LexM/S. CHILLIES EXPORTS HOUSE LTD. versus COMMISSIONER OF INCOME TAX
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M/S. CHILLIES EXPORTS HOUSE LTD. v. COMMISSIONER OF INCOME TAX APRIL 22, 1997 (S.C. AGRAWAL AND K.S. PARIPOORNAN, JJ.] Finance Acts of 74-75, 76-77 & 77-7/r-S. 2(8)(c) of 74, S. 2(7)(c) of 76 and S. 2(6)( c) of 77, respectively-The tenn 'processing of goods' in relation to an 'llldustrial Company'-Ref ers to the c11111u/ative effect of all the activities canied out to make the goods marketable/aportable, and it is immatelial even if some part of that activity is done by an outside agency. A B c The short question raised in these Appeals was whether the Appel· !ant was entitled to the concessional tax as applicable under S. 2(8)(c) of the Finance Act 74-75 based on a finding of whether there was 'processing of goods'. The High Court rejected the Appellant's case earlier inter alia D on the ground that the Appellant only sorted, graded clipped and stemmed the chillies but did not do the fumigation which was done by another agency. The same reasoning was followed in the later cases as well. The Appellant, relying on the judgment of the Supreme Court in E Chowgule & Co . . v. Union of India, 47 STC 124 pleaded that there was 'processing of goods' and hence was entitled to be taxed at 55% only. The Revenue contested by submitting that the Chowgule case was restricted in scope and referred to another decision of this Court in Delhi Cold Storage P. Ltd. v. CIT, (191 ITR 656). F Allowing the Appeal, this Court HELD : 1. The entire matter requires a second look. A better investigation into the different activities carried on by the assessee which resulted in the making of the goods lit for export and how far the cumula· tive effect of those activities will amount to 'the processing of goods' should G be arrived at in the light of the various decisions referred to hereinabove. Since such indepth investigation and analysis of the matter has not been made, the decision in the three instant appeals solely based on the earliest decision of the High Court of Madras, rendered in 115 ITR 73, when such materials were not available, cannot stand. TI1e impugned judgments are H 907 908 SUPREME COURT REPO R '.'.S [1997] 3 S.C.R. A set aside and the matters remitted to the High Court for a denovo con· sideration according to law. [918-D-F] B 2. It is evident that the various aspects highlighted in the decisions adverted as also the circular of the Central Board of Direct Taxes were not available to the Madras High Court when it rendered its main decision in 1977 (115 ITR 73). The ultimate conclusion as to whether the assessee was carrying 011 the business of processing of goods would depend upon the consideration of all relevant materials available in the case. [917-E-F] 3. The Madras High Court has eschewed from consideration one C important activity carried on in the matter, namely, the activity relating to fumigation by the treatment with methyl bromide on the ground that it was done by •mother (M/S. Mysorlet Pvt. Ltd., Bangalore) on behalf of the assessee. That is an irrelevant or immaterial factor. The sole 11uestion is whether on a consideration of the totality of the activities induding the one D relating to the fumigation by the treatment with methyl bromide which enables the goods to be exported as a marketable commodity, amounted E to the business of proces~ing of goods. The High Court has omitted to consider the matter in that perspective. [917-F-G] 4. It also does not stand to reason to state that the dictum laid down by the three member hench in Clwwgule case has been departed from in the later decision rendered by another coordinate Bench in the New De/Iii Cold Storage P. Ltd. v. Commissioner of Income Tax, (191 ITR 656). It appears that since in the cold storage there was only an act of preserva· tion· without any positive action this Cnurt was inclined to take the view F that the company running cold storage is not an industrial company and no process is inrnlved. Fumigation requires positive action. The dictionary meaning of the said word is "to treat (something contaminated or infected) with fumes or smoke". The meaning for the word, "fumigate" is to subject to smoke or fumes, as for dbinfection". Archaic-to perfume. Whether "refrigeration" "fumigation" are of the same or similar import, or whether G there is any difference, is a matter which re11nires a close look. It appears that though the goods purchased by the assessee were chillies, it had to
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