TaxTMI 
TaxTMI 
2016 (5) TMI 1038
X X X X Extracts X X X X
X X X X Extracts X X X X
....en is mainly used for road construction, road repair, roofing and similar purposes. There are several variants of bitumen in use for a considerable period, viz, polymer modified bitumen (PMB), crumb rubber modified bitumen (CRMB) and bitumen emulsion. Bitumen it its original form is a solid and it melts at a high temperature. Traditionally, bitumen has been used for road construction for long and the sight and smell of bitumen is one of the everlasting memories of long-distance road travel in India. 3. For its convenient use, bitumen is now increasingly marketed in an emulsified form so that solid bitumen is not required to be brought to its molten state at high temperatures at the time of its application. Emulsifiers are added to bitumen and certain other chemicals are mixed therewith for bitumen emulsion to be produced as a fine dispersion of minute droplets of one liquid in another in which it is not soluble or miscible. There is undoubtedly a chemical change that is brought about in bitumen being treated with emulsifiers and other chemicals, but the end product of bitumen emulsion has similar use as bitumen; except that solid bitumen no longer needs to be brought to a molten s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ding that CRMB would be treated as bitumen for the purpose of imposition of tax under the said Act of 2003. A further reference was made under Section 102 of the Act for the determination of the status of bitumen emulsion and the rate of tax payable thereon. Such matter was disposed of by an order of May 7, 2013 with the observation that "Bitumen emulsion is not bitumen but is an unspecified goods covered under Schedule CA as was decided earlier". Such order of May 7, 2013 was challenged before the West Bengal Taxation Tribunal which agreed with the view expressed by the Commissioner that bitumen emulsion would attract tax at the rate of 13.5 per cent under Section 16(2)(b)(a) of the said Act of 2003. The Tribunal's judgment of August 21, 2015 has been challenged in a petition under Article 226 of the Constitution. WPTT No.101 of 2015 is pending before a Division Bench of this court. 7. The petitioner in the lead matter and the other petitioners apprehend that in view of the opinion expressed by the Commissioner in the order dated May 7, 2013 as upheld by the Tribunal's judgment dated August 21, 2015, assessment orders would be passed involving the petitioners on the basis of bitu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d that by the absorption of hydrogen atoms the groundnut oil assumed a semi-solid state. The process of refinement was found not to upset the essential characteristics of the original product, though the colour, odour and taste changed considerably. As for the hydrogenation, the Supreme Court accepted that it was a chemical change that the original groundnut oil underwent, but observed that "it continues to be the same edible fat ... and its nutritional properties continue to be the same". Both the refined and hydrogenated forms of groundnut oil were held to be groundnut oil for the purpose of the deduction claimed under the then local Sales Tax Act as applicable. 11. The petitioners also refer to the judgments reported at 2006 (197) (ELT) 324 (H. P. L. Chemicals Limited v. Commissioner of Central Excise) and (1990) 1 SCC 532 (Bharat Forge and Press Industries Private Limited v. Collector of Central Excise) for the proposition that when an article has reasonable resemblance with an enumerated item in a tariff schedule, "it will be against the very principle of classification to deny it the parentage and consign it to an orphanage of the residuary clause." 12. The petitioners emph....
X X X X Extracts X X X X
X X X X Extracts X X X X
....article, can a process of manufacture of one commodity to another be said to have taken place. If the process is to enhance the use of the original product, notwithstanding a chemical change, the finished product must be seen to retain its original identity for it being relatable to the relevant tariff item. The petitioners say that unless an express intention is evident in a taxing statute, the legislature must not be seen to have provided for different rates of tax for similar products having the same use. Finally, the petitioners refer to the oft-quoted dictum in 1997 (93) ELT 641 (Sun Export Corporation v. Collector of Customs) where the Supreme Court held that if there were two views possible, the one favourable to the assessee in matters of taxation has to be preferred. 16. The petitioners have also referred to the judgments of the Karnataka High Court, Madhya Pradesh High Court and Allahabad High Court on bitumen and its related products and commend the same view to be taken by treating bitumen emulsion as relatable to Entry 14 in Part - I of Schedule C to the Act of 2003 in this State. 17. The petitioners emphasise that a distinction must be made between the exigible basi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rt, as long as the State does not make such a distinction, bitumen emulsion has to be regarded as being relatable to Entry 14 in Part - I of Schedule C to the said Act covering bitumen and bitumen emulsion cannot be seen to fall under the residuary entry in a different schedule. 20. The State seeks to rely on the voluminous literature on bitumen emulsion that the petitioner in the lead matter has submitted in court without such petitioner placing much reliance thereon. The State refers to the divers uses of bitumen emulsion indicated in the compilation submitted by IOC. A diagram at page 9 of the compilation indicates the application of bitumen emulsion for slurry seal, penetration macadam, soil stabilization, cold mix, tack coat, prime coat, fog seal, dust binding, crack filler, patching filler, recycling and surface dressing. The State relies on the wide definition of the word "manufacture" in Section 2(22) of the Act and says that the complex process of converting bitumen to bitumen emulsion as evident from the literature on the subject submitted by IOC should prompt the court to hold that bitumen emulsion cannot be regarded as bitumen merely because the word bitumen is used as....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., to notice how CRMB and PMB are produced, particularly since such variants of bitumen have been held in Osnar Chemical to be taxable as bitumen. In IOC's compilation on bitumen emulsion, there is a section on CRMB and there is a Bureau of India Standards (BIS) publication on polymer and rubber modified bitumen which, respectively, record as follows: "To produce CRMB, Crumb Rubber powder retrieved form (sic, from) the used tyres is added to normal Bitumen along with additives. For homogeneous mixing of the Crumb Rubber powder and additives, electrically operated stirrers are used to achieve optimum results." "Polymer and rubber modified bitumen, often abbreviated as polymer modified bitumen is obtained by the incorporation of thermoplastics, crumb rubber powder (ordinary) or chemically treated crumb rubber and elastomers or a blend of polymeric and other additives compatible with bitumen or a short residue obtained after refining of crude oil. The modified bitumen is prepared at refineries or at suitable centrally located or mobile plants with high shear mixing facility ... . "Over the years, different types of modifiers have been used to make modified bitumen. The most commonly ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f a commodity in the manufacture of another commodity and observed that the test was whether "the article produced is regarded in the trade, by those who deal in it, as distinct in identity from the commodity involved in its manufacture." 26. The State relies on the judgment in Mauri Yeast where an entry in the U. P. Trade Tax Act, 1948 was considered. At paragraph 30 of the report it was observed that "in interpreting different entries, attempts shall be made to find out as to whether the same answers the description of the contents of the basic entry and only in the event it is not possible to do so, recourse to the residuary entry should be taken by way of last resort." The product in question was yeast and the issue was whether yeast would fall under the head of chemicals or had to be treated as an unclassified item. The State emphasises on the observation at paragraph 44 of the report that classification of goods under a particular entry is, essentially, a question of fact. The State says that the facts relevant to assess whether bitumen emulsion can be regarded as bitumen are not before the court for such exercise to be completed. The State contends that the common parlance ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is very obvious why the Supreme Court held that chicks and broilers were not the same since chicks would scarcely be sought after in markets for their meat, but broilers would. The decision, though it recognises that the process of rearing chicks to broilers would fall within the definition of manufacture, is not apposite in the present context of two products having bitumen as its core content and being put to similar use. 31. The next decision brought by the State pertained to the distinction between spices and masala powder. In the judgment reported at (2007) 6 SCC 365 (A. P. Products v. State of Andhra Pradesh) it was observed that spices lose their original identity in masala powder being made out of them and masala powder had to be seen as a different commercial commodity. On the principle recognised in Osnar Chemical, the judgment in A. P. Products is distinguishable since the original spices used for producing masala powder lose their identity and character. Paragraph 27 of the report, however, noticed that sales tax law is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ident from the expressions used in the schedules regarding the rates of tax. However, in this case, since the only relatable entry is bitumen, there is scarcely any scope to ascertain any intention from the expressions used in the relevant schedules to arrive at the conclusion that bitumen emulsion is not relatable to bitumen despite it being used for substantially the same purpose. 35. The State has also placed an extract from paragraph 2.2 of "A white Paper on State-level Value Added Tax" presented by an empowered committee of State finance ministers in 2005. The concept of value added tax and the setting off of input tax credit referred to in the extract, does not throw any light on the issue that has arisen here. 36. There is certainly a distinction between the end products of a process that can be regarded as manufacture under excise laws and under sales tax or VAT laws. In excise law the tax is on the manufacture; in sales tax and VAT law, it is the sale or transfer of the property in the goods by one to another which is taxed. What is relevant for the present assessment is not so much as to whether bitumen undergoes a change in it being processed to manufacture bitumen emu....