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Granites are hard to digest, and so is a recent decision of the Madras High Court, if you were to view it from the angle of granite companies. The case between the Commissioner of Income-Tax and Vijay Granites P Ltd was whether cutting and polishing granite slabs before exporting them could be called manufacture. The company raises granites from mines, also purchases granite blocks, polishes them and exports the same. When it claimed tax benefit available for manufacturing companies, the Department declined, stating that no manufacturing process was involved in cutting granites and polishing them. A precedent that supported the taxman's stand was Gomatesh Granites case, which was about "extracting granite from the hills and processing it by cutting rough edges before export." There, the court had held that extraction of granite could not be regarded as the result of any manufacturing activity. What then is manufacturing, you may wonder? The court explained in that case: "Manufacturing implies subjecting the raw material or other ingredients that go into the making of the final product to a series of processes as a result of which the input undergoes changes at different stages and ultimately emerges as a product with a distinct commercial identity of its own, and becoming capable of use for the purposes to which the inputs which went into the making of the product by themselves could not have been as effectively used."
Applying this to "blasting of a granite block which is found on a natural formation", court observed that it "involves only a process of cutting or removing part of a larger mass, and that activity of removing a part form the larger block or hill, though it involves skill, labor and effort, and perhaps use of machinery as well, is not an activity which can properly be regarded as manufacture, even after the widest possible meaning is ascribed to that term." And, "the granite hills are a natural bounty and merely removing a portion of it does not involve a process of manufacture. It is more properly to be regarded as mining." Also, "The granite block which is cut from the larger formation continues to remain granite only... Cutting a larger mass of granite with a view to obtain a block of granite which without any further process of any significance - the only thing done by the assessed herein being just washing the block and cutting rough edges - also cannot be regarded as a process of production." Vijay Granites counsel argued that the earlier case of Gomatesh did not apply because there is a new factor, 'polishing.' To support his contention, he cited a host of cases, ranging from 'cuttting and polishing of diamonds' to 'nine process are involved in curing of coffee.
In the coffee case, the apex court had observed that the word "manufacture' has to be given a meaning as is understood in common parlance: "It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different articles then it would amount to a manufacturing activity." However, the High Court decided that the act of cutting and polishing granite slabs before exporting them did not involve any process of manufacture or production. Perhaps, when you plan home improvement and need to bargain a better price for granite slabs, the decision could come in handy, so you can reason with the dealer that no manufacture was after all involved.
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