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TMI Blog2016 (9) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... ial Taxes, Lucknow, U.P. under Section 59 of the VAT Act seeking a clarification about the rate of tax applicable to the sales of bitumen emulsion. The Commissioner of Commercial Taxes, vide order dated 23.1.1999 opined that bitumen emulsion is an unclassified commodity and, therefore, is excisable to tax at the rate of 12.5% as it would fall under the residuary Entry. 3. Being aggrieved by the order dated 23.1.1999, the respondent preferred Appeal No. 6 of 2009 under the VAT Act before the Tribunal Commercial Taxes, U.P., Lucknow (for short 'the tribunal') which was heard by the Full Bench. It was contended before the tribunal by the assessee-appellant therein that bitumen as a commodity is taxed at 4% under Serial no. 22 Part A of Schedule II to the VAT Act and bitumen is found in solid state and to bring it in the liquid form, water is added to it and very little quantity is used in the process. Elaborating the said submission, it was urged that when bitumen is available in the liquid form, it is known as bitumen emulsion and is commonly known as bitumen when it is available in the solid form; and both the commodities are understood in the same manner in the commercial world an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Excise, Bangalore v. Osnar Chemical Private Limited (2012) 2 SCC 282 and ultimately ruled that it could not be said that mixing of some material would amount to manufacture unless it results in a change when the commodity concerned cannot be recognised as an original commodity but rather new and distinct article emerges having different commercial use and identity. On the basis of the aforesaid analysis, the High Court allowed the revision and set aside the orders of the forums below. 7. We have heard Mr. Pawan Shree Agarwal, learned counsel for the appellant and Mr. Kavin Gulati, learned senior counsel along with Mr. Avi Tandon, learned counsel for the respondents. 8. Criticising the view of the High Court, it is submitted by Mr. Agarwal that it has erred in opining that bitumen in its emulsified form also remains bitumen. He has drawn inspiration from the language used in Section 2(t) of the VAT Act to structure the submission that in the process of conversion, manufacturing takes place. It is his further argument that the decision in Osnar Chemical Private Limited (supra) is not applicable to the present controversy as the said decision was rendered in the context of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new one, for the purposes of this Act and the tax can be imposed as a single point levy again, but in the case at hand, that is not the situation. Learned senior counsel further submits that every process involved in the manufacture of a commodity does not relate to manufacture of a new product as the end product continues to retain the character of the original product. According to him, solely because some process has been carried out, it cannot be held that a new product has come into existence. Expatriating the said submission, it is put forth that the process of heating on high degree temperature and then adding water to it to obtain emulsified bitumen does not alter the basic nature of bitumen but only brings a change in physical appearance of the product. He has heavily relied on Osnar Chemical Private Limited (supra) to highlight that bitumen would include bitumen emulsion. 10. The principal controversy, as we perceive, is "whether "bitumen emulsion" is covered within Entry 22 of Schedule II of the VAT Act which only refers to "bitumen"". According to Academic Press Dictionary of Science and Technology, "bitumen" means:- "Bitumen Geology and naturally occurring flammable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontent in bitumen is 80-87%. Three basic components of bitumen are (I) asphaltene, (II) maltene and (III) carbine. The chemical bonds in bitumen are weak and break when heat is applied. When it is cooled, it comes back to its original structure, but not necessarily the same as before." 15. The said report has further proceeded to state that emulsion is a two phase system consisting of two immiscible liquids, one being dispersed as finite globules in the other. In bitumen emulsion, bitumen globules are suspended as emulsion in water with the help of emulsifiers, which are used to stabilize the emulsion. Emulsifiers break into ions and charge the bitumen particles. Charged particles repel each other and the suspension remains stable and this stability remains as long as water does not evaporate, freeze or emulsifier does not break. 16. About the characterization of the bitumen, report states:- "Bitumen materials have certain characteristics such as (I) waterproofing (II) durability, (III) resistance to strong acids and (IV) cementing properties. At normal temperature, bitumen is semi-solid and takes time to flow. At higher temperatures, it behaves like a viscous liquid, whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... men and bitumen emulsion. The stand of the Revenue is that the word "bitumen" must be conferred a narrow meaning for the reason that the legislature has not thought it appropriate to use the prefix or suffix like "all", in all forms or of all kinds. It may be immediately clarified that bitumen is a generic expression which would include different types of bitumen. Revenue, however, as stated earlier, intends to apply it restrictively. The said submission has a fundamental fallacy. Entry 22 does not exclude or specify that it would not include bitumen of all types and varieties. This is not the principle or precept applied to interpret the entries under the Schedule of the Act. We will be deliberating in detail on the said aspect at a later stage. Prior to that, we would like to advert to certain other aspects. 19. At the very inception, we think it absolutely seemly to state that the nature and composition of the product or the good and the particular entity in the classification table is important. Matching of the good with the Entry or Entries in the Schedules is tested on the basis of identity of the goods in question with the Entry or the contesting entries and by applying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Maharashtra v. Bradma of India Limited (2005) 2 SCC 669, the Court had observed that the general principle is that specific Entry would override a general Entry. Referring to the decisions in the case of Collector of Central Excise, Shillong v. Wood Craft Products Ltd. (1995) 3 SCC 454, it has been ruled that resort can be made to a residuary heading only when by liberal construction the specific Entry cannot cover the goods in question. Referring to Entry No. 90 in the said case, which covered tabulating, calculating, cash registering, indexing and data processing, etc, other than computer machines, it was held that the words did not contain words of limitation and would cover every species of cash registering machines, irrespective of their mode of operation. In the absence of any limitation or qualification as to the different kind of cash registering machines, there was no reason for such qualification and limit the Entry to a particular kind of cash registering machine. However, computers had been specifically excluded and were separately dealt with in Entry 97(a). The assessee, who was manufacturing electronic cash registers would, therefore, be covered by Entry 90 and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parlance" test in addition to the "end use test". 26. Reliance placed by the Revenue on the decision in the case of Hindustan Aluminium Corporation Ltd. v. State of Uttar Pradesh and another (1981) 3 SCC 578, is of no assistance, for in the context of the particular notification it was held that aluminium ingots, billet, roll products, extrusion, etc. would not be covered by the exemption, which was granted to all kinds of minerals, ore, metals or alloys, including sheets and circles used in the manufacture of brasswares and scraps. In this context, referring to Section 3A of the U.P. Sales Tax Act and the notification as applicable, it was held that the earlier notifications issued from time to time would show that the expression "metal" had been employed with reference to metal in its primary sense. The principle laid down in the said authority is in the context in issue and is based upon the schematic arrangement indicated and specified in the notification under consideration therein. That apart, the said decision also emphasizes that a word describing a commodity in a sales tax statute should be interpreted according to its popular sense and words of everyday use must be cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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