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2009 (10) TMI 585 - HC - VAT and Sales TaxManufacture Cleaning of used oil - classification - rate of sales tax - Held that - the process of cleaning did not amount to manufacturing. By the process of cleaning no new commercial commodity comes into being. The used mobil oil with impurities was not consumed in the process of manufacturing and a new product was not being emerged. The used mobil oil which was with impurities by the processing becomes free from impurities but mobil oil before cleaning and after cleaning remains mobil oil. There was no change in its form, nature and characteristic. The old mobil oil before cleaning and mobil oil after cleaning remained same and was covered under the entry of All kind of oil including used oil liable to tax @ 4% under the Notification No. ST-II-5785/X-10(1)-80-U.P. Act XV-48-Order-81 dated 7-9-1981 at the point of manufacturer or importer, therefore, the provisions of Section 3AAAA of the Act prior to amendment in the 1998 was inapplicable.
Issues Involved:
1. Whether the process of cleaning used/burnt mobil oil amounts to manufacturing. 2. Whether the purchase of used oil is liable to tax under Section 3AAAA of the Act. 3. Whether the sale of cleaned mobil oil is liable to tax. Issue-wise Detailed Analysis: 1. Whether the process of cleaning used/burnt mobil oil amounts to manufacturing: The dealer argued that the process of cleaning used oil, which involves heating and mixing with sulphuric acid and phirfull to remove impurities, does not change the essential characteristics of the oil. The cleaned oil remains mobil oil, and thus, no new commodity is created. The Tribunal upheld this view, stating that cleaning used oil does not constitute manufacturing as no new commercial commodity comes into being. The court referenced several cases, including CST v. Roopji and Sons, CST v. Oil Processors Private Limited, and Punjab Aromatics v. State of Kerala, to support the conclusion that the process of refining or cleaning does not amount to manufacturing since the essential nature of the product remains unchanged. 2. Whether the purchase of used oil is liable to tax under Section 3AAAA of the Act: The assessing authority levied tax on the purchases of used oil under Section 3AAAA, arguing that the used oil was old, discarded, unserviceable, and obsolete goods. However, the dealer contended that the used oil had not outlived its utility and remained mobil oil with impurities. The court referred to the Notification No. ST-II-5785/X-10(1)-80-U.P. Act XV-48-Order-81 dated 7-9-1981, which distinguishes between old, discarded, unserviceable, or obsolete items and items that retain their essential characteristics. The court concluded that since the used oil retained its characteristics as oil, it does not fall under the category of old, discarded, or unserviceable goods and thus is not liable to tax under Section 3AAAA. 3. Whether the sale of cleaned mobil oil is liable to tax: The Tribunal and the court held that the cleaned mobil oil, being the same commodity as the used mobil oil but free from impurities, is not a manufactured product and thus its sale is not liable to tax. The court emphasized that the process of cleaning did not result in a new product but merely restored the oil to its original state. The cleaned mobil oil falls under the entry of "All kinds of oil" and is liable to tax at 4% under the relevant notification, not as a manufactured product. Therefore, the provisions of Section 3AAAA were deemed inapplicable. Conclusion: The court allowed the revision filed by the dealer and dismissed the revision filed by the Commissioner of Trade Tax, U.P. It was concluded that the process of cleaning used mobil oil does not amount to manufacturing, the purchase of used oil is not liable to tax under Section 3AAAA, and the sale of cleaned mobil oil is not liable to tax as a manufactured product. The Tribunal's order was upheld, affirming that the cleaned mobil oil remains the same commodity as the used mobil oil and is taxable under the entry of "All kinds of oil" at the specified rate.
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