COMMISSIONER OF INCOME TAX- 1, MUMBAI versus M/S. HINDUSTAN PETROLEUM CORPORATION LTD.

Citation: [2017] 7 S.C.R. 631 · Decided: 03-08-2017 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Dismissed
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Judgment (excerpt)

[2017] 7 S.C.R. 631 
COMMISSIONER OF INCOME TAX- 1, MUMBAI 
A 
v. 
MIS. HINDUSTAN PETROLEUM CORPORATION LTD. 
(Civil Appeal No. 9295 of2017) 
AUGUST 03, 2017 
(A.K. SIKRI AND ASHOK BHUSHAN, JJ.I 
Income Tax Act, 1961 - ss.80HH, 80-1 and 80-IA - Whether 
bottling of LPG undertaken by the assessee amounts to 'production' 
B 
or 'manufacture' for the purposes of ss.80HH, 80-1 and 80-IA of C 
the IT Act - Held: LPG bottling is a highly technical and complex 
· activity which requires precise functions of machines operated by 
technically expert personnel - LPG produced in the refinery cannot 
be directly supplied to the consumer for domestic use because of 
various reasons of handling, storage and safety - The process of 
bottling of LPG renders it capable of being marketed as a domestic 
D 
kitchen fuel and, thereby, makes it a viable commercial product -
Therefore, activity of filing cylinder with compressed gas amounts 
to production or manufacture for the purpose of ss.80HH, 80-1 
and 80-IA -
G_~s Cylinders Rules, 2004 - r.2(.-.::xxii). 
Words and phrases - Manufacture - Interpretation of. 
E 
Dismissing the appeals, the Court 
HELD: Sections 80HH, 80-1 and 80-IA of the Act use both 
the expressions, namely, 'manufacture' as well :is 'production'. 
An assessee whose process amounts to either 'manufacture' or 
'production' (i.e. one of these two and not both) would become 
F 
· entitled to the benefits enshrined therein. The specific activities 
at assessees' plant include receiving bulk LPG vapour from the 
oil refinery, unloading the LPG vapour, compression of the LPG 
vapour, loading of the LPG in liquefied form into bullets, followed 
by cylinder filling operations. After the bottling activities at the G 
assessees' plants, LPG is stored in eylinders in liquefied form 
under pressure. When the cylinder valve is opened and the gas 
is withdrawn from the cylinder, the pressure falls and the liquid 
boils to return to gaseous state. This is how LPG is made suitable 
for domestic use by customers who will not be able to use LPG in 
631 
H 
632 
SUPREME COURT REPORTS 
[2017] 7 S.C.R. 
A its vapour form as produced in the oil refinery. It, therefore, 
becomes apparent that the LPG obtained from the refinery 
undergoes a complex technical process in the assessees' plants 
and· is clearly distinguishable from the LPG bottled in cylinders 
and cleared from these plants for domestic use by customers. 
B 
The said activity would definitely fall within the expression 
'production'. The definition of 'manufacture of gas' in Rule 2 
(xxxii) of the Gas Cylinders Rules, 2004 also supports the case 
of the assessees inasmuch as gas distribution and bottling is 
treated as manufacturing or producing gas. [Paras 15-181 [640-
c 
D 
H; 641-A; 643-D, G-H; 644-A, E-F] 
Commissioner of Income Tax, Madras v. Vinbros and 
Company (2015) 14 SCC 483 - relied on. 
Servo-Med Industries Private Limited v. Commissioner 
• of Central Excise, Mumbai (2015) 14 SCC 47 - held 
inapplicable. 
Commissioner of Income Tax, Kera/a v. Tara Agencies 
(2007) 6 sec 429 : [20151 6 SCR 690; Vadilat 
Chemicals Ltd. v. State of A.P. & Ors. (2005) 6 SCC 
292: [20051 2 Suppl. SCR 1 - distinguished: 
E 
State of Gujarat v. Kosan Gas Company (1992) 87 STC 
236; Commissioner of Income Tax, Goa v. Sesa Goa 
Ltd. (2004) 271 ITR 331 (SC); Mis. Puttu Petro 
Products Pvt. Ltd. v. The Assistant Commissioner of 
Income Tax, Mangalore (2014) 361 ITR 290; Central 
U.P. Gas Ltd. v. Deputy Commissioner of Income Tax, 
F 
Kanpur MANU/UP/2895/2016 - referred to. 
Case Law Reference 
(1992) 87 STC 236 
referred to 
Paras 
(2015) 14 sec 47 
held inapplicable 
Para 9 
G [2015) 6 SCR 690 
distinguished 
Para 9 
(2010) 320 ITR 79 (SC) . 
referred to 
Para 11 
[2005) 2 Suppl. SCR 1 
distinguished 
Para 11 
(2004) 271 ITR 331 (SC) 
referred to 
Para 15 
H 
COMM. OF INCOME TAX- 1, MUMBAI v. MIS.HINDUSTAN 
633 
PETROLEUM CORPORATION LTD . 
. (2014) 361 ITR 290 
(201s) 14 sec 483 
referred to 
relied on 
Para 16 
Para 20 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 9295 
of2017. 
From the Judgment and Order dated 07.03.2013 of the High Court 
of Judicature at Bombay in ITA No. 2134 of2012 
A 
B 
WITH 
C.A.Nos.9296,9297,9298,9299,9300,9301,9302,9303,9304, 
C 
9305, 9306, 9307, 9308 and 9309 of2017. 
D. L. Chidananda, A. K. Srivastava, Mrs. Anil Katiyar, Advs. for 
the Appellant. 
J. D. Mistry, Sr. Adv., Tarun Gulati, Rony 0. John, Vasu Nigam, 
Kishore Kuna!, R. Chandrachud, Ms. Rachna Yad
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