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TMI Blog2010 (10) TMI 658X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is an entirely different product commercially known and regarded as different from petroleum crude and which is different than the one which is derived by mere distillation of the petroleum crude which is a mineral oil - Decided in favor of the assessee - Tax Appeals Nos. 11 to 16/05, 65 to 66/07 & 20/10 - - - Dated:- 21-10-2010 - KARNIK D. G., REIS F. M. JJ S.N. Inamdar with Sudin Usgaonkar and Ms. A. Pereira for the Appellant. Ms. Asha Dessai for the Respondent. JUDGMENT The judgment of the court was delivered by D. G. Karnik J.- These appeals relate to different assessment years in respect of the same assessee namely Goa Carbon Limited and involve a common point. Hence, all the appeals are disposed of by this common judgment. Learned counsel for the parties stated that all the relevant papers have been filed in Tax Appeal No. 13 of 2005. Hence it would be appropriate to state the facts therein. 2. The appellant is a company involved in manufacture of calcined petroleum coke (hereinafter referred to as the "CPC") which is used for : making pre-baked anodes or carbon paste by aluminium smelters for production of basic aluminium metal ; as a carbon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calcined petroleum coke manufactured by the appellant is the `mineral oil' within the meaning of section 80HHC ?" 4. The appellant has annexed to this appeal a technical note describing the process of manufacture of the calcined petroleum coke (CPC) at exhibit A. The correctness of the note is not disputed by the Revenue before us. The process of manufacture of the CPC is summarised below : 5. The petroleum crude oil is a naturally occurring petroleum substance quite deep beneath the surface of the earth and is obtained from on-shore/off-shore wells by an oil exploration process. Since the petroleum crude oil is a naturally occurring substance below the surface of the earth, it is some times referred to as "mineral oil" and is commonly called "petroleum crude" or "crude oil" or "petroleum crude oil". This petroleum crude oil which is produced by several companies like ONGC, OIL INDIA and some foreign companies is sold to refineries like Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL), Indian Oil (IOC) and IBP for processing into various petroleum products. After dewatering, de-salting and de-sulphurization, the petroleum crude oil, which is in liquid form at normal tem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufactures the CPC from this RPC/green coke by subjecting it to a manufacturing process commonly called as the calcining process. The calcining process consists of the RPC/green coke being thermally upgraded for removal of associated moisture and volatile combustion matter and to otherwise improve critical physical properties, i.e., electrical conductivity, real density and oxidation characteristics. The calcining process is essentially a time temperature function with the most important control variables being the heating rate, volatile combustion matter/air ratio and final calcination temperature. By the calcination process the physical properties of the RPC change completely and a new product commercially known as the CPC comes into existence. A part of the CPC manufactured by the appellant is sold in the domestic market which is consumed by the industry for making pre-bakes or carbon paste by aluminium smelters for production of basic aluminium metal, as a carbon raiser for making carbon steel by steel mills, foundries and steel plants, for production of titanium dioxide, cathodic protection of cross countries oil/gas pipe lines and other miscellaneous uses for chemical industry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HHC provides that the section applies to all the goods or merchandise, other than those specified in clause (b), if the sale proceeds of such goods or merchandise exported out of India are received in, or brought into India by the assessee in a convertible foreign exchange within a period of six months from the end of the previous year or such extended period as the Chief Commissioner may allow. Clause (b) of sub-section (2) of section 80HHC which provides that the section would not apply to (i) mineral oil, and (ii) minerals and ores other than processed minerals and ores specified in the Twelfth Schedule to the Act. 8. The short question that arises for our consideration is whether the CPC manufactured and exported by the appellant falls within clause (b) of sub-section (2) of section 80HHC so as to refuse to it deduction in respect of the export profits arising out of the manufacture and export of the CPC.Before we actually turn to the question at hand, it would be appropriate to refer to the object and purpose of section 80HHC of the Act. Undoubtedly, the exports by a country are necessary for its economic development. Every country needs to import raw materials as well as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Appellate Tribunal has held that since the CPC is derived from crude petroleum which is a mineral oil, the CPC is a mineral oil. It was not the case of the Revenue before the Income-tax Appellate Tribunal that the CPC is a mineral or ore falling under sub clause (ii) of clause (b) of section 80HHC(2) but it was its case that the CPC is a mineral oil. Even before us learned counsel for the Revenue did not contend that the CPC is mineral or ore but submitted that it is a "mineral oil" being derived from the mineral oil. We would presently proceed to examine whether the CPC can be regarded as a "mineral oil". 10. The term "mineral oil" is not defined in the Act. Therefore, submitted Mr. Inamdar, the expression "mineral oil" must be interpreted in the common parlance language. In Indian Hotels Co. Ltd. v. ITO [2000] 245 ITR 538 (SC), while interpreting the expression "industrial undertaking" appearing in section 80J of the Income-tax Act, the Supreme Court held that since the expression "industrial undertaking" was not given any meaning under the Act it must be understood as per common parlance language. Similarly in CIT v. Babcock and Wilcox of India Ltd. [2000] 241 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealing in "mineral oil" and other related commodities understand the expression "mineral oil". If a trader were to go in the market to buy and asks for a mineral oil, he may be shown crude oil and anything and everything but calcined petroleum coke (CPC). Although the CPC is a product which is derived from the crude oil no trader in the market would call the CPC a crude oil or mineral oil. In the common parlance, nobody would mistake the CPC for a crude oil. 12. Looking at the meaning given in different dictionaries, the Oxford Advanced Learner's Dictionary, 7th Edition, gives the meaning of the word "mineral oil" to be (1) petroleum (2) liquid paraffin. The Oxford English Dictionary, 1970 reprint, (Volume VI) states the word "mineral oil", to be a general name for petroleum and the various oils distilled from it. It defines separately the words "mineral tar" to be : pissasphalt ; mineral wax as ozocerite. Legal dictionaries do not give a precise definition to the expression "mineral oil" but give the meaning of the word "mineral". The word "mineral" is defined in Black's Law Dictionary, 6th Edition as any valuable inert or lifeless substance formed or deposited in its present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l would ordinarily be a solid substance and mineral oil ordinarily would be in a liquid form or at least capable being converted into liquid form like LPG or CNG by simply applying or subjecting it to pressure. If these tests are applied, the CPC would not be a mineral oil. 13. The learned counsel for the Revenue referred to a decision of this court in Burmah Shell Refineries Ltd. v. G. B. Chand, ITO [1966] 61 ITR 493 and invited our attention to the following sentence appearing at page 501 of the report : " . . . it is clear that the expression "mineral oil" is wide enough to include both the petroleum in its crude form as well as the products secured or obtained from the crude oil by refining". 14. Strongly relying upon this observation the learned counsel submitted that since the CPC is admittedly a product derived form a crude oil or mineral oil, it must be held to be included in the meaning of the expression "mineral oil". It is settled principle of law that the judgments or decisions of the courts are not to be read like a statute. A sentence here and sentence there cannot be picked up and read as a sentence of a statute. The judgment must be read as a whole. The ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany was engaged in the business of mineral oil. The stage before the court was of provisional assessment. Furthermore the company was admittedly engaged in the business of refining crude oil which undoubtedly is a mineral oil. The final product in that case appears to be refined crude oil and not the CPC with which we are concerned. It was in this context the observation was made in the decision that the expression mineral oil would include the products secured from the crude oil by refining. The court was not required to consider whether the CPC, which is a different commercial product manufactured from the asphalt or tar (a residue obtained in the refining process), was a mineral oil. The decision has no application to the facts of the case at hand. 16. LPG, motor spirit, diesel, jet fuel, paraffin wax, tar and bituminous materials are produced by refining petroleum crude/crude oil. These products are produced simply by atmospheric and vacuum distillation without subjecting the crude oil to any other manufacturing process. Asphalt, tar and bituminous materials are the bottom products obtained at the fractional distillation process. They are very heavy, viscous and tarry ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onverting the green coke/raw petroleum coke into the calcined petroleum coke (CPC). In our view, the appellant is engaged in the business of manufacture of the CPC. Though the initial raw material used for manufacture of the CPC is a petroleum crude oil extracted from the earth, the product which is manufactured by the appellant is an entirely different product commercially known and regarded as different from petroleum crude and which is different than the one which is derived by mere distillation of the petroleum crude which is a mineral oil. The appellant does not merely squander away the mineral resource of the country by exporting a mineral resource or by superficial or inconsequential treatment to an extracted mineral oil. The mineral oil is first subjected to a distillation process wherein all valuable products like motor spirit, diesel, jet fuel etc., are taken out and what remains is a residue in the form of tar or bituminous products. This residue is again subjected to a manufacturing process known as delayed coking process to convert the tar and bituminous material into a green coke or raw petroleum coke. Yet another manufacturing process, though only a specified heat tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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