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TMI Blog2016 (4) TMI 877X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed on the purchase of rubber by manufacturers of finished rubber projects within the State for use of such rubber by such manufacturers in the manufacture of finished rubber products within the State. Through SRO.No.1516/90, the term 'finished rubber products' occurring in SRO.No.641/81 was sought to be explained by the introduction of an Explanation which is deemed to have come into force with effect from 1.4.1989 subject to the condition that taxes if any remitted by any dealer shall not be refunded. That Explanation is, inter alia, to the effect that for the purpose of SRO.No.641/81 'finished rubber product' shall not include any form of rubber which are subjected to processing by mixing with chemicals, gas, fumigation or any other similar process to make any 'compound of rubber'. 3. While completing the assessments for the relevant years, the assessing authority denied the claim of concessional rate of tax on the purchase turnover of raw rubber used in the manufacture of rubber compound on the ground that the goods manufactured by the assessee is compound of rubber which is not a finished product. The first appellate authority upheld that view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of mixing rubber with chemicals, gas, fumigation, etc. What assessee is doing is admittedly mixing up of natural rubber with carbon black, processing oil, etc. to make it a compound of rubber. In fact not only the assessee but also others who are engaged in the manufacture of tyre are using the same process and the variation is only in the ratio and the quality of chemical and other ingredients used in mixing which determine the quality of the tyre. In these circumstances we hold that the finding of the Tribunal that the rubber compound or compound of rubber made by the assessee is not "any compound of rubber" referred to in the notification is absurd, unrealistic and unsustainable. Explanation covers process of mixing of rubber with chemicals or any other ingredient to make any compound of rubber, and therefore assessee will not get concessional rate of tax on the purchase of rubber used in the production of rubber compound. We are of the view that the purpose of Explanation as found by this Court in the earlier decision is to deny benefit to producers of any compound of rubber and therefore the distinction between manufacture and processing raised by the assessee has no relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment and order dated 18.12.2008 of the Division Bench of the Kerala High Court in STRs Nos.224, 225, 213, 231, 262 of 2006 and restore the same to the file of the High Court. 6. Be it also mentioned that two writ petitions were filed, being Writ Petition No. (OP) 12020 of 1998 and OP 3444 of 1998, by the appellant herein before the Kerala High Court challenging the validity of the notifications issued by the respondent, which also were dismissed by the High Court under the impugned judgment and order. 7. Since we have set aside the entire judgment and order passed in the aforesaid STRs, the judgment and order passed in the said writ petitions are also set aside and the writ petitions are restored to the file of the High Court. 8. The parties are given liberty to adduce additional evidence, if any, before the High Court by way of additional documents as also by filing fresh affidavits and further replies/rejoinder thereto. The State of Kerala as also the appellant would be at liberty to file such additional documents or affidavits in terms of the said order on or before June 15, 2011 and it shall also be open to the parties to file any additional documents in response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of remand dated 28.04.2011, reference is made to the documents produced by the State as Annexures A1 to A17 after the remand. Those documents are received as evidence in terms of the order of remand. On the basis of those materials, it is argued on behalf of the State that its specific contention is that what is manufactured by the assessee within the State, by whatever name it is called by the assessee, is a 'compound of rubber', excluded from the definition of 'finished product' in terms of the concessional rate notification. It is further argued that the assessee, by the use of the terms 'rubber compound' and 'compound rubber'; alternatively, for the product manufactured by them within the State, belies its contention and lends credibility to the stand of the State on that issue, which is primarily a question of fact. 6. Per contra, the learned senior counsel appearing for the assessee in the captioned revisions argued that the effect of the remand order issued by the Apex Court is that the factual findings recorded by the Appellate Tribunal stand confirmed subject to any additional evidence that the State may produce to rebut those finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t precedent is authority for the proposition that when an order of remand is made by the superior court for the purpose of considering certain aspects, the court to which the case is remitted cannot assume a wider field of jurisdiction than the one which is permitted by the superior court through the remand order. The court below is bound by the order of remand and cannot examine the whole controversy afresh, as if all the contentions of all the parties were open before it. Such an approach by a court below would not be countenanced. That was a case where the Apex Court was dealing with the effect of an order of remand made by it to a High Court. For further support, see Budhilal v. Jagannathdas [AIR 1963 MP 344] rendered holding that when limits for enquiry are laid down by an order of remand, the court to which the case is remanded would have no jurisdiction to enter into questions falling outside those limits. 9. Bearing in mind the aforenoted principles of law relating orders of remand, we see that the remand order was issued by the Apex Court after holding, in paragraph No.4 thereof that a finding has to be recorded as to whether or not 'rubber compound' or 'compo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amendment is as to whether the Tribunal committed an error in law and in fact in not correctly construing the words "any other similar process" as comprehensive and descriptive of the processing undertaken by "mixing with chemical, gas, fumigation" as to take within its purview the process held out by the assessee as the one undertaken by it, since the resultant product of the process of the assessee is only a raw material which goes into manufacture of tyres, tubes and flaps which are manufactured by the assessee outside the State of Kerala. It is also pointed out that the Government has consciously and intentionally included "any compound of rubber" as falling outside the purview of the notifications and the Tribunal, therefore, erred in law in concluding that the process undertaken by the assessee for the production of 'compound of rubber' or 'rubber compound' would lead to a product eligible for concessional rate. The question as to whether the Tribunal has erred in law and has thereby failed to give effect to the intention of the Government in issuing the notification under consideration is projected as an issue for decision. 11. After remand, the State fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate issued by the Superintendent of Central Excise, which has certified that the assessee has been producing masticated rubber by mixing raw rubber with carbon black and chemicals and the said item is classified with the description "compounded rubber" in the Central Excise Tariff Act, 1985. Annexure A7 is the print out said to be from what has been down loaded from wikipedia in relation to tyre manufacturing. It reads as follows: "Tyre plants are traditionally divided into five departments that perform special operations. These usually act as independent factories within a factory. Large tyre makers may set up independent factories on a single site, or cluster the factories locally across a region." That material shows, among other things, that tyre manufacturing process is traditionally divided into five departments that perform special operations. These usually act as independent factories within a factory. Large tyre makers may set up independent factories on a single site, or cluster the factories locally across a region. Compounding is the operation of bringing together all the ingredients required to mix a batch of rubber compound. Each component has a different mix ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is filed placing therewith the certificate dated 13.06.2011 issued by Sri.S.Mohanachandran Nair, Director (Processing and Product Development), Rubber Board. That certificate is to the following effect: "TO WHOMSOEVER IT MAY CONCERN A certificate bearing even No. dated 1st January 1996 was issued to M/s.MRF Ltd. on their request to give clarification on the nature of COMPOUND RUBBER manufactured at their Vadavathoor Factory as to whether it is a Rubber Product and different from `Compound of Rubber' as mentioned in Govt. of Kerala Notification SRO No.505/95 read with SRO No.1728/93. Accordingly, the relevant notifications were examined and the process of manufacture of COMPOUND RUBBER by M/s.MRF Ltd. at their above facility was studied before issue of the said certificate. As there has been no change in the manufacturing activity of COMPOUND RUBBER at their Vadavathoor Factory, its process of manufacture remains the same and is summarized below. For the manufacture of COMPOUND RUBBER, Masticated Natural Rubber is fed into heavy duty machinery like Banbury and mixed with chemicals like anti-oxidants, activators, accelerators and fillers like carbon black, silica along wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic rubber, reclaimed rubber, chemicals like antioxidant, activators, and other allied materials are added, after weighing in chemical/weighing balances, into the machine using loading/charging conveyor. Using the carbon black handling system, carbon black, the reinforcing filler, is added into the Banbury. Process oil is introduced into the machine through a specifically designed oil injection system. Other fillers such as silica and clay are loaded through the hopper door of the machine. The mixing operation for manufacture of compound rubber is taking place inside the enclosed chamber of the Banbury machine, having rotors with specially designed contoured wing, which rotate in opposite directions and subjected to pneumatically controlled ram pressure. The entire process is controlled through a sophisticated computer system. The downstream equipment consists of the chute, two-roll mills, tank with separating agents and auto batch off unit. At the third stage, the output material from the Banbury, in a lump form, is transmitted to a battery of two-roll mills/extruders and is subjected to further processing at a specified temperature into a sheet form. The sheet is then immersed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a person who is the Director of a Company, which, going by that affidavit, is involved in the manufacture of compound rubber. That affidavit says inter alia that the said company manufactures compound rubber using raw rubber, carbon black, chemicals and softeners in sophisticated mixing machinery to take out the compounded rubber for sale, and the manufacture involved value addition of about 30% more than the value of rubber, and the product is used by the buyers for making Tread Rubber, Tyre, Battery case etc. Similar is Annexures R1(e), R1(f) and R1(g), which are the affidavits of the Managing Directors of Forbes Ewart and Figgis Pvt. Ltd. and Pottekkattu Rubbers Pvt. Ltd. and the proprietor of Island Rubbers, respectively, all of which stand to affirm that compound rubber is a different and distinct product which is a commodity sold as such, as well. Annexure R1(h) is a certification by a Chartered Accountant. Certain photographs of the manufacturing unit are produced supported by affidavits as Annexures R1(i) and R1(j), respectively. Annexures R1(k) to R1(o) are notification SRO 641/81, assessment order, order of the Tribunal, reply given by the assessee to pre-assessment noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r rubber compound, which is the product of the assessee's unit in question, is a finished rubber product. It is a product made by bringing together all of the ingredients required to make a component, according to the required properties. This component is essentially a finished rubber product and is not merely one which is a result of mixing with chemicals, gas, fumigation etc. or any other process similar to mixing with chemicals, gas, fumigation etc. As would be reflected from the affidavit filed on behalf of the Department after remand and referred to in paragraph No.11 above, what the Department appears to suggest is that whatever comes out of the process in the assessee's unit within the State is only an intermediary product to be ultimately utilised in the manufacturing process of the assessee in its business of production of tyres and tubes, which activity is carried out outside the State. If this suggestion is to be accepted, we have to dispel the credibility and evidentiary value of the views of the experts that the processing of rubber in such manner as is noted in those affidavits is a process of manufacture and such activity need not by itself conclude in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficers connected with Rubber Board, which holds under that Act. 19. Legislative history would show that the Indian Rubber Production Board was set up in 1942 with the object of encouraging and ensuring increased production of rubber by all possible means, taking into consideration that rubber had then become a scarce commodity. The Order of 1942 under which that Board was constituted, was replaced by the Rubber Control and Production Order, 1946. Later it was found necessary that on the termination of the 1946 Order, a statutory organisation should be set up to look after the interests of the rubber producers in India and the functions of that statutory organisation will include, steps, inter alia, to promote research and do all such other things, as may be necessary, for the development of the industry. The Rubber Act 1947 thus came into being. With effect from 01.08.1955, that Act was amended to provide the development of the rubber industry to be under the control of the Union. The purposes of that Act and its amendment through Act 54 of 1982, among other things, are to provide for promotion of research and all such other things, as are necessary for the development of the rubb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding rubber contained in any manufactured article. These statutory materials carry relevant evidentiary value to show that any manufactured article would not be treated as rubber, even if it contains rubber. Therefore, when the process of mixing rubber with chemicals, gas, fumigation or any other similar processes results in compound of rubber or rubber compound, it apparently goes out of the term of rubber as understood in the parlance of statute law, at least from 1947, when the Rubber Act came into force. Any article which is one resulting out of a process which turns rubber from its different facets noted in clause 3(h) of the Rubber Act, to an article which does not fall under that definition, it will be a manufactured article; and the rubber included in which will not be treated as rubber under the primary legislation dealing with rubber after bringing that matter under the control of the Union through Union legislation leading to the Rubber Act. Statutory provisions of the Rubber Act appreciated in the context of the objects of that Act and the expertise of the persons who give effect to the purposes of that Act, unequivocally, show that the conclusions resulting out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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