The DCIT, Circle-3(1)(TDS), Vijayawada v. M/s AP GENCO Ltd. (Unit:NTR Thermal Power Sttion), Vijayawada

ITA 356/VIZ/2010 | 2007-2008
Pronouncement Date: 10-03-2011 | Result: Dismissed

Appeal Details

RSA Number 35625314 RSA 2010
Bench Visakhapatnam
Appeal Number ITA 356/VIZ/2010
Duration Of Justice 9 month(s) 3 day(s)
Appellant The DCIT, Circle-3(1)(TDS), Vijayawada
Respondent M/s AP GENCO Ltd. (Unit:NTR Thermal Power Sttion), Vijayawada
Appeal Type Income Tax Appeal
Pronouncement Date 10-03-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 10-03-2011
Date Of Final Hearing 06-12-2010
Next Hearing Date 06-12-2010
Assessment Year 2007-2008
Appeal Filed On 07-06-2010
Judgment Text
ITA 356 TO 358 OF 10 AP GENCO LTD VJA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 356 TO 358 /VIZAG/ 20 10 ASSESSMENT YEAR S : 2007 - 08 2008 - 09 & 2 009 - 10 DCIT CIRCLE - 3(1)(TDS) VIJAYAWADA VS. M/S. A.P. GENCO LTD. VIJAYAWADA (APPELLANT) (RESPONDENT) TAN NO.HYDV 02154F APPELLANT BY: SHRI R.K. SINGH DR RESPONDENT BY: SHRI G.V.N. HARI CA ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER:- THESE APPEALS ARE PREFERRED BY THE REVENUE AGAINS T THE ORDER OF THE CIT(A) ON COMMON GROUNDS WHICH ARE AS UNDER: 1. THE ORDER OF THE CIT(A) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LD. CIT(A) HAVING QUOTED THE DEFINITION OF `SC RAP AS CONTAINED IN SEC. 206C WHICH MEANS `WASTE AND SCRAP FROM THE MANUFACTURE IS NOT JUSTIFIED IN APPLYING THE SAID STATUTORY PROVISIONS AS `WASTE OR SCRAP AS OBSERVED BY HIM AT PARA-11 AND PARA-12 OF HIS ORDER. 3. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE W ORDS `AND AND `OR HAVE DIFFERENT MEANINGS DIFFERENT CONNOTATION S AND DIFFERENT LEGAL CONSEQUENCES AND THEREFORE THE CIT(A) IS NOT JUSTIFIED IN SUBSTITUTING THE WORD `OR FOR `AND APPEARING IN T HE DEFINITION OF `SCRAP. 4. THE LD. CIT(A) IS ALSO NOT JUSTIFIED IN OBSERVING T HAT `FLY ASH IS GENERATED AS A BY-PRODUCT TO ELECTRICITY. 5. THE LD. CIT(A) FAILED TO CONSIDER THE SUBMISSION MA DE BY THE ASSESSING OFFICER DURING THE COURSE OF APPELLATE PR OCEEDINGS THAT BURNING OF COAL WHEREVER IT IS DONE ALWAYS RESULTS IN ASH AND THEREFORE SUCH ASH CANNOT BE A BY-PRODUCT TO ELECTR ICITY. 6. THE LD. CIT(A) ALSO FAILED TO CONSIDER THE SUBMISSI ON MADE BY THE ASSESSING OFFICER BEFORE HIM THAT THE DEFINITION OF SCRAP HAS TWO LIMBS VIZ. `WASTE AND SCRAP FROM THE MANUFACTURE AND `WASTE & SCRAP FROM THE MECHANICAL WORKING OF MATERIALS WHIC H IS DEFINITELY NOT USABLE AS SUCH FOR VARIOUS REASONS AND THAT TH E FIRST LIMB SQUARELY APPLIES TO THE FACTS OF THE INSTANT CASE B UT NOT THE SECOND LIMB. 7. THE CIT(A) IS NOT JUSTIFIED IN OBSERVING THAT IF AN Y WASTE IS UTILIZED AS SUCH IN THE MANUFACTURING PROCESS THEN SUCH AN ITEM CANNOT BE ITA 356 TO 358 OF 10 AP GENCO LTD VJA 2 COVERED BY THE DEFINITION OF SCRAP AS IT IS CONTRA RY TO THE DEFINITION CONTAINED IN SEC. 206C. 8. LD. CIT(A) FAILED TO NOTE THAT SCRAP DOES NOT CEASE TO BE SCRAP FOR THE MERE REASON THAT IT WAS UTILIZED IN SOME OTHER INDUSTRY. 9. THE LD. CIT(A) FAILED TO APPRECIATE THAT THE WORDS `DEFINITELY NOT USABLE AS SUCH AS APPEARING IN THE DEFINITION OF S CRAP QUALIFIES ONLY THE SCRAP FROM THE MECHANICAL WORKING OF MATER IALS AND HENCE NOT APPLICABLE TO THE INSTANT CASE. 10. THE APPELLANT CRAVES FOR LEAVE TO ADD MODIFY OR D ELETE ANY OF THE GROUNDS OF APPEAL. 2. THOUGH THE REVENUE HAS RAISED VARIOUS GROUNDS BU T THE SOLE ISSUE EMERGES FROM THESE GROUNDS IS WHETHER THE FLY ASH G ENERATED DURING THE COURSE OF GENERATION OF ELECTRICITY IS A BY-PRODUC T OR A SCRAP? 3. THE BRIEF FACTS BORNE OUT FROM THE RECORD ARE TH AT ASSESSEE IS A STATE GOVERNMENT COMPANY ENGAGED IN THE BUSINESS OF GENER ATION OF ELECTRICITY. DURING THE COURSE OF SURVEY U/S 133A OF I.T. ACT A T THERMAL POWER STATION IT CAME TO LIGHT THAT ASSESSEE HAD COLLECTED RS.4.495 CRORES RS.5.581 CRORES RS.4.19 CRORES RESPECTIVELY FOR THE FINANCIAL YEARS 2006-07 2007-08 & 2008- 09 AND FOR THE PERIOD 1.4.08 TO AUGUST08 TOWARDS S UPPLY OF FLY ASH TO VARIOUS CONSUMERS. THE A.O. WAS OF THE VIEW THAT FLY ASH I S A SCRAP WITHIN THE DEFINITION AS PER PROVISIONS OF SECTION 206C AND AS NO COLLECTION OF TAX AS PER PROVISIONS OF SECTION 206C WERE MADE BY THE ASSESSE E A SHOW CAUSE NOTICE WAS ISSUED PROPOSING TO INVOKE THE RELEVANT PROVISI ONS TO TREAT THE ASSESSEE AS DEFAULTER. IN RESPONSE THERETO ASSESSEE CLAIME D THE FLY ASH TO BE A BY- PRODUCT AND NOT A SCRAP. HAVING REJECTED THE CONTE NTION OF THE ASSESSEE THE A.O. TREATED THE ASSESSEE IN DEFAULT AND RAISED THE DEMANDS. 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) AND FILED THE DETAILS OF CONSUMERS WHO HAVE PURCHASED T HE FLY ASH AND USED IT AS A RAW MATERIAL. COPIES OF AFFIDAVITS OF CONSUMERS WERE ALSO PLACED BEFORE THE CIT(A) IN SUPPORT OF HIS CONTENTIONS. IT WAS ALSO EXPLAINED BEFORE THE CIT(A) THAT THE FLY ASH IS BEING USED IN MANUFACTURE OF P ORTLAND CEMENT MINE RECLAMATION ROAD SUBBASE FLOWABLE FILL ETC. THE CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF RELEVANT PROVISIONS OF THE AC T AND THE DEFINITION OF FLY ASH GIVEN IN WIKIPEDIA. HAVING CONVINCED WITH THE EXPL ANATIONS OF THE ASSESSEE THE CIT(A) TREATED THE FLY ASH TO BE THE BY-PRODUCT AND HELD THAT IT DOES NOT ITA 356 TO 358 OF 10 AP GENCO LTD VJA 3 FALL WITHIN THE PURVIEW OF DEFINITION OF A SCRAP GI VEN IN SECTION 206C OF THE ACT THEREFORE THE ACTION OF THE A.O. IN TREATING THE ASSESSEE AS A DEFAULTER IN TERMS OF SECTION 206C CANNOT BE SUSTAINED. ACCORDI NGLY ORDERS ISSUED U/S 206C FOR ALL THESE FINANCIAL YEARS WERE VACATED. T HE RELEVANT OBSERVATION OF THE CIT(A) ARE EXTRACTED HEREUNDER: I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT. THE MAIN ISSUE FOR ADJUDICATION IS WHETHER FLY ASH IS TO BE TREATED AS SCRAP OR WASTE WITHIN THE MEANING OF THE DEFINITION PROVIDED IN SEC.206C OF THE ACT. FOR THE SAKE OF CLARITY THE RELEVANT PROV ISION IS REPRODUCED BELOW: 206C. (1) EVERY PERSON BEING A SELLER SHALL AT T HE TIME OF DEBITING OF THE AMOUNT PAYABLE BY THE BUYER TO THE ACCOUNT OF THE BUYER OR AT THE TIME OF RECEIPT OF SUCH AMOUNT FROM THE SAID BUYER IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER COLLECT FROM THE BUYER OF ANY GOODS OF THE NATURE SPECIFIED IN COLUMN (2) OF THE TABLE BELOW A SUM EQUAL TO THE PERCENTAGE SPECIFIED IN THE CORRESPONDING ENTR Y IN COLUMN (3) OF THE SAID TABLE OF SUCH AMOUNT AS INCOME-TAX: SL.NO. NATURE OF GOODS PERCENTAGE (1) (2) (3) (I) ALCOHOLIC LIQUOR FOR HUMAN CONSUMPTION ONE PER CEN T (II) TENDU LEAVES FIVE PER CENT (III) TIMBER OBTAINED UNDER A FOREST LEASE TWO AND ONE- HALF PER CENT (IV) TIMBER OBTAINED BY ANY MODE OTHER THAN TWO AND ONE- UNDER A FOREST LEASE HALF PER CENT (V) ANY OTHER FOREST PRODUCE NOT BEING TIMBER TWO AND O NE- OR TENDU LEAVES HALF PER CENT (VI) SCRAP ONE PER CENT. EXPLANATION. FOR THE PURPOSES OF THIS SECTION (A) BUYER MEANS A PERSON WHO OBTAINS IN ANY SALE BY WA Y OF AUCTION TENDER OR ANY OTHER MODE GOODS OF THE NATURE SPECI FIED IN THE TABLE IN SUB-SECTION (1) OR THE RIGHT TO RECEIVE AN Y SUCH GOODS BUT DOES NOT INCLUDE (I) A PUBLIC SECTOR COMPANY THE CENTRAL GOVERNMENT A STATE GOVERNMENT AND AN EMBASSY A HIGH COMMISSION LEGATION COMMISSION CONSULATE AND THE TRADE REPRESENTATION OF A FOREIGN STATE AND A CLUB; OR (II) A BUYER IN THE RETAIL SALE OF SUCH GOODS PURCHASED BY HIM FOR PERSONAL CONSUMPTION; ITA 356 TO 358 OF 10 AP GENCO LTD VJA 4 (B) SCRAP MEANS WASTE AND SCRAP FROM THE MANUFACTURE O R MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE CUTTING UP WEAR AND OTHER REASONS; A PLAIN READING OF THE EXPLANATION SUGGESTS THAT SC RAP WOULD INCLUDE ONLY SUCH WASTE OR SCRAP WHICH ARISES FROM MANUFACT URE OR MECHANICAL WORKING OF MATERIALS. FURTHER SUCH WASTE SHOULD N OT BE DEFINITELY USABLE AS SUCH. ACCORDINGLY IT WOULD NOT INCLUDE ANY WASTE OR SCRAP WHICH A) DOES NOT ARISE FROM MANUFACTURE OR MECHANICAL WORKING OF MAT ERIALS OR B) WHICH IS USABLE AS SUCH. AS A COROLLARY BY PRODUCTS GENERA TED FROM THE MANUFACTURING PROCESS ARE NOT COVERED IN THE ABOVE DEFINITION SINCE THE SAME COULD BE USED AS SUCH BY OTHER CONSUMERS. FLY ASH IS DEFINED IN WIKIPEDIA AS FOLLOWS: FLY ASH IS ONE OF THE RESIDUES GENERATED IN THE COM BUSTION OF COAL. FLY ASH IS GENERALLY CAPTURED FROM THE CH EMNEYS OF COAL- FIRED POWER PLANTS AND IS ONE OF TWO TYPES OF ASH THAT JOINTLY ARE KNOWN AS COAL ASH; THE OTHER BOTTOM ASH IS REMOVE D FROM THE BOTTOM OF COAL FURNACES. DEPENDING UPON THE SOURCE AND MAKEUP OF THE COAL BEING BURNED THE COMPONENTS OF FLY ASH VARY CONSIDERABLY BUT ALL FLY ASH INCLUDES SUBSTANTIAL AMOUNTS OF SILICON DIOXIDE (SIO2) (BOTH AMORPHOUS AND CRYSTALLINE)_ AN D CALCIUM OXIDE (CAO) BOTH BEING ENDEMIC INGREDIENTS IN MANY COAL BEARING ROCK STRATA. THE REUSE OF FLY ASH AS AN ENGINEERING MATERIAL PRI MARILY STEMS FROM ITS POZZOLANIC NATURE SPHERICAL SHAPE AND RELATIVE UNIFORMITY. FLY ASH RECYCLING IN DESCENDING FREQU ENCY INCLUDES USAGE IN: PORTLAND CEMENT AND GROUT EMBANKMENTS AND STRUCTURAL FILL WASTE STABILIZATION AND SOLIDIFICATION RAW FEED FOR CEMENT CLINKERS MINE RECLAMATION STABILISATION OF SOFT SOILS ROAD SUBBASE AGGREGATE FLOWABLE FILL MINERAL FILLER IN ASPHALTIC CONCRETE OTHER APPLICATIONS INCLUDE CELLULAR CONCRETE GEOPO LYMERS ROOFING TILES PAINTS METAL CASTINGS AND FILLER I N WOOD AND PLASTIC PRODUCTS. FLY ASH UTILISATION PROGRAMME (FAUP) A TECHNOLOGY PROJECT IN MISSION MODE OF GOVERNMENT OF INDIA WAS COMMISSIONED DURING 1994 AS A JOINT ACTIVITY OF DEPARTMENT OF SCIENCE & TECHNOLOGY (DST ) MINISTRY OF POWER (MOP) AND MINISTRY OF ENVIRONMENT & FORESTS (MOEF). FAUP HAS BEEN UNDERTAKING VARIOUS PROJECTS/ACTIVITIES FOR TECHNOL OGY DEVELOPMENT/DEMONSTRATION DISSEMINATING THE INFORM ATION CREATING ITA 356 TO 358 OF 10 AP GENCO LTD VJA 5 AWARENESS FACILITATING MULTIPLIER EFFECTS PROVIDI NG INPUTS FOR POLICY INTERVENTIONS ETC. IN THE AREA OF SAFE MANAGEMENT & GAINFUL UTILIZATION OF FLY ASH. THE MAIN OBJECTIVES OF THE FLY ASH MISSION WE RE 1. TO DISSEMINATE INFORMATION AND KNOW HOW FOR GAINFUL UTILIZATION OF FLY ASH. 2. TO FACILITATE MANUFACTURE OF FLY ASH PRODUCT AND/OR USE OF FLY ASH IN REPLACEMENT OF CEMENT GOOD EARTH SOIL CLA YS MINERALS ETC. 3. DISSEMINATION OF INFORMATION OF SAFE DISPOSITION OF UNUTILISED FLY ASH. 4. SPECIFIC ACTIONS TO BE TAKEN WITH POTENTIAL GOVT. AGENCIES/DEPARTMENTS TO PATRONIZE FLY ASH AND ITS P RODUCTS FOR REGULAR USE (TOWARDS THIS SUCH DEPARTMENTS SHO ULD INCLUDE FLY ASH AND ITS PRODUCTS IN THEIR RESPECTIV E SCHEDULES OF MATERIALS AND RATES). 5. TO DISSEMINATE INFORMATION AND KNOW HOW FOR GAINFUL UTILIZATION IN AGRICULTURE APPLICATION INCLUDING FO RESTRY ETC. 6. TO IDENTIFY AND COORDINATE TECHNOLOGY/PRODUCTS DEVE LOPMENT FOR EXISTING/EMERGING APPLICATION OF FLY ASH PREFER ABLY USING LOCAL MATERIAL AND OTHER INDUSTRIAL WASTE. IT IS APPARENT THAT THE INITIATIVE TAKEN BY THE GOV ERNMENT ARE TOWARDS THE INCREASED USAGE OF FLY AS A RAW MATERIA L IN SEVERAL AREAS OF MANUFACTURING ACTIVITY. THE FLY ASH UTILI ZATION BY DR. N.T.P.S. UNIT IBRAHIMPATNAM HAS INCREASED FROM 5. 7% IN THE YEAR 1998-99 TO 65.5% IN THE YEAR 2007-08. DURING THE F IRST HALF OF THE FINANCIAL YEAR 2008-09 THE FLY ASH UTILIZATION AT THE APPELLANTS UNIT AT IBRAHIMPATNAM WAS ABOVE 82%. THE APPELLANT HAS ENTERED INTO MOUS WITH CEMENT COMPANIES FOR INVESTMENT IN FLY AS H HANDLING SYSTEMS AND IN RETURN THE CEMENT COMPANIES ARE ASSU RED OF FLY ASH SUPPLY. THE UTILIZATION OF FLY ASH GENERATED IN TH E THERMAL PLANT IS EVIDENCED BY THE RECEIPT OF AMOUNTS FROM THE CONSUM ERS DURING THE PERIOD RELEVANT TO THE THREE APPEALS IN THE AP PELLANTS BOOKS OF ACCOUNT. WHETHER THE AMOUNT RECEIVED FROM THE CONS UMERS IS ACCOUNTED FOR AS A SALE OR AS A DONATION BY THE APP ELLANT WOULD BE IMMATERIAL AS REGARDS THE APPLICABILITY OF THE PROV ISIONS OF SEC.206C. HOWEVER SEC.206C WOULD BE APPLICABLE ON LY IN CASE FLY ASH IS CONSIDERED EITHER AS SCRAP OR WASTE. SINCE FLY AS IS GENERATED AS A BY-PRODUCT IN THE THERMAL PLANT AS DISTINCT FROM THE BOTTOM ASH AND IS BEING SUPPLIED BY THE APPELLANT TO VARIOUS CONSUMERS IT CANNOT BE DENIED THAT FLY AS IS A BY- PRODUCT AND USABLE AS SUCH. EVEN PRESUMING THAT FLY ASH CANNOT BE CONSIDERED AS A BY-PRODUCT ITS USABILITY AND UTILITY IS NOT I N DISPUTE. IF ANY WASTE IS UTILIZED AS SUCH IN THE MANUFACTURING PROC ESS THEN SUCH AN ITEM CANNOT BE COVERED BY THE DEFINITION OF SCRA P. IN THE INSTANT CASE THE USE OF FLY ASH BY CONSUMERS IN ITS ORIGIN AL FORM CANNOT BE DISREGARDED. THIS INFERENCE IS SUPPORTED BY THE AF FIDAVITS FILED BY THE CONSUMERS WHO HAVE RECEIVED SUPPLY OF FLY ASH F ROM THE APPELLANT DURING THE RELEVANT PERIOD. M/S. INDIA C EMENTS LTD. VISHNUPURAM M/S. VENU BUILD PRODUCTS IBRAHIMPATNA M M/S. ITA 356 TO 358 OF 10 AP GENCO LTD VJA 6 RAMCO INDUSTRIES LTD. M/S. BHEEMA CEMENTS LTD. NA LGONDA DIST. MY HOME INDUSTRIES LTD. HYDERABAD M/S. DECCAN CEM ENTS LTD. NALGONDA DIST. M/S. VISAKHA INDUSTRIES LTD. M/S. PARA SAKTHI INDUSTRIES LTD. HAVE FILED AFFIDAVITS AFFIRMING THE USAGE OF FLY ASH BY THEM. FROM THE AFFIDAVITS IT IS CLEAR THAT THE FLY ASH IS BEING USED AS A RAW MATERIAL NOT ONLY IN THE MANUFACTURE OF FL Y ASH BRICKS IN THE MANUFACTURE OF CEMENT BUT ALSO IN THE MANUFACTU RE OF ASBESTOS FIBER CEMENT SHEETS. ON THE CONTRARY NO REASONS H AVE BEEN SPECIFIED IN THE ORDER FOR REJECTING THE CONTENTION OF THE APPELLANT THAT FLY ASH IS UTILIZED IN THE MANUFACTURE OF VARI OUS PRODUCTS. IN THE LIGHT OF THE ABOVE DISCUSSION I AM OF THE VIEW THAT FLY ASH PER SE CANNOT BE BROUGHT WITHIN THE PURVIEW OF THE DEFINITION OF SCRAP IN SEC.206C OF THE ACT AND THEREFORE THE AC TION OF THE A.O. IN TREATING THE APPELLANT AS A DEFAULTER IN TERMS O F SEC.206C CANNOT BE SUSTAINED. ACCORDINGLY THE ORDERS U/S 206C FOR THE THREE FINANCIAL YEARS ARE VACATED. 5. AGGRIEVED THE REVENUE HAS PREFERRED AN APPEAL B EFORE THE TRIBUNAL AND PLACED A HEAVY RELIANCE UPON THE ORDER OF THE A SSESSING OFFICER. THE LD. D.R. HAS ALSO PLACED A RELIANCE UPON THE DEFINITION OF SCRAP GIVEN IN CLAUSE (B) OF EXPLANATION TO SECTION 206C OF THE I.T. ACT. TH E LD. D.R. FURTHER CONTENDED THAT THE ASSESSEE IS ENGAGED IN GENERATIO N OF ELECTRICITY AND THE FLY ASH IS NOTHING BUT A SCRAP GENERATED DURING THE COURSE OF GENERATION OF ELECTRICITY. THEREFORE THE A.O. HAS RIGHTLY INVOK ED THE PROVISIONS OF SECTION 206C OF THE I.T. ACT. 6. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND BESIDES PLACING A HEAVY RELIANCE UPON THE ORDER OF THE CIT(A) HAS CO NTENDED THAT IN CLAUSE (B) OF EXPLANATION TO SECTION 206 THE SCRAP HAS BEEN D EFINED AND ACCORDING TO THE DEFINITION THE SCRAP MEANS WASTE AND SCRAP FRO M MANUFACTURE OR MECHANICAL WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF BREAKAGE CUTTING UP WEAR AND OTHER REA SONS. MEANING THEREBY THE SCRAP IS A WASTE MATERIAL LEFT OUT OF THE RAW M ATERIALS WHICH CANNOT BE USED IN ANY MANNER. BUT THE FLY ASH IS A BY-PRODUC T GENERATED DURING THE COURSE OF GENERATION OF ELECTRICITY AND IT IS BEING USED AS A RAW MATERIAL FOR THE MANUFACTURE OF CEMENT AND OTHER VARIOUS ITEMS. HE HAS ALSO INVITED OUR ATTENTION TO THE DEFINITION OF FLY ASH GIVEN IN WIK IPEDIA. ITA 356 TO 358 OF 10 AP GENCO LTD VJA 7 7. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF THE RECORD WE FIND THAT THE SOLE CONTROVERSY BEFORE US IS WHETHER THE FLY ASH GENERATED DURING THE COURSE OF GENERATION OF ELECTR ICITY IS A BY-PRODUCT OR A SCRAP AS DEFINED IN CLAUSE (B) TO EXPLANATION BELOW SECTION 206C OF THE I.T. ACT? ACCORDING TO THE DEFINITION GIVEN IN EXPLANAT ION THE SCRAP MEANS A WASTE AND A SCRAP FROM THE MANUFACTURE OR MECHANICA L WORKING OF MATERIALS WHICH IS DEFINITELY NOT USABLE AS SUCH BECAUSE OF B REAKAGE CUTTING UP WEAR AND OTHER REASONS. MEANING THEREBY THE SCRAP IS T HE WASTE LEFT OUT OF THE RAW MATERIALS WHICH CANNOT BE USED IN ANY MANNER W HEREAS THE BY-PRODUCT IS NOT A WASTE AND IT HAS ITS OWN MARKET VALUE THO UGH IT MAY NOT BE AT PAR WITH THE MAIN PRODUCT. GENERALLY THE SCRAP IS EIT HER BEING THROWN OUT OR SOLD AT A CHEAPER RATE BECAUSE IT CANNOT BE USED AS A R AW MATERIAL FOR MANUFACTURE OF DIFFERENT ITEMS. BUT IN THE CASE OF A BY-PRODUCT IT HAS ITS OWN MARKET VALUE AND CAN BE USED FOR PRODUCTION OF DIFF ERENT ITEMS. IN THE INSTANT CASE UNDISPUTEDLY THE FLY ASH WAS PURCHASE D BY VARIOUS CONSUMERS AND THEY HAVE FILED AN AFFIDAVIT IN SUPPORT OF THE CONTENTIONS THAT THE FLY ASH WAS UTILIZED AS A RAW MATERIAL FOR MANUFACTURE OF D IFFERENT ITEMS. THE FLY ASH IS ALSO DEFINED IN WIKIPEDIA AS UNDER: FLY ASH IS ONE OF THE RESIDUES GENERATED IN THE COM BUSTION OF COAL. FLY ASH IS GENERALLY CAPTURED FROM THE CH EMNEYS OF COAL- FIRED POWER PLANTS AND IS ONE OF TWO TYPES OF ASH THAT JOINTLY ARE KNOWN AS COAL ASH; THE OTHER BOTTOM ASH IS REMOVE D FROM THE BOTTOM OF COAL FURNACES. DEPENDING UPON THE SOURCE AND MAKEUP OF THE COAL BEING BURNED THE COMPONENTS OF FLY ASH VARY CONSIDERABLY BUT ALL FLY ASH INCLUDES SUBSTANTIAL AMOUNTS OF SILICON DIOXIDE (SIO2) (BOTH AMORPHOUS AND CRYSTALLINE)_ AN D CALCIUM OXIDE (CAO) BOTH BEING ENDEMIC INGREDIENTS IN MANY COAL BEARING ROCK STRATA. THE REUSE OF FLY ASH AS AN ENGINEERING MATERIAL PRI MARILY STEMS FROM ITS POZZOLANIC NATURE SPHERICAL SHAPE AND RELATIVE UNIFORMITY. FLY ASH RECYCLING IN DESCENDING FREQU ENCY INCLUDES USAGE IN: PORTLAND CEMENT AND GROUT EMBANKMENTS AND STRUCTURAL FILL WASTE STABILIZATION AND SOLIDIFICATION RAW FEED FOR CEMENT CLINKERS MINE RECLAMATION STABILISATION OF SOFT SOILS ROAD SUBBASE ITA 356 TO 358 OF 10 AP GENCO LTD VJA 8 AGGREGATE FLOWABLE FILL MINERAL FILLER IN ASPHALTIC CONCRETE OTHER APPLICATIONS INCLUDE CELLULAR CONCRETE GEOPO LYMERS ROOFING TILES PAINTS METAL CASTINGS AND FILLER I N WOOD AND PLASTIC PRODUCTS. 8. SINCE THE ENORMOUS EVIDENCE IS PLACED ON RECORD TO PROVE THAT FLY ASH WAS PURCHASED BY VARIOUS CEMENT MANUFACTURERS T O USE IT AS A RAW MATERIAL THE FLY ASH CANNOT BE CONSIDERED TO BE A SCRAP. THEREFORE WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY HELD IT TO BE THE BY-PRODUCT TO WHICH PROVISIONS OF SECTION 206 CANNOT BE APPLIED. WE HOWEVER CAREFULLY EXAMINED THE ORDER OF THE CIT(A) BUT WE FIND NO INF IRMITY THEREIN AS HE HAS DISCUSSED THE ISSUE IN DETAIL IN HIS ORDER. WE THEREFORE CONFIRM THE ORDER OF THE CIT(A). 9. IN THE RESULT THE APPEALS OF THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 10.3.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 10 TH MARCH 2011 COPY TO 1 DCIT CIRCLE - 3(1)(TDS) VIJAYAWADA 2 M/S. AP GENCO LTD. (UNIT: NTR THERMAL POWER STATIO N) IBRAHIMPATNAM VIJAYAWADA 3 THE CI T VIJAYAWADA 4 THE CIT (A) VIJAYAWADA 5 THE DR ITAT VISAKHAPATNAM. 6 GUAR D FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM