes, physically all the limbs or plates are prepared, however every single and individual plate is yet to be further processed to restore or improve its quality characteristics.

V-ANNEALING : The fifth and one of the most important step of the process is the annealing process. This process is undertaken to de-burr and relieve the stress and strains on the limbs / plates through a roller hearth annealing furnace, CRGO electrical steel and core laminations develop stress, strains and burrs during shipment transit and processing which affects its quality. Annealing process is down as per the mill's specification at a temperature of 820' for 72 to 90 seconds depending upon the thickness and grade of material. This process of annealing is to restore and improve the magnetic and electrical properties of lamination.

VI-TESTING OF LAMINATION : After annealing, the laminations are physically inspected for technical details. They are verified to ensure that they are as per customer's drawings and specifications. Key aspects like length, width, thickness, mitering, holing, notching and physical appearances are verified and examined during this process. The verification is done by experienced and skilled quality executives. To certify and verify that the annealing process has restored or improved the magnetic and electrical properties of the lamination, a test is conducted. The Franklin power supply unit measures the surface insulation of the lamination and the Epstein tester iron loss tester measures the core/iron loss in the lamination. The quality and technical staff ensures that the lamination is as per its technical details. Certificates are prepared and issued by quality department as per the results.

VII-CORE STACKING : The core laminations are stacked as per customer's specification. The laminations are stacked in such a fashion that minimum manhandling is occurred while assembling / packaging or transporting the core. Due to the large sizes of core laminations of power transformers, they stacked and directly sent to packaging department for packaging and forwarding.

VIII-CORE ASSEMBLY : The transformer laminations for distribution transformers are assembled and built to form an assembled transformer core. Drawings, specifications and details are provided by the customers. The supporting utilities to build the core lamination are also supplied by the customers which include iron channels, iron rods of various sizes, nuts and bolts, insulation tape, craft paper, resins etc. All the limbs/plates are interleaved in mitered joints in order to facilitate the passage of the magnetic/electrical flux and to avoid hot spots and reduce no load losses, no load current and low noise level. Highly experienced, professional and trained personnels are employed to assemble the transformer core. The personnels practice utmost care during building the core and ensure that stacking factor, building, window height, air gapping and other technical aspects are within technical limitations / details.

IX-TESTING OF ASSEMBLED CORE : After assembling and building the core, it is mandatory to test and certify the no load losses of the built core. EMCO no load tester measures and ensures that its technical results are within standard limits specified in customer's drawings. The technical staff and testing laboratory are fully equipped to detect and rectify any lapse in the built core. Certificates are prepared by quality department.

X-PACKAGING AND FORWARDING : For packing the assembled cores, the whole core is horizontally laid down onto wooded skids then securely wrapped with jute cloth and plastic covers. The core is then strapped tightly to the skids/pallets with steel straps. For packing stacked core laminations, individual limbs/ laminations are packed separately with jute cloth and plastic wrappers, further they are strapped tightly onto wooden skids/pallets. Strapping the final product onto wooden skids ensures and prevents any damaged or disturbance to the material during transportation. Packing lists provided to customers. The Packaging department follows the Pyramid style of packing the laminations which is advantageous during core assembly.

10. Admittedly, the majority opinion has recorded that the aforesaid activities in cases of some assessees are without the process of annealing but the said fact by itself does not make any difference. The majority opinion, as expressed by the Third Member, in his order, reads as under:.Looking to these facts, there cannot be two opinions that the shape of lamination has undergone a complete change after performing various processes. I also find that there was no dispute that the raw material from which the core is made is called CRGO coils whereas the item which has emerged after various processes is called transformer core. It is also undisputed position that the CRGO coils even with few processes cannot be used in a transformer unless all the processes were complete. It is the transformer core only which is end product which could be used in the manufacturing of transformer. Thus there cannot be any dispute that due to various processes the product has distinct name, shape and uses. By these processes the raw material loses its identity and new product comes into existence which is commercially recognized as a new product.

45. I have, therefore, examined as to whether out of various processes performed by the assessees it could be said that the manufacture of transporter core has taken place. I find that during the course of assessment proceedings as well as appellate proceedings, the experts opinion from SAIL, VJTI & ERDA was filed. These institutions are well recognized institutions in the technical fields. Once technical opinion from them was filed the same should have been considered on its merits. Though the opinion expressed by them was not sacrosanct yet once the same was filed, the same should be accepted or rejected on merits. I have also perused the opinion given by them in the forms of question and answer also. In their opinion they have confirmed that various activities performed by the assessees for making the transformer core was manufacturing activity. Nothing has been brought to my notice to take a different view in this regard.

11. Thus, the findings of facts, after appreciation of evidence on record, by the Tribunal are that CRGO coils even with a few processes, out of all the processes enumerated hereinabove, cannot be used in a transformer unless all the processes were completed. That after completion of all the processes, CRGO/CRNO coils get converted into transformer core which is the end product which can be used in manufacture of transformer. There is no dispute that due to various processes, the end product, which is an input for the purpose of manufacturing transformer, has a distinct name, shape and use. After the raw-material in the form of CRGO/CRNO Coils and/or sheets goes through all the aforesaid processes, the raw-material looses its identity and a new product comes into existence which is commercially distinct from raw-material on which the processes have been performed. The Tribunal has further referred to various opinions of different experts on the subject and recorded that such technical opinions should be considered on merits, and though not sacrosanct, either the same should be accepted or rejected on merits, but cannot be ignored. That the experts have opined that various activities performed by the assessee for making the transformer core amount to manufacturing activities and nothing was pointed out to take a different view, i.e. different from the view expressed by the experts.

12. In light of the aforesaid findings of facts recorded by majority of the members of the Tribunal, the Court is of the opinion that it cannot be said that any substantial question of law is involved. Whether a particular activity amounts to manufacture or not would always be a question dependent upon the facts and evidence on record and would be based on the facts of each case. The only issue which would call for an inquiry is as to whether correct tests have been applied after finding the facts on record. 'The tests to ascertain whether an activity amounts to manufacture or production of an article or thing have been laid down and reiterated by various decisions of the Apex Court and this High Court. Broadly, the requirement is that the raw material must be, in the first instance, subjected to a process of such a nature that it cannot be termed to be the same as the end-product after the raw material undergoes the process of manufacture. In other words, the goods purchased as raw material should go in as inputs in the process of manufacture and the result must be manufacture of other goods. The article produced must be regarded by the trade as a new and distinct article having an identity of its own, an independent market after the commodity is subjected to the process of manufacture. The nature and extent of the process would vary from case to case, and in a given case, there may be only one stage of processing, while in another case, there may be several stages of processing, and perhaps, a different kind of process at every stage. That with every process, the commodity would experience a change, but ultimately, it is only when the change, or a series of changes, bring about a result so as to produce a new and distinct article, that it can be said that the commodity used as raw material has been consumed in the manufacture of the end-product. To put it differently, the final product does not retain the identity of the raw material after it has undergone the process or processes of manufacture. (2006) 282 ITR 568 (Guj.).

13. Applying the aforesaid tests to the facts found by the Tribunal, it is not possible to come to the conclusion that any legal infirmity exists in the impugned order of the Tribunal so as to give rise to substantial question of law. The Court is also of the opinion that in a case where the subject matter involves technical issue and opinion of technical experts in the field have been placed on record, unless and until such opinion of an expert is dislodged by placing on record a contrary opinion and giving an opportunity to the expert to deal with such contrary opinion, and thereafter examining the expert on the said issue, it would not be correct to discard such an opinion summarily. In fact, the Court and the Tribunal, or any other forum for that matter, would be wholly ill-equipped to deal with such technical opinion on merits and should refrain from undertaking such an exercise without following the aforesaid procedure. The Tribunal has in the circumstances rightly, while recording majority opinion, given due credence to the opinion of the technical experts of the field.

14. Accordingly, the appeal is dismissed in absence of any substantial question of law.