COMMISSIONER OF COMMERCIAL TAX U.P. vs. M/S A.R. THERMOSETS (PVT.) LTD

C.A. No.-002650-002650 - 2016Supreme Court06 September 2016Bench: DIPAK MISRA PRAFULLA C. PANT23 pages
For Petitioner: RAVI PRAKASH MEHROTRA
AI SummaryDismissed

What were the facts?

The respondent, M/s. A.R. Thermosets (Pvt.) Ltd., sought clarification on the tax rate for bitumen emulsion. The Commissioner of Commercial Taxes, U.P., classified it as an unclassified commodity taxable at 12.5% under the residuary entry. The assessee appealed to the Tribunal, arguing that bitumen emulsion is essentially bitumen, taxed at 4% under Serial No. 22, Part A of Schedule II of the VAT Act. They presented technical reports and relied on case law to support their claim that bitumen and bitumen emulsion are commercially the same. The Tribunal dismissed the appeal. The assessee then filed a revision with the High Court, which allowed the revision, setting aside the lower authorities' orders.

What did the Supreme Court hold?

The Supreme Court held that bitumen and bitumen emulsion are the same commodity for the purpose of classification under the VAT Act. The High Court's view was found to be flawless. The Court reasoned that while the process of emulsification makes bitumen easier to use, it does not fundamentally change its composition, commercial character, or identity. Both are used in road construction, satisfying the 'end use test'. The Court applied the 'composition test', 'commercial or common parlance test', and 'end use test'. The distinction between 'manufacture' under the Excise Act and classification under the Sales Tax/VAT Act was noted, with the latter being the relevant consideration. The Court found no fallacy in treating bitumen emulsion as a form of bitumen, and it should not be excluded from the specific entry (Entry 22) to be taxed under the residuary entry. The appeal was dismissed, upholding the High Court's decision.

What were the issues?

1. Whether bitumen and bitumen emulsion are the same commodity for the purpose of interpreting Entry No. 22, Schedule II, Part A of the U.P. Value Added Tax Act, 2002, as originally enacted, up to the enforcement of notification no. 2758 dated 29.9.2008? (Question of law and fact) Assessee's contentions: - Bitumen is taxed at 4% under Entry 22, Part A of Schedule II. Bitumen emulsion is a liquid form of bitumen, commonly understood as bitumen in the commercial world with the same end use. - Technical reports support the view that there is no difference between bitumen and bitumen emulsion. - Relied on CST v. Ashok Grah Udyog Kendra Private Ltd., CST v. Bechu Ram Kishori Lal, and M/s Indodan Milk Products v. Commissioner Sales Tax. - Ambiguity in taxing statutes should be resolved in favour of the assessee, and resort to the residuary entry is a last measure. - The activity of mixing water with bitumen does not amount to manufacture under Section 2(t) of the VAT Act, and this question is irrelevant to the classification issue. Revenue's contentions: - The High Court erred in opining that bitumen in its emulsified form remains bitumen. - The process of conversion constitutes manufacturing under Section 2(t) of the VAT Act. - The decision in Commissioner of Central Excise, Bangalore v. Osnar Chemical Private Limited is not applicable as it pertains to the Central Excise Act, 1944, not the VAT Act. - Relied on Sonebhadra Fuels v. Commissioner, Trade Tax, U.P., Lucknow and N. Eswari v. K. Swarajya Lakshmi. - The intention of the legislature is to tax bitumen at a specific rate, and the court should not enlarge the scope of the statute. - The lower authorities' view was neither perverse nor arbitrary, and the High Court should not have interfered in its revisional jurisdiction.

Which sections of the Income-tax Act were involved?

Section 11,Section 81,Section 58,Section 59,Section 2(t),Section 3A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
Page 1 JUDGMENT Reportable IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.2650 OF 2016 [Arising out of SLP(C) No. 22191 OF 2013] Commissioner of Commercial Tax, U.P. ... Appellant Versus M/s. A.R. Thermosets (Pvt.) Ltd. ... Respondent

J U D G M E N T Dipak Misra, J.

In this appeal, by special leave, the Revenue has called in question the legal sustainability of the judgment and order passed by the High Court of Judicature at Allahabad in Commercial Tax Revision no. 1156 of 2009 preferred by the assessee-respondent under Section 11 of the U.P. Trade Tax Act, 1948 (for brevity, ‘the 1948 Act’) read with Sections 81 and 58 of the VAT Act, 2008 (for short, ‘the VAT Act’)

Page 2 JUDGMENT 2 whereby the learned Single Judge has allowed the revision negativing the stand put forth in opposition by the State to the stance highlighted by the assessee.

2.

The facts on which the controversy rests is in a narrow compass. The respondent manufactures “bitumen emulsion”. It filed an application before the Commissioner, Commercial Taxes, Lucknow, U.P. under Section 59 of the VAT Act seeking a clarification about the rate of tax ap

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 11

All 7,109 judgments and leading authorities on Section 11 →

Recent GST High Court judgments

Search GST case law →