Judgment :- Ramachandran Nair, J. 1. The question raised is whether the Tribunal was justified in confirming the disallowance of exemption claimed under Section 10A by the assessee on the profit derived from export of gold jewellery. We heard the learned counsel appearing for the appellant and learned senior standing counsel for the respondent. 2. The assessment is for the years 2004-05. The assessee claimed exemption under Section 10A of the Act on an income of Rs.4,39,96, 140/- on the ground that it had got an industrial unit in the Special Economic Zone, Kochi where the ornaments were produced for export. However, the assessing officer noticed that assessee was not engaged in manufacturing of gold jewellery in the industrial unit in the Special Economic Zone and the only machinery the assessee had was valued at Rs.45,040/-, which is accounted in the books of accounts. Since goods exported were not manufactured in the unit in the Special Economic Zone, the assessing officer declined exemption. Even though the first appellate authority allowed the claim, the Tribunal, on second appeal by the department, held that, the assessee, which has not manufactured and produced gold jewellery in the industrial unit in the Special Economic Zone, is not entitled to the benefit of exemption under Section 10A of the Act. It is against this order of the Tribunal, assessee has come up in appeal. 3. The assessee’s counsel relied on our judgments in I.T.A.100/09, wherein we have held that, an industrial unit in the Special Economic Zone engaged in blending, packing and export of tea is entitled to exemption under Section 10A of the Act. However, in this case it is the admitted position that jewellery exported is handmade and is manufactured by engaging large number of goldsmiths and contractors on piece rate basis. In other words, the actual manufacture of the jewellery, which is exported, was not done in the industrial unit in the Special Economic Zone. There is nothing on record as to what exactly is the processing done by the appellant in the industrial unit in the Special Economic Zone where the value of the machinery used is only Rs.45,040/-. Counsel clarified before us that the gold melting and initial processing of the raw material is done at the industrial unit in the Special Economic Zone, which, according to the counsel, is sufficient to qualify for exemption. Counsel clarified before us that the gold melting and initial processing of the raw material is done at the industrial unit in the Special Economic Zone, which, according to the counsel, is sufficient to qualify for exemption. Learned standing counsel, on the other hand, referred to the opening clause of Section 10A(1), which makes it clear that profit on export of articles manufactured or produced in the Free Trade Zone or Special Economic Zone only is entitled to exemption. In this case, admittedly, the appellant is not engaged in any manufacturing activity of gold ornaments in the industrial unit in the Special Economic Zone. Only initial processing of raw material, that is melting, is done there. The raw material is stated to be supplied to goldsmiths, who make the gold ornaments for the appellant. The appellant does not have the machinery to make the jewellery in the industrial unit or elsewhere. Counsel has relied on the liberal definition of manufacture, which includes even processing contained in the EXIM policy. In this case, we notice that the processing or manufacturing involves conversion of gold into ornaments, which is a hand work by goldsmiths. So long as the appellant is not engaged in any manufacturing activity of the product from raw material at the unit in the Special Economic Zone, we feel that the appellant was rightly declined the benefit by the Tribunal. We, therefore, confirm the order of the Tribunal and dismiss this appeal. However, we feel that assessee is to be granted eligible exemption under Section 80 HHC of the Act, which is available even to merchant exporters subject to the assessee satisfying the conditions provided therein. The assessing officer shall grant eligible exemption under Section 80 HHC to the assessee.