The activities undertaken by the petitioner in purchasing kendu leaves in bundles and thereafter the process of eliminating various types of leaves, namely, cracked leaves, fungus-infested leaves, discoloured leaves, immature leaves, small size leaves procedure has been adopted to dry the leaves in a special way, did not amount to processing within the meaning of Section 206C of the Income Tax Act.

JUDGMENT :

Susanta Chatterji, Actg. C.J.

1. The writ petitioner has asked for the following reliefs :

"... to admit this writ petition, issue Rule nisi and call upon the opposite parties to show cause as to why the present petition under Article 226 of the Constitution shall not be allowed and issue writ/writs, direction/directions/order as this court may deem proper and more particularly to issue ;

(1) Writ of mandamus quashing the circulars of the Central Board of Direct Taxes, dated January 10, 17, 1996, vide annexure-5 series ;

(2) Writ of certiorari quashing the decision of opposite party No. 4 vide order dated April 8, 1996, rejecting the petition of the petitioner for exemption certificate u/s 206C of the Act ;

(3) Writ of mandamus declaring that screening process adopted by the petitioner amounts to processing within the proviso to Section 206C of the Act and to direct the opposite party No. 5 to grant such certificate so that the opposite party No. 6 agents/servants/branch officers will not realize Income Tax at the point of purchase of tendu leaves ;

(4) Such other order/direction/declaration/writ as this court may deem proper in the interest of justice . . ."

2. The petitioner is an assessee under the Income Tax Act and carries on business of trading in petroleum products as well as purchase and sale of processed bidi leaves. The petitioner is a permanent resident of Dhenkanal and for generations the family of the petitioner is staying in Dhenkanal having their lands and building, business premises. For decades, the petitioner is an Income Tax assessee.

3. The petitioner claims that he purchases processed kendu (bidi) leaves from Orissa Forest Development Corporation Ltd., opposite party No. 6, from its kendu leaves division at Angul and the Regional Marketing Executive of the said Corporation at 6-A, Raja Subodh Mallik Square, Calcutta.

4. It is placed on record that kendu leaves are purchased by the petitioner in bundles. Sometimes these bundles contain leaves as plucked, i.e., cracked leaves, fungus-infested leaves, discoloured leaves, immature leaves, small size leaves. These leaves are not suitable for use in making bidi. Therefore, the petitioner has to adopt a process of eliminating the aforementioned types of leaves. Thereafter these leaves are dried again by a special procedure. Only after such processing the leaves are made ready for bidi manufacturing,

5. It is contended that the Orissa Forest Development Corporation never used to collect Income Tax from the petitioner as per Section 206C of the Income Tax Act, at 15 per cent. by way of "Collection at source". However, since the first proviso to Section 206C exempted such collection of Income Tax in respect of processing of such forest produce, the petitioner submitted an application before opposite party No. 4 for grant of exemption certi-ficate/non-deduction certificate so that the Orissa Forest Development Corporation would not realise Income Tax at the time of purchase. Opposite party No. 4 had granted such certificate. Copy of such certificate is annexed as annexure-1 to the writ petition. The petitioner claims that again he applied for such a certificate on April 3, 1996, for the period April 1, 1996 to March 31, 1997. Copy of such application is annexed as annexure-2 to the writ petition.

6. By order dated April 8, 1996, opposite party No. 4 rejected the application of the petitioner dated April 3, 1996. The grounds of rejection of such certificate are as follows :

(a) The nature of activities carried out by the petitioner cannot be termed as processing.

(b) The processing is carried out for making the leaves a saleable and marketable commodity.

(c) Such operations do not result in change of product.

(d) Opposite party No. 4 placed reliance on the circulars issued by the Central Board of Direct Taxes dated January 10, 1996 and January 17, 1996.

7. The petitioner has also placed on record that the clarification as made by the Central Board of Direct Taxes vide its l