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15 Manufacture — Twisting and texturising partially oriented
yarn amounts to manufacture in terms of S. 80-IA of the Act.
[CIT v. Emptee Poly-Yarn P. Ltd., (2010) 320 ITR 665 (SC)]
The short question which arose for determination in a batch
of civil appeals before the Supreme Court was : Whether twisting and texturising
of partially oriented yarn (‘POY’ for short) amounted to ‘manufacture’ in terms
of S. 80-IA of the Income-tax Act, 1961 ?
The Supreme Court observed that it has repeatedly recommended
to the Department, be it under the Excise Act, the Customs Act or the Income-tax
Act, to examine the process applicable to the product in question and not to go
only by dictionary meanings, but this recommendation is not being followed over
the years.
The Supreme Court having examined the process in the light of
the opinion given by the expert, which had not been controverted, held that POY
was a semi-finished yarn not capable of being put in warp or weft, it could only
be used for making a texturised yarn, which, in turn, could be used in the
manufacture of fabric. In other words, POY could not be used directly to
manufacture fabric. According to the expert, crimps, bulkiness, etc. were
introduced by a process, called as thermo mechanical process, into POY which
converts POY into a texturised yarn. According to the Supreme Court, if one
examined this thermo-mechanical process in detail, it would become clear that
texturising and twisting of yarn constituted ‘manufacture’ in the context of
conversion of POY into texturised yarn.
