Karnataka High Court
Ennar Refineries vs Assistant Commissioner Of Commercial ... on 21 February, 1992
Equivalent citations: ILR1992KAR2779
JUDGMENT S. Rajendra Babu, J.
1. The petitioner being aggrieved by a clarification issued by the Commissioner of Commercial Taxes stating that the groundnut oil brought into a local area for refining is taxable under entry 16B up to March 31, 1987, has approached this Court. Pursuant to this clarification, in the course of the assessment, a pre-assessment notice is issued to the petitioner relying upon the aforesaid clarification.
2. Though normally this Court could not have interfered with a pre-assessment notice issued, but relegated the parties to work out their remedies as provided under the statute inasmuch as the assessing authority is bound by the circular issued by the Commissioner, it becomes necessary to examine the validity of the circular.
3. The stand of the authorities that conversion of raw groundnut oil into refined groundnut oil involves the process of manufacture as contemplated under entry 16B of the Karnataka Tax on Entry of Goods into Local Areas, for Consumption, Use or Sale Therein Act, 1979 (hereinafter referred to as "the Act") is plainly untenable in the light of the decisions of the Supreme Court. In Tungabhadra Industries Ltd. v. Commercial Tax Officer precisely the question as to whether the oil subjected to certain process like hydrogenation continues to be oil, arose for consideration and the Supreme Court held that it does not give rise to new commodity at all and therefore tax was not attracted to that particular goods. The contention advanced on behalf of the assessee in that case is that the hydrogenated groundnut oil was no less groundnut oil than either refined or unrefined oil and the fact that the quality of the oil had been improved does not negative its continuing to be oil and the materials before the departmental authorities and the court established that it continued to be oil and was nothing more, was upheld. The decision in this case is that when raw groundnut oil is converted into refined oil, it involves a process, but the processing consists merely in removing from raw groundnut oil that constituent part of the raw oil which is not really oil. The elements removed in the refining process consist of free fatty acids, phosphotides and unsaponifiable matter. After the removal of this non-oleic matter therefore the oil continues to be groundnut oil and nothing more. The matter removed from the raw groundnut oil not being oil cannot be used, after separation, as oil or for any purpose for which oil could be used. In other words, the processing consists of the non-oily content of the raw oil being separated and removed, rendering the oily content of the oil 100 per cent. Thus, it falls within the scope of the decision that the quality of the oil had been improved and therefore it does not negative its continuing to be oil. In refining the same, purification process is involved and nothing more.
4. I think this contention raised on behalf of the petitioner has got to be accepted and this view is reiterated in Collector of Central Excise v. Jayant Oil Mills Pvt. Ltd. . Therefore, the clarification issued by the Commissioner at annexure B in so far as groundnut oil brought into local area for refining is taxable under entry 16B of the Schedule to the Act up to March 31, 1987 shall stand quashed. In the circumstance, it is open to the petitioner to file his objections to the proposition notice issued to him. If he has already filed objections, further objections may be filed as may be open to him in law and such objections shall be filed within one month from today. It is open to the respondents to complete the assessment as provided under law and in the light of the observations made above. Petition is allowed.
5. Rule made absolute accordingly.
6. Writ petition allowed.