1. The Income-tax Appellate Tribunal (Jaipur Bench) (hereinafter referred to as "the Appellate Tribunal") has, at the instance of the Revenue, referred to this court, under Section 256(1) of the Income-tax Act, 1961 (for short, "the Act"), the following question of law for its opinion :

" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that business activity of the assessee is clearly in the nature of manufacturing or production and, therefore, it is entitled for relief under Section 80HH of the Income-tax Act, 1961 ?"

2. The facts stated by the Appellate Tribunal are these :

" The assessee had business of mining of limestones and marble blocks and thereafter cutting and sizing the same before being sold in the market. The assessee claimed itself to be an industrial undertaking for the purpose of Section 80HH of the Income-tax Act. The Income-tax Officer did not accept the same, as according to him, the assessee was not engaged in the manufacture or production of goods. The Commissioner of. Income-tax (Appeals), however, accepted the claim of the assessee and allowed the appeal. The Appellate Tribunal, on appeal by the Revenue, sustained the order of the Commissioner of Income-tax (Appeals) following an earlier decision of the Bench in the case of the assessee itself for the assessment year 1978-79 in I. T. As. Nos. 1492 and 1495 dated July 25, 1980."

3. Mr. G.S. Bapna, learned counsel for the Department, urged that the assessee-company was engaged in the business of excavating the limestone and marble blocks and then selling the marble slabs after cutting them into marble slabs by sawing. It was submitted that the activities, being carried on by the assessee-company, do not involve any manufacturing process and, therefore, it was not entitled to deduction under Section 80HH of the Act. In support of his arguments, Mr. Bapna relied upon the decision of this court in the case of Polar Marmo Agglomerates Ltd. v. Union of India [1994] 73 ELT 536 (Raj) and the Supreme Court decision in the case of CIT v. N.C. Budharaja and Co. [1993] 204 ITR 412.

4. Mr. C.K. Garg, learned counsel for the assessee-company, on the other hand, submitted that the activities being carried on by the assessee-company involve conversion of boulders into marble slabs/tiles/rooks and such activities do amount to manufacturing activity within the meaning of the term used in Section 80HH. In this behalf, Mr. Garg heavily relied upon the decision of this court in the case of the assessee's sister concern, CIT v. Best Chem and Limestone Industries Pvt. Ltd. [1994] 210 ITR 883, in D.B.I.T. Reference No. 116 of 1981 decided on December 8, 1992. Reliance was also placed on the Madras High Court decision in the case of CIT v. M.R. Gopal [1965] 58 ITR 598, this court's decision in CTO v. Bikaner Gypsum Ltd. [1986] 61 STC 264, the Patna High Court's decision in CWT v. Jagdish Singh Sekhar [1987] 167 ITR 558, the Orissa High Court decision in CIT v. S.L. Agarwala and Co. [1992] 197 ITR 239 and the Supreme Court decision in Aditya Mitts Ltd. v. Union of India [1989] 73 STC 195 ; AIR 1988 SC 2237.

5. We have carefully considered the facts of the case, as found by the Appellate Tribunal and thoughtfully gone through the cases cited by learned counsel for the parties before us. On the facts found by the Tribunal it is difficult for us to opine that the activities being carried on by the assessee-company involve any manufacturing process or activity.

6. The relevant part of Section 80HH as it stood at the relevant time, runs as under :

"80HH. (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to twenty per cent, thereof.

(2) This section applies to any industrial undertaking which fulfils all the following conditions, namely :

(i) it has begun or begins to manufacture or produce articles after the 31st day of December, 1970, but before the 1st day of April, 1990, in any backward area ;

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence in any backward area :

Provided that this condition shall not apply in respect of any industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in Section 33B, in the circumstances and within the period specified in that section ;

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose in any backward area;

(iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power."

7. It is true that Section 80HH was brought on the statute book to encourage establishment of industrial undertakings in backward areas for the reason that such establishment leads to development of that area besides providing employment and, therefore, a liberal interpretation which advances the purpose and object underlying the provision may be adopted. But as was observed by the Supreme Court in CIT v. N.C. Budharaja's case [1993] 204 ITR 412, the said principle cannot, however, be carried to the extent of doing violence to the plain and simple language used in the enactment. It would not be reasonable or permissible for the court to rewrite the section or substitute words of its own for the actual words employed by the Legislature in the name of giving effect to the supposed underlying object. After all the underlying object of any provision has to be gathered on a reasonable interpretation of the language employed by the Legislature.

8. It is thus well-settled that while dealing with the articles used for business purposes a term is required to be interpreted in a purely commercial sense. It should not be interpreted in any technical sense. The meaning of the word "manufacture", in the context of the language of Section 80HH is, therefore, required to be construed in the popular sense in which it is commonly understood by the people.

9. In the case of Deputy CST v. Pro Food Packers [1980] 46 STC 65, 65 ; [1980] Suppl. SCC 174, the Supreme Court considered the meaning of the word "manufacture" with reference to several decisions and stated the test in the following words :

"There are several criteria for determining whether a commodity is consumed in the manufacture of another. The generally prevalent test is whether the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture. Commonly, manufacture is the end result of one or more processes through which the original commodity is made to pass. The nature and extent of processing may vary from one case to another, and indeed there may be several stages of processing and perhaps a different kind of processing at each stage. With each process suffered, the original commodity experiences a change. But it is only when the change, or a series of changes, take the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. Where there is no essential difference in identity between the original commodity and the processed article it is not possible to say that one commodity has been consumed in the manufacture of another. Although it has undergone a degree of processing, it must be regarded as still retaining its original identity."

10. The Supreme Court had spoken almost in the same words in the case of Union of India v. Delhi Cloth and General Mills [1977] ELT (J) 199 where it was observed that manufacture implies a change, but every change in the raw material is not manufacture although every change of an article is the result of treatment, labour or manipulation. In order to make a change amount to "manufacture" something more is necessary and that something more is such transformation of a production as brings into existence a new and different article having distinct name, character or use. The same view was expressed in the case of South Bihar Sugar Mills v. Union of India [1978] ELT (J) 3, where it was observed that if a new substance known to the market emerges, this will amount to manufacture. In the case of Empire Industries Ltd. v. Union of India [1986] 162 ITR 846 (SC), it was observed by the Supreme Court that to constitute manufacture, it is not necessary that one should absolutely make out a new thing because it is well-settled that one cannot absolutely make a thing by hand in the sense that nobody can create matter by hand. It is the transformation of one matter into something else which would amount to manufacture. It is a question of degree that something else is a different commercial commodity having its distinct character, use and name and commercially known as such. In other words, if by application of labour and skill the commodity is transformed to the extent that it is commercially known differently, it will suffice to say that manufacture has taken place. The moment there is a transformation into a new commodity having its own character, use and name whether as a result of one process or several processes, "manufacture" takes place.

11. The above discussion leads us to hold that "manufacture" implies a change, but, as cautioned by the Supreme Court, every change is not "manufacture" although every change in the article is the result of treatment, labour and manipulation. To bring about the change qualifying as manufacture something more is necessary and that something is transformation, i.e., a new and different article, having a distinct name, character or use, must emerge. This view of ours, we think, is in conformity with the views expressed by this court in the case of Polar Marmo Agglomerates Ltd. [1994] 73 ELT 536 (Raj). In that case, the question involved was whether conversion of agglomerated marble block into agglomerated marble slabs/tiles amounted to "manufacture" or not. The court considered this question in great detail and finally, making reference to a number of decisions of this court in different cases, held as under in paragraph 16 of the decision ;

" 16. It has been held in the following decisions of this court that conversion of marble blocks into marble slabs/tiles by sawing does not involve manufacturing process :

1. D. B. Civil Writ Petition No. 1654 of 1982--Amruteheele v. Union of India, decided on July 22, 1987.

2. D. B. Civil Writ Petition No. 869 of 1992--Jain Marbles v. Union of India, decided on May 26, 1988.

3. S. B. Civil Writ Petition No. 133 of -1983--Kasat Enterprises v. Union of India, decided on November 7, 1990, and

4. S. B. Civil Writ Petition No. 479 of 1985--J.S. Marbles v. Union of India, decided on July 19, 1990.

Similar view has been taken in Collector of Central Excise v. Fine Marbles and Minerals Pvt. Ltd. [1985] 22 ELT 128 ; Sangmermer India Pvt. Ltd. v. Collector, Central Excise [1989] 42 ELT 725 (Tribunal) and Associated Stone Industries (Kota) Ltd. v. Collector of Central Excise [1992] 60 ELT 639. It is mentioned in Associated Stone Industries (Kota) Ltd. v. Collector of Central Excise [1992] 60 ELT 639, paragraph 3, that the Revenue filed appeal against the order given in Collector, Central Excise v. Fine Marbles [1985] 2 ELT 128 and the Supreme Court dismissed it. Similar will be the position for the conversion of Agglomerated Marble Blocks into Agglomerated Marble Slabs/Tiles."

12. Following and borrowing the language from Deputy CST v. Pio Food Packers [1980] 46 STC 63 (SC), we conclude that although at some point processing and manufacturing will merge where the commodity retains a continuing substantial identity through the processing stage we cannot say that it has been manufactured. We find the same position in the instant case. We have stated in extenso the facts found by the Appellate Tribunal. Those facts are that the activities of the assessee-company consist of excavating limestone and marble boulders and after cutting the boulders into slabs, selling them. After cutting the boulders into slabs, may be with the aid of machinery, the original commodity retains a continuing substantial identity through the processing stage, carried out by the assessee-company. It has not been found by the Tribunal, as was unsuccessfully tried by Mr. Garg to assert, that the assessee-company converts the boulders into powder, chips or any other article commercially known by another name and used as a different article. On such facts, as are stated by the Appellate Tribunal to us, we opine that the activities carried on by the assessee-company did not amount to manufacture and, therefore, it was not entitled to the benefit of Section 80HH of the Act.

13. The cases relied upon by Mr. Garg are, in our opinion, distinguishable on facts. In the case of CIT v. Best Chem and Limestone Industries Pvt. Ltd. [1994] 210 ITR 883 (Raj), the assessee was found engaged in the business of extracting limestone and its sale either as such or after converting it into lime and lime dust or concrete by stone crusher. Such are not found to be the facts in the case before us.

14. In the Madras case of CIT v. M.R. Gopal [1965] 58 ITR 598, the process employed in converting boulders into small stones, i.e., chips of various sizes, with the aid of machinery, was held to be manufacturing activity. A totally different article known as chips and used as such was brought into existence by the activity of the assessee in that case. Obviously such are not the facts in our case.

15. In the case of State of Gujarat v. Oil and Natural Gas Commission (supra) the entire activity of the said commission from extracting the oil till purifying it and passing it over to the refineries for further refinement was a well knit and integrated activity and was, we say so with great respect, rightly considered to be an activity of manufacturing. But such are not the facts in the present case.

16. In the case of CTO v. Bikaner Gypsum Ltd. [1986] 61 STC 264 (Raj), the activity of excavation of gypsum from the ground was not considered to be a manufacturing activity. With respect we endorse the same view.

17. In the case of CWT v. Jagdish Singh Sehkar [1987] 167 ITR 558, the Patna High Court considered the unearthing of boulders and then crushing them into small pieces as amounting to manufacturing activity. The crushing activity is different from that of cutting activity. The crushing activity results in loss of the identity of the original article and brings into existence a new, different and distinct article. Such are not the facts in the case before us. Herein, the marble stone did not lose its original identity by simply undergoing the process of cutting into slabs.

18. In the case of CIT v. S.L. Agarwala and Co. [1992] 197 ITR 239 (Orissa), the activity of breaking up of huge iron ingots into small pieces, which were a different and distinct commercial commodity was considered to be manufacturing activity. The facts of that case are clearly distinguishable from those before us.

19. In Aditya Mills Ltd.'s case [1989] 73 STC 195 (SC) doubling together of two plies of polyster spun yarn and one ply of rayon filament yarn resulting in a different yarn and in the case of Union of India v. Delhi Cloth and General Mills Co. Ltd. [1977] ELT (J) 199, the activity of manufacture of hydrogenerated oil known as vanaspati from the raw materials bringing into existence an altogether different commercial commodity were considered as amounting to "manufacturing". Obviously such are not the facts in the case before us.

20. To sum up, we answer the question, referred to us, in the negative, i.e., for the Revenue and against the assessee. We accordingly hold that the Tribunal was not justified in holding that the business activity of the assessee is in the nature of manufacturing or production. We further hold that the assessee-company was not entitled for relief under Section 80HH of the Act. Let the record of the Tribunal be returned along with our above opinion for necessary action according to law.