By TIOL News Service

BANGALORE, JAN 29, 2016: THE issue is - Whether relevance placed on Central Excise notification could be considered as the basis to conclude that Rubber Process Oil could be classified as a petroleum product falling under 'Tar and others'. NO is the answer.

Facts of the case

The assessee is a Company engaged in the manufacture and sale of automotive tubes and other rubber products at its factory in Mysore. It was a registered dealer under the provisions of the KVAT Act and also under the Karnataka Tax on Entry of Goods Act, 1979. The returns filed by assessee were verified the statement of accounts produced and concluded the re-assessment under Section 6(1) of the KTEG Act in respect of the year 2009-10 by considering that Rubber Process Oil of the value of Rs.2,86,59,985/- as being liable to entry tax at 5%. Similarly, in respect of the year 2010-11, assessment was concluded u/s 5(4) of the KTEG Act and levied entry tax at 5% on the value of Rubber Process Oil of Rs.2,80,60,569/-. The assistant commissioner of commercial tax, according to the assessee, had without any independent application of mind, merely referred to and relied upon the clarification issued by the commissioner to the effect that Rubber Process Oil, which was used as a lubricating agent in the manufacture of rubber products was liable to entry tax at 5% under notification No.FD 11 CET 2002(I) dated 30.03.2002. The Asst. commissioner also levied and demanded interest.

Held that,

++ a Division Bench of HC in Carl Bechem Lubricants (India) Pvt. Ltd., v. The State of Karnataka, TAET No.7/2011 decided on 17.04.2013, while dealing with a similar situation when 'IPOL Cylinder Oil 1200' was sought to be treated as a petroleum product with reference to the notification issued under the Central Excise Tariff, has opined that the classification under the Central Excise Act would have no application under the KTEG Act. By the same token of reasoning, it could straightaway be said that the relevance placed on the notification issued under the Central Excise Tariff could not be the basis to conclude that the Rubber Process Oil could be classified as a petroleum product falling under "Tar and others". The other significant circumstance in coming to a conclusion that the classification made is apparently off the mark and without basis are the opinions furnished by two bodies, namely, Indian Rubber Institute and Indian Oil Corporation Limited. Given these opinions and juxtaposed with the reasoning that has been adopted by the Commissioner of Commercial Taxes in arriving at a conclusion that the Rubber Process Oil could be treated as a "Petroleum Product" falling under the classification of "Tar and others" cannot be readily accepted. The clarification is held to be bad in law and shall not bind the petitioner. Accordingly, the petitions are allowed. The impugned Annexures 'A' and 'A1' stand quashed to the extent of levy of tax and the interest on Rubber Process Oil on the basis that it could be classified under 'Tar and other products' being a petroleum product. Consequently, Annexure 'B' clarification also stands quashed. It is open for the authorities to reconsider the matter and proceed in accordance with law.

(See 2016-TIOL-163-HC-KAR-VAT)