TMI Blog2016 (5) TMI 1038X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be founded on a negative test: whether the goods are more non-relatable than relatable to the entry on a reasonable application of the three criteria, before they are parked under the residuary entry. There can be no mathematical formula for such an exercise, but there must be a pronounced doubtful co-relation between the goods in question and the specified entry on all three counts before such goods can be banished to the residuary entry, irrespective of whether the residuary entry carries a higher or lower rate of tax. A further consideration would be that since an indirect tax as sales tax is passed on to the consumers, whether a dealer should be penalised and made to pay the tax by upsetting an interpretation that has been accepted for a few years. If such are the tests, bitumen emulsion would pass muster to find itself in the company of bitumen in Entry 14 in Part-I of Schedule C to the Act of 2003. therefore, the bitumen emulsion is more relatable to the entry covered by bitumen rather than the residuary entry in Schedule CA to the Act. - Petition disposed of - WP 2905 (W) of 2016, WP 324 of 2016 With WP 1163 of 2015 With WP 325 of 2016 WP, 403 of 2016, WP 404 of 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trend of the submission made on behalf of the parties that there are, at present, four variants of bitumen products used for the same or similar purposes with very little commercial difference: bitumen in its original form, PMB, CRMB and bitumen emulsion. There is a bit of a history to the matter that requires to be noticed. A legal issue has raged for sometime as to whether PMB, CRMB and bitumen emulsion are distinct from bitumen and should be regarded as products of different manufacture and separate commercial commodities excigable to further excise duty upon bitumen being refined to obtain such products. As far as PMB and CRMB are concerned, the matter has been laid to rest by a judgment reported at (2012) 2 SCC 282 (Commissioner of Central Excise, Bangalore-II v. Osnar Chemical Private Limited). In the context of PMB and CRMB, the Supreme Court held that the process of mixing polymers and additives with bitumen does not amount to manufacture . The Supreme Court observed that the process involved merely resulted in the improvement of quality of bitumen and there was no change in the characteristics or identity of bitumen resulting in the transformation of bitumen into a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to explain the process of making the other varieties of bitumen, particularly bitumen emulsion. The petitioners claim that though the process of preparing the product can be loosely called as manufacture, unless the product is commercially and otherwise substantially different from the product which is identified by name in the relevant schedule, the related product should be regarded as the product named in the schedule and not treated as an unspecified product not relatable to the product specified in the relevant entry. The petitioners also refer to the views expressed, whether in the context of entry tax or VAT by Tribunals and courts in other States. 9. The petitioners submit that the classification of goods for the purpose of determining the tax chargeable thereon has to be based on the relatability of the product to the named entry and if the department intends to classify the goods under a different heading or sub-heading from that claimed by the assessee, it is for the department to adduce evidence and discharge the burden of proof. In such context, the petitioners first refer to a Supreme Court judgment reported at (1960) 11 STC 827 (Tungabhadra Industries Limited v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral terms or without any limitation or restriction, its scope should be regarded as wide enough to include all varieties and variants. They rely on a Supreme Court judgment reported at 2005 (140) STC 17 (State of Maharashtra v. Bradma of India Limited) where it was observed that resort has to be had to the residuary heading only when a liberal construction by the specific heading cannot cover the goods in question. The petitioners also refer to the principle that when there is a conflict between two entries, one leading to the opinion that it comes within the purview of the tariff entry should be preferred over the other opinion that brings it under the residuary entry. Another Supreme Court judgment reported at 2008 (225) ELT 321 (Mauri Yeast India Private Limited v. State of UP) has also been pressed into service in support of such proposition. 14. The petitioners exhort that in a taxing statute words of everyday use must be construed as in common parlance, and not from any technical or scientific point of view. They insist that when a word has a scientific or technical meaning, and also an ordinary meaning as per common parlance, it is the latter sense that the taxing statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture, will not change the nature of the product under the sales tax or value added tax laws, though it could be regarded as an entirely different product after undergoing a process of manufacture under excise laws. The petitioners maintain that when any product is relatable to any entry in a schedule under a sales tax or valued added tax statute, merely because the product is in a refined form than the product reflected in the entry, such refined product cannot be regarded as unrelatable to the entry as long as, even after its refinement, the product is commercially similar to the product named in the entry and is substantially used for like purposes as the original product. 18. The petitioners have placed several entries from the schedules to the Act of 2003, including tea. The petitioners suggest that since the many variants of tea have not been differently classified in the schedules to the said Act, all forms of tea will be covered by the single entry, irrespective whether such tea is green tea or organic tea or herbal tea or the like. Similarly, the petitioners seek to demonstrate that in several cases a distinction has been made in the schedules to the said Act between sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Use of cold mix technology in construction and maintenance of road using bitumen emulsion , which is included in the compilation submitted by IOC on bitumen emulsion. The State says that it is evident from the literature and the structure of bitumen emulsion described therein that products bitumen and bitumen emulsion are quite distinct. Paragraph 2.3 of the document records as follows: 2.3 Production of Bitumen Emulsion Most of the bitumen emulsions are manufactured by continuous process using a colloid mill, which consists of a high-speed rotor revolving at 1000 to 6000 revolutions/minute in a stator. Hot bitumen and emulsifier solutions are fed separately but simultaneously into the colloid mill. The temperature of two components is critical to the emulsification process. The viscosity of bitumen entering into colloid mill should not exceed 0.2 Pa-s (2 Poise). If a harder grade bitumen or modified bitumen is used, the emulsification process becomes more difficult. Higher temperature is needed to allow bitumen to be pumped into and disperse in the colloidal mill; dispersion of bitumen requires more power input to the mill, which further increases the production temperatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has placed paragraph 5(viii) from its affidavit in WP 1163 of 2015 to suggest that the distinction between bitumen and bitumen emulsion requires a more profound understanding of science and chemistry than available in course of an adjudication under Article 226 of the Constitution. The underlying submission is that matters of such kind are best left to experts and an expert opinion should scarcely be tinkered with in this extraordinary jurisdiction unless found to be patently absurd. Paragraph 5(viii) from the said affidavit reads as follows: In any view of the matter the question whether Bitumen Emulsion is a separate commercial commodity if and when compared to Bitumen and whether the process of conversion from Bitumen to Bitumen Emulsion amounts to manufacture, requires a fact finding enquiry. 25. The State first relies on a judgment reported at (1977) 39 STC 378 (State of West Bengal v. Washi Ahmed) where a view taken by this court was affirmed by the Supreme Court on the ground that the description of an entry in a schedule to a Sales Tax Act must be construed and understood as in common parlance and its popular sense meaning. Green ginger in that case was regarded as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) held that the conversion of bitumen into bitumen emulsion was a process of manufacture. In the same vein, the State refers to a judgment of the Madhya Pradesh High Court reported at (2010) 27 VST 67 (Tiki Enterprises v. Commissioner of Commercial Tax) where it was held that upon bitumen being treated with emulsifiers, a new product comes into existence. 28. A judgment reported at (1981) 1 SCC 653 (Chowgule and Company Private Limited v. Union of India) has been placed by the State where the issue was whether the blending of ores resulted in a different product being produced. The Supreme Court laid down certain principles as to what would amount to processing . The State relies more on the judgment for it disagreeing with a view of the Bombay High Court that the blending of different brands of tea could not be regarded as processing of tea. However, the issue in the present case is whether the nature of the product bitumen has been so changed in its conversion to bitumen emulsion that the resultant product would not be relatable to the entry covered by bitumen. 29. The next case cited by the State is report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oal briquettes and coal dust were different commodities in substance and in their characteristics and the finding of fact rendered by the tribunal could not be interfered with. There is no finding of fact rendered by the Commissioner of Sales Tax in the opinion of January 6, 2012 except that bitumen emulsion may be used in special circumstances where cold application of bitumen is desirable. The Commissioner also referred to the Central Excise tariff schedules were bitumen and bituminous mixtures were differently classified. Though the Commissioner emphasised that bitumen emulsion was a separate commercial product and distinct from bitumen, such opinion was not based on any scientific study or fact-finding exercise. 33. The State has relied on a judgment reported at (1990) 4 SCC 51 (Laminated Packings (P) Limited v. Collector of Central Excise) where laminated kraft paper was found to be distinct from kraft paper. However, that judgment pertained to an excise issue and may not be relevant in the present context. Similarly, the judgment reported at (1991) Supp (2) SCC 348 (Union of India v. Babubhai Nylchand Mehta) dealing with coated or waterproof kraft paper and ordinary kraft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct entries for the two products. The limited question, in the context of a separate entry for bitumen emulsion or other bituminous products not being created by the State, is whether bitumen emulsion is relatable to bitumen in the existing scheme apparent from the schedules to the Act of 2003. For such limited purpose, which may not hold if a distinct classification were to be introduced, the relevant considerations pertain to the commercial natures of the two goods and their uses. It may also be pertinent in the context to appreciate that the judgment in Osnar Chemical was rendered in the context of the Excise Act. CRMB and PMB were found relatable to petroleum bitumen under the relevant tariff item and the mixing of polymer and additives with bitumen was not found to be a process of manufacture that changed the identity or characteristics of bitumen. The process was found to only improve the grade or quality of bitumen. The same analogy may not apply to bitumen emulsion, but bitumen emulsion would, nonetheless, for its use and commercial identity, be relatable to bitumen. 38. The principle, while matching goods against the entries in schedules under the sales tax and VAT laws, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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