1980 (3) TMI 237 - HC - VAT and Sales Tax

Summary

Issues:
Petitions against the orders of the Sales Tax Appellate Tribunal, Madras Bench holding that the sale of mineral oil was liable to sales tax.

Analysis:
The petitioners purchased mineral oil from the Indian Oil Corporation under the brand name Indrex Oil Light and subjected it to different chemical processes before selling it under different commercial names. The Tribunal held that the processed oil was a different commercial commodity and thus subject to sales tax. The Tribunal's order outlined the specific procedures followed by the petitioners in processing the oil, emphasizing the transformation of the oil into distinct products like transformer oil, soluble cutting oil, and Oil 91.

The main contention was whether the processed oil, which had undergone significant chemical alterations, could be considered the same as the original mineral oil purchased by the petitioners. The Tribunal concluded that the processed oils had lost their original identity and emerged as separate taxable items, distinct from the base oil. The Tribunal's decision was based on the interpretation of item 47-A of the First Schedule to the Tamil Nadu General Sales Tax Act, 1959, which encompassed "all kinds of mineral oils" and implied the existence of different types of mineral oils.

The Court agreed with the Tribunal's reasoning, emphasizing that the processed oils were no longer the same kind of mineral oil purchased initially but had transformed into different commercial commodities through the chemical processes applied. Therefore, the sales of these processed oils were deemed liable to sales tax under item 47-A. The Court upheld the Tribunal's decision, dismissing the tax revision petitions filed by the petitioners.

In conclusion, the judgment affirms that the processed oils, resulting from specific chemical treatments applied to the base mineral oil, constituted distinct taxable items under the relevant sales tax legislation. The Court's decision underscores the principle that significant alterations to a product's composition can render it a new commercial commodity subject to taxation, even if derived from a previously taxed item.