2009 (8) TMI 1103 - HC - VAT and Sales Tax

Emulsified bitumen - whether would not fall under entry No. 16 of Schedule II, Part II appended to the Madhya Pradesh Value Added Tax Act, 2002? Held that - It is not in dispute that bitumen in its original form would not absorb or mix with water but after emulsifier is fired upon the raw bitumen, then it is clear that quality of absorbing or mixing in the water would come into being. The quality of a new product is changed and it is commonly and commercially known as a different commodity, then it cannot be said that the new produce would fall in original entry. Undisputedly, bitumen and emulsified bitumen are two different commodities in the commercial world, though use of the said articles some times may be common, but some times, even the cost of the use as would also require to be considered to vary and use of the new product which is commercially different economically to some extent. Thus the learned Commissioner, Commercial Tax, was justified in holding that emulsified bitumen would not fall in entry No. 16. Appeal dismissed.

Summary

Issues:
Challenge to the correctness, validity, and propriety of the order dated May 2, 2008 passed by the Commissioner, Commercial Tax, Madhya Pradesh, regarding the classification of emulsified bitumen under the Madhya Pradesh Value Added Tax Act, 2002.

Analysis:
The petitioners contended that emulsified bitumen should be taxed at a lower rate under entry 16, Part II, Schedule II as it is a product of bitumen itself with no physical or chemical changes. The Commissioner, after considering arguments, concluded that emulsified bitumen falls under the residuary entry, distinguishing it from bitumen and coal tar.

In support of their argument, the petitioners referred to various decisions and research work, emphasizing that emulsified bitumen is essentially a derivative of bitumen and should not be classified separately. On the other hand, the State argued that bitumen and emulsified bitumen are distinct commercially, with the latter requiring an emulsifier to change its properties for specific applications like road laying.

The court examined the nature of bitumen, its processing, and the creation of emulsified bitumen through the addition of an emulsifier. It cited legal precedents such as the Chowgule & Co. Pvt. Ltd. case and the Titaghur Paper Mills case to highlight the principle that a product should be considered distinct if it commercially differs from its original form.

Referring to judgments like Lal Kunwa Stone Crusher and Bherhaghat Mineral Industries, the court discussed the broad interpretation of entries like "stone" to include various forms, even after processing. The court also drew parallels with the Porritts case where "dryer felts" were classified under textiles based on their common usage.

Ultimately, the court agreed with the Commissioner's decision, stating that emulsified bitumen is a commercially different product from bitumen and should not be classified under entry 16. The court emphasized the economic and commercial distinctions between bitumen and emulsified bitumen, supporting the Commissioner's classification decision.

In conclusion, the court found no grounds to interfere with the Commissioner's order and dismissed the petition challenging the classification of emulsified bitumen under the Madhya Pradesh Value Added Tax Act, 2002.