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TMI Blog2008 (3) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 1985-86 and 1986-87. According to the assessing authority the rate should have been eight per cent whereas in the regular assessment the tax had been calculated at four per cent. The reason for this was that the "spent bleaching earth" according to the dealer was a mineral and therefore, under the Notification No. 6075, dated October 1, 1983 it was covered by entry "all kinds of minerals" and therefore taxable at four per cent whereas according to the assessing authority it had wrongly been taxed as mineral and in fact it should have been taxed as unclassified goods at eight per cent. The proceedings under section 22 of the Act were ultimately quashed by the High Court on the ground that the assessment order passed by the assessing authority had merged into the appellate order passed in appeal filed by the dealer and therefore the assessing authority had no jurisdiction to initiate proceedings under section 22 of the Act. It would be relevant to mention here that the notice unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is legally justified in validating the initiation of proceeding under section 21? (ii) Whether there was any material to justify the initiation of proceeding under section 21 on March 4, 1991? (iii) Whether the initiation of proceeding under section 21 was based on any material and inasmuch as in any case, on account of change of opinion? (iv) Whether the levy of tax under section 21 on spent earth as unclassified items is based on any relevant material, on account of change of opinion? (v) Whether the spent earth is liable to tax as a mineral or as an unclassified items?" I have heard Sri Krishna Agrawal, learned counsel for the dealer-applicant and Sri B.K. Pandey, learned Standing Counsel representing the Department. Sri Krishna Agrawal, learned counsel appearing for the dealer, has made elaborate submissions both on the validity of the proceedings under section 21 of the Act as also on the merits of the case that "spent bleaching earth" was not liable to be taxed at eig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, 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 purchased by soap manufacturers. This product sold by the vegetable oil manufacturers is commercially and in common parlance known as "spent bleaching earth". Further Sri Agarwal submits that the "spent bleaching earth" is nothing but "bleaching earth" and retains its composition as "bleaching earth" and therefore, is a mineral covered by entry in the Notification No. 6075, dated October 1, 1983. He has further submitted that there was no dispute that the "bleaching earth" is a mineral and therefore "spent bleaching earth" even if it had lost its capacity to absorb, is still "bleaching earth" with its basic composition remaining the same and therefore should be treated as a mineral and accordingly taxable at the rate of four per cent only. In support of his contention he has relied upon the following decisions: (i) Commissioner of Central Excise v. Markfed Vanaspati and Allied Industries reported in [2003] 1 RC 157. (ii) Commissioner of Sales Tax v. Chela Ram Tulsidas reported in [1980] UPTC 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 order on a particular issue and if there is no application of mind it cannot be said that there is any change in the opinion. Sri Pandey has further submitted with regard to the merits of the matter that there is no issue that "bleaching earth" is a mineral. But the moment "bleaching earth" loses its capacity or its property to absorb for the reason that in refining/cleaning of the oil certain quantity of oil remains permanently absorbed in the "bleaching earth" it cannot be said that it still remains in the same form as it was taken out from the earth. It does not remain a mineral any longer. He has referred to the dictionary meaning of the "bleaching earth" as also the word "spent" given in the New Oxford English Dictionary. According to the dictionary meaning the word "spent" means used up completely, exhausted, worn out, exhausted of the active or effective power, no longer active, effective or serviceable. Thus, once the "bleaching earth" had lost its capacity or property for which it was being used by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the present case, the reasons was very much available on the record from the previous proceedings under section 22 of the Act and therefore, it cannot be said that on the date of issuing the notice under section 21 of the Act, the assessing authority had no material on record to form its opinion with regard to applicability of lower rate of tax. Thus, limb first limb of the argument with regard to the validity of the proceedings under section 21 of the Act cannot be accepted. The second limb of the argument with regard to the validity of the proceedings under section 21 of the Act is that it amounted to change of opinion. This argument also cannot be accepted. From a perusal of the assessment order it cannot be noticed that the assessing authority had applied its mind or had made any discussion with regard to the rate of tax to be applied on the sale of "spent bleaching earth". The argument with regard to change of opinion could have been urged only where the assessing authority after applying its mind had held that the lower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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, Sri Krishna Agarwal, learned counsel for the dealer, in this regard has referred to the definition of "mining" as given in the Encyclopaedia Britannica, which reads as follows: "Mining and quarrying: Mining in a broad sense is the excavation of valuable mineral materials from the earth's crust and includes minerals of organic origin, such as coal and petroleum." In continuation of the same he has further referred to a book titled "refining of oil and fats (for edible purpose) " by A.C. Anderson and published by Pergamon Press Ltd., London 1953 and has placed strong reliance on the passage quoted as follows; in particular the last sentence under the Chapter "Bleaching by Absorption": "Absorbents.-The most important absorbent used in bleaching fats and oils is bleaching earth or clay, natural bleaching earth, otherwise known as Fuller's earth from its ancient use in the 'fulling' or scouring of wool, comprises various earths or clays consisting basically of a hydrated silicate. The mineralogical characteris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p manufacturers. They purchase "spent bleaching earth" from vegetable oil manufacturers and use it for manufacturing of soap. What is primarily done is to extract the oil absorbed in the "spent bleaching earth" and utilise it in the manufacture of soap. The "spent bleaching earth" along with solvents is treated to a certain temperature whereafter the oil contents surface and is accordingly extracted for use by soap manufacturer. The question here is as to whether "spent bleaching earth" still remains a mineral or falls in the category of unclassified items. According to Sri Agarwal the entry under the Notification No. 6075 is "all kinds of minerals " and, therefore, "spent bleaching earth" would also fall in the said category as the category is very wide and would cover all kind of minerals. Mineral may be of many kinds and that is why the entry is wide, but the question is whether a mineral having lost its capacity or its property would still remain a mineral or would be something other than a mineral. The definition of "mineral" as given in Webster's English Dictionary is an organic substance occurring naturally in the earth and having a consistent and distinctive set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Allied Industries [2003] 1 RC 157 was with regard to a case under the Central Excise Tariff Act, 1985. In the said case the apex court was of the view that "spent bleaching earth" remained earth even after processing. To hold that "spent bleaching earth" would be an excisable commodity, what was essential was that there should have been some manufacturing process. The apex court held that there was no manufacturing activity under the Trade Tax Act. Under the Trade Tax Act manufacturing is not essential. What is to be seen is whether the goods which is being traded is covered by the entry of "all kinds of mineral". The apex court was not dealing with the definition of "mineral" but was interpreting as to whether "spent bleaching earth" was a mineral or not under the Tariff Act. Further the entry at item 1507 was residue resulting from the treatment of fatty substances. In that view the apex court tested the said product as to whether it would fall in the said entry or not. It was essential to test it within the twin tests of manufacture and marke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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