Activity of sieving to separate dust particles is ‘manufacture’ under the SEZ Act, 2005: Madras HC [Read Order]

The Madras High Court while upholding the decision of the CIT(A) and Tribunal held that the Activity of sieving to separate dust particles is ‘manufacture’ under the SEZ Act, 2005.

The Assessee, M/s.Vetrivel Minerals filed their return of income for the Assessment Year under consideration admitting total income and the assessee claimed deduction under Section 10AA of the SEZ Act, 2005.

However, the Assessing Officer rejected the claim of the assessee on the ground that the raw material and the finished products are one and the same and there was no manufacturing activity having taken place in the SEZ unit of the assessee.

The Assessing Officer chose to refer to the ‘Gate Pass’ issued by the Government wherein the description of the goods is shown as ‘Tailings rich in ilmenite’. Further, the Assessing Officer opined that a minor activity of sieving to separate dust particles only is carried out in the SEZ units, and hence, it does not amount to manufacturing.

However, the CIT(A) observed that the processes carried out by the assessee in their SEZ unit result in a new product having a  different name, character or use, as per the definition of “manufacture”, as defined under Section 2(r) of the Special Economic Zone Act, 2005.

The Revenue carried the matter to the tribunal, wherein the tribunal once again re-appreciate the factual position and found that there is a process of ‘manufacture’ as defined under the SEZ Act, which takes place in the SEZ unit and also pointed out that the Assessing Officer himself has accepted that the assessee’s unit, processed the raw materials by removing 10 to 20% impurities.

The two-judge bench of Justice T.S. Sivagnanam, and Justice V. Bhavani Subbaroyan while dismissing the appeal upheld the observation made by the CIT(A) and Tribunal.