TMI Blog2008 (3) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... 08 - VIKRAM NATH , J. VIKRAM NATH J. This sales tax revision under section 11 of the U.P. Sales Tax Act, 1948 (hereinafter referred to as, the Act ) has been filed by M/s. M.R. Soap Private Limited, Lower Bazar, Modinagar, Ghaziabad (hereinafter referred to as, the dealer ) assailing the judgment of the Sales Tax Tribunal, Bench-II, Ghaziabad, dated January 25, 1994 whereby the second appeal of the dealer was dismissed. The present revision arises out of the proceedings under section 21 of the Act relating to assessment year 1986-87. The dealer is a manufacturer of soap. With regard to the relevant assessment year it submitted its returns and the assessing authority vide order dated February 28, 1989 accepted the account books of the dealer and found that only an amount of Rs. 4,326 was due as tax. Subsequently proceedings under section 22 of the Act for rectification of the assessment order were initiated on the ground that the rate of tax applied on the sales of imported spent bleaching earth by the dealer was at a lower rate. It may also be noted that the proceedings under section 22 of the Act had been initiated for both the years, i.e., assessment years 1985- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s informed that the rate of tax applied on the sale of spent bleaching earth was four per cent whereas actually it should have been eight per cent and therefore he may submit his explanation as to why the rate of tax be not corrected. The dealer submitted his explanation. The assessing authority by order dated August 31, 1991 held that the rate of tax applied was lower as what should have been actually applied and accordingly passed an order that on the sale of the spent bleaching earth the tax is to be calculated at the rate of eight per cent. It accordingly raised a demand of Rs. 84,240 vide order dated August 31, 1991. Aggrieved by the same the dealer preferred an appeal, which was dismissed by the Deputy Commissioner (Appeals) vide judgment and order dated December 26, 1991. The dealer thereafter filed a second appeal before the Tribunal which was also dismissed by the order impugned in this revision on January 25, 1994. Aggrieved the present revision has been filed. The questions of law sought to be raised by means of the present revision as framed by the dealer-applicant are as follows: (i) Whether, on the facts and in the circumstances of the case, the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t bleaching earth also. Further he has relied upon the following decisions in support his contention with regard to the validity of the reassessment proceedings: (i) Commissioner, Trade Tax, U.P., Lucknow v. Mishra Auto Sales, Sonbhadra reported in [2006] 30 NTN 251. (ii) Palco Lining Company v. Sales Tax Officer reported in [1983] 54 STC 255 (All); [1983] UPTC 1116. (iii) Commissioner of Income-tax v. Kerala State Cashew Development Corporation reported in [1992] 198 ITR 520. With regard to the merits of the matter Sri Agrawal has submitted that bleaching earth which is also commonly known as Fuller's earth is a mineral. It is used in textile industry, fulling of wool, bleaching and clarifying petroleum and vegetable oil manufacturers for cleaning/refining. For the sake of convenience the commodity is being referred to as the bleaching earth and its modified form as spent bleaching earth . The bleaching earth has a property of absorbing grease oil, dense impurities and therefore, becomes useful for vegetable oil manufacturers. The vegetable oil manufacturers thereafter sell the said used bleaching earth which had lost its capacity to absorb. It is pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that the assessing authority under sections 21 and 22 of the Act was the same and therefore, he was well aware as to why the notice under section 21 of the Act was issued. In this regard he has also referred to the findings recorded by the assessing authority while passing the order under section 21 of the Act that the notice under section 22 of the Act was issued for the same reason. With regard to the submission on behalf of the dealer regarding change of opinion, Sri Pandey has referred to regular assessing order and submits that there was no discussion or application of mind by the assessing authority with regard to the rate of tax applicable on the sale of spent bleaching earth . The only discussion was with regard to the rate of tax of acid oil . He has further referred to the finding recorded by the Tribunal hat the assessing authority while passing the assessment order had not applied his mind and therefore, submits that the submission made on behalf of the dealer with regard to change of opinion cannot be accepted. According to him, the change of opinion would occur only where the assessing authority had applied his mind while passing regular assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmitted position is that in the proceedings under section 22 of the Act the issue was the same as has been taken for initiating the proceedings under section 21 of the Act, i.e., with regard to assessment to tax at a lower rate than at which it was assessable under the Act. It was not in issue that the assessing authority in the proceedings under section 22 of the Act and in the proceedings under section 21 of the Act was the same authority. From the order sheet it also appears that it was only when the proceedings under section 22 of the Act were dropped that the proceedings under section 21 of the Act were initiated. Therefore, it cannot be said that the assessing authority did not have any reason to believe that the whole or part of the turnover had been assessed to tax at a rate lower than at which it was assessable. Moreover, even the assessee knew and had knowledge with regard to the applicability of lower rate of tax. There is no requirement under law that the assessing authority should record reasons in writing before issuing notice. What is required is that the assessing authority should have reason to believe that any of the four conditions elaborated above existed. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessing authority to change its opinion and impose tax on such articles sold by the dealer. This is not the case here at hand. As already held there is no discussion on merits by the assessing authority with regard to rate of tax applicable to sale of spent bleaching earth in the regular assessment. (iii) In the case of Kerala State Cashew Development Corporation Limited [1992] 198 ITR 520 (Ker) the matter arose out of reassessment proceedings under the Income-tax Act, 1961 where recording of reasons for initiating reassessment is mandatory under section 48 of the said Act. The present case is under the U.P. Sales Tax Act, 1948 which does not require recording of reasons. What is required is that there should be material on record justifying the assessing authority to believe that any of the condition for initiating reassessment proceedings exists. As already recorded there was material on record justifying the reason to believe in the present case. Now, coming to the question on merits as to whether spent bleaching earth is to be treated as a mineral in order to cover it by Notification No. 6075, dated October 1, 1983 and accordingly liable to four per cent tax, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to as hydrous silicate of alumina and is found in its original form in the surface of the earth. It may be of different compositions depending upon from where it is being excavated. It has the property to absorb impurities like petty oil, grease and basic colour. Its main use is in textile industries and also in the vegetable oil industry. With its repeated use by the vegetable oil manufacturers its property/capacity to absorb reduces as the impurities get absorbed and reduce its capacity to further absorb. This product which has lost its capacity to further absorb is what is referred to as spent bleaching earth or spent fuller's earth . The word spent is used as an adjective to indicate that it is no longer capable to further purify or absorb the impurities. In other words, its capacity to absorb the impurities has been exhausted. The bleaching earth itself gets impure on account of the impurities having been absorbed by it. The impurities so absorbed by the bleaching earth serves a different purpose for the soap manufacturers. They purchase spent bleaching earth from vegetable oil manufacturers and use it for manufacturing of soap. What is primarily done ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This spent bleaching earth becomes relevant for soap manufacturers only on account of the absorbed impurities, gained from the process involved in the vegetable oil manufacturing. For soap manufacturers bleaching earth as excavated from the earth is of no use but after being used by the vegetable oil manufacturers it becomes useful for them in the manufacturing of soap as they extract the oil and impurities absorbed in it and use it in the manufacturing of soap. From the above discussion, it is difficult to hold that the spent bleaching earth would still remain a mineral, in view of the accepted definition of mineral as it has lost its properties existing at the time of excavation. The reliance placed by the counsel for the dealer in the case of Chela Ram Tulsidas [1980] UPTC 1238 is of no help for the reason that it does not deal with spent bleaching earth . The said decision only decided that the bleaching earth is a mineral. The question as to whether spent bleaching earth is a mineral or not was not an issue in the case of Chela Ram Tulsidas [1980] UPTC 1238. The next decision relied upon by the counsel for the dealer in case of Markfed Vanaspati and A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing. This is not the question here as already discussed while dealing with the case of Markfed Vanaspati and Allied Industries [2003] 1 RC 157. On the hand, this court in the case of British India Corporation Limited [2008] 11 VST 265; [2004] UPTC 898 held that coal ash obtained as a residue from burning coal was not the same item as coal as the properties of the two products were quite different. The coal ash did not have combustible properly like coal and would therefore, upon sale, be taxed as an unclassified item and not as coal at a lower rate of tax. Similar, is the present issue where spent bleaching earth obtained after bleaching earth has been used in refining of vegetable oils, having lost its property of absorption, would be a different commodity and therefore taxable as an unclassified item. In the present case as has been held above, spent bleaching earth does not remain a mineral as it has lost its originality as excavated and also its physical properties have changed and therefore the view taken by the Tribunal appears to be correct. No question of law as such arises warranting interference in revisional jurisdiction. Revision lacks merit a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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