Rajes Kumar, J.

1. These are two revisions one filed by the dealer and another filed by the Commissioner of Trade Tax, U.P., Lucknow against the order of the Tribunal dated 4.3.2002 for the assessment year 1996-97.

2. The dealer had purchased used/burnt mobil oil and after its refining sold the mobil oil. The process of refining mentioned in the Tribunals order is, that used oil were heated and mixed with sulphuric acid and phirfull by which the impurities were settled at the bottom and the oil became free from impurities. The claim of the dealer was that it had purchased used oil from unregistered dealer and the process of cleaning of such oil does not amount to manufacturing. Therefore, neither the purchases of used oil nor the sale of mobil oil was liable to tax. The assessing authority had levied the tax on the purchases of used oil under Section 3AAAA of theand levied the sales of mobil oil treating it as manufactured product.

3. Being aggrieved by the impugned order, the dealer filed appeal before the Deputy Commissioner (Appeals), Meerut. The Deputy Commissioner (Appeals), Meerut accepted the contention of the dealer in part. He has accepted that in cleaning no manufacturing process was involved and, accordingly, held that sale of mobil oil was not liable to tax but had confirmed the levy of tax on the purchases of used/burnt oil under Section 3AAAA of the.

4. Being aggrieved by the order of the Deputy Commissioner (Appeals), the dealer as well as the Commissioner of Trade Tax filed appeals before the Tribunal. The Tribunal by the impugned order upheld the view of the Deputy Commissioner (Appeals) in this regard.

5. Being aggrieved by the order of the Tribunal, the dealer filed Revision No. 161 of 2002 and the Commissioner of Trade Tax filed Revision No. 429 of 2002.

6. Heard Sri Manish Goyal, learned Counsel for the dealer and learned Standing Counsel.

7. Learned Counsel for the dealer submitted that the used oil was not old, discarded and obsolete goods. It was not outlived its utility as mobil oil. In the process of its use certain impurities have been mixed which have been simply removed by the process of cleaning. He submitted that the used oil has been simply heated and sulphuric acid and phirfull have been mixed by which the impurities settled down at the bottom which were separated. By this process characteristic of the oil has not been changed. Prior to refining, it was mobil oil and after the cleaning it was mobil oil and, therefore, no tax could be levied under Section 3AAAA of theas well as on the sale of the mobil oil because used mobil oil was purchased within the State of U.P. He further submitted that cleaning of used oil does not amount to manufacturing, inasmuch as no new commodity comes into being.

8. In support of the contention learned Counsel for the applicant relied upon the decisions of this Court in the case of CST v. Roopji and sons reported in 2003 STI-390, the decision of the Bombay High Court in the case of Commissioner of Sales Tax, Maharashtra State, Bombay v. Oil Processors Private Limited reported in 1998 108 STC 44, the decision of this Court in the case of The Commissioner, Trade Tax, U.P., Lucknow v. S/S Agrawal Oil Refinery Corporation, Kanpur reported in 2006 30 NTN 143 and a recent decision of the Apex Court in the case of Punjab Aromatics v. State of Kerala reported in : (2008) 11 Supreme Court Cases 482 [LQ/SC/2008/1041] .

9. Learned Standing Counsel submitted that the used oil was old, discarded, unserviceable and obsolete goods liable to tax at the point of sales to consumer under the Notification No. ST-II-5785-dated 7.9.1981. It was purchased from unregistered dealer without payment of tax. The process of cleaning of impurities amounts to manufacturing and, therefore, the purchases of old oil is liable to tax under Section 3AAAA of theand the sale of refined mobil oil was liable to tax being manufactured goods. In support of the contention he relied upon the decision of this Court in the case of Commissioner of Sales Tax v. S/S Industrial Lubricants reported in STI 1984 Allahabad High Court, 270.

10. Learned Counsel for the dealer submitted that the decision of this Court in the case of Commissioner of Sales Tax v. S/S Industrial Lubricants (Supra) does not apply to the present case. He submitted that none of the authorities have recorded any finding that the old/used oil outlived its utility. He submitted that the said decision is applicable only in case if the used oil outlived its utility. He submitted that the issue involved is squarely covered by the decision of this Court in the case of The Commissioner, Trade Tax, U.P., Lucknow v. S/S Agrawal Oil Refinery Corporation, Kanpur (Supra) in which the earlier decision of this Court in the case of Commissioner of Sales Tax v. S/S Industrial Lubricants (Supra) has been considered in detail.

11. Having heard learned Counsel for the parties, I have perused the impugned order and the order of the authorities below.

12. It is useful to refer Section 3AAAA of theas it existed at the relevant time and relevant notification No. ST-II-5785/X-10(1)-80-U.P. Act XV-48-Order-81 dated 7.9.1981:

Section 3-AAAA. Liability to tax on purchase of goods in certain circumstances- Subject to the provisions of Section -3, every dealer who purchases any goods liable to tax at the point of sale to consumer-

(a) from any registered dealer in circumstances in which no tax is payable by such registered dealer, shall be liable to pay tax on the purchase price of such goods at the same rate at which but for such circumstances, tax would have been payable on the sale of such goods;

(b) from any person other than a registered dealer whether or not tax is payable by such person, shall be liable to pay tax on the purchase price of such goods at the same rate which tax is payable on the sale of such goods:

Provided that no tax shall be leviable on the purchase price of such goods in the circumstances mentioned in Clauses (a) and (b), if -

(i) such goods purchased from a registered dealer have already been subjected to tax or may be subjected to tax under Section 3-AAA;

(ii) tax has already been paid in respect of such goods purchased from any person other than a registered dealer;

(iii) the purchasing dealer resells such goods within the State or in the course of inter-State trade or commerce or exports out of the territory of India, in the same form and condition in which he had purchased them;

(iv) Such goods are liable to be exempted under Section 4-A of the.

Explanation--For the purpose of this section and of Section 3-AAA the sale of -

(i) ginned cotton after ginning raw cotton purchased as aforesaid, or

(ii) dressed hides and skins or tanned leather after dressing or tanning raw hides and skins purchased as aforesaid, or

(iii) rice during the period commencing on September 2, 1976 and ending with April 30, 1977 after bulling paddy purchased as aforesaid, shall be deemed to be in the same form and condition.

Notification No. ST-II-5785/X-10(1)-80-U.P. Act XV-48-Order 81 dated 7.9.1981.

1. Old discarded- Old, discarded, unserviceable or obsolete machinery, stores or vehicles including waste products except cinder, coal ash and such items as are included in any other notification issued under the @ 8% sale to consumer.

2. All kinds of oil- Oils of all kinds, other than those covered by any other entry of this list or by any other notification issued under the. M or I 4%.

13. The facts are not in dispute, namely, that the dealer had purchased used mobil oil from unregistered dealer and by the process of cleaning, impurities had been removed and thereafter sold the cleaned mobil oil as mobil oil. In the process of cleaning old used mobil oil were heated in which sulphuric acid and furfil had been mixed by which the impurities settled down at the bottom which were removed. The question for consideration is whether the used mobil oil was not mobil oil and after cleaning there was any change in its character and some new commodity has been obtained or as a result of cleaning.

14. Similar question came up for consideration before this Court in the case of The Commissioner, Trade Tax, U.P., Lucknow v. S/S Agrawal Oil Refinery Corporation, Kanpur (Supra). This Court held as follows:

It is useful to refer the Notification No. ST-II-5785/X-10(1)-80-U.P. Act XV-48-Order-81 dated 7.9.1981.

Old, discarded, unserviceable or obsolete machinery, stores or vehicles including waste products except cinder, coal ash and such items as are included in any other notification issued under the @ 8% sale to consumer.

15. The aforesaid notification came up for consideration before Honble Supreme Court in the case of M/s Rainbow Steel Ltd., Meerut v. CST reported in 1981 UPTC 400. The Apex Court held as follows:

When the expression "Old" is by itself vague, imprecise and ambiguous being too general, the principle of Noscitur of socies will have to be applied i.e. all the associated words will taken colour from each other the meaning of the more general adjective viz "Old" have restricted to a sense analogous to the list general adjective discarded unserviceable or obsolete.

Or to fall within the expression that old machinery occurring in the entry, the machinery must be old machinery in the sense that it has become non functional or non usable.

16. Thus, if the used oil possess the characteristic of oil and is usable as an oil, it cannot be treated covered under the entry of "old, discarded or unserviceable.... In the case of CST v. M/s Roopji & Songs, Arvindpuri, Meerut reported in STI 2003 Allahabad High Court 390, used oil has been held as covered under the entry of "All kinds of oil... and not covered under the entry of "old, discarded, unserviceable...." This Court held as follows:

So far as used oil is concerned it is not the case of the revenue that the used oil lost its characteristic of oil. Used oil only contains some impurity, but has all characteristic of oil and remains as oil. Entry of All kinds of oil.... is a wider entry and includes all kinds of oil including used oil. Accordingly, Tribunal had rightly held barrel made of iron liable to tax under the entry of containers made of iron at the rate of 4% and used oil under the entry "Oils of all kind...at the rate of 4%".

In the case of CST v. Oil Processors Private Limited (supra), the question for consideration was whether the processing/conversion of used lubricating oil into usable lubricating oil by the process of refining amounts to manufacturing. The Division Bench of the Bombay High Court held that what has been obtained by the process of refining is lubricating oil from the used oil and the process does not amount to manufacturing. This decision is referred for limited purposes that the used lubricating oil and the refining lubricating oil both have been treated as lubricating oil which shows that the used lubricating oil had a characteristic oil.

In the case of Commissioner of Sales Tax v. S/S Industrial Lubricants (Supra) relied upon by the learned Standing Counsel, the item for consideration was that mobil oil which has already been used and which has outlived its utility as mobil oil. In that case, it has been held that such mobil oil which has outlived its utility as mobil oil does not retain the character of mobil oil, but it becomes old discarded or unserviceable. Thus, the case is distinguishable on the facts and is not applicable in the present case.

17. In Punjab Aromatics v. State of Kerala (Supra), the question for consideration was the levy of purchase tax on the red oil. The fact was that, there was a conversion of red oil to sandalwood oil. The question was whether the raw material was subsumed into final product. Whether there was consumption of used red oil (purchased oil) in the process of conversion to sandalwood oil. The Apex Court held as follows:

We find merit in this civil appeal filed by the assessee. At the outset, it may be stated that process of purification is not in dispute. The entire process of purification has been discussed by the Tribunal in its judgment. The said process eliminates impurities. In the present case we are required to consider the words "consumes such goods (red oil) in the manufacture of other goods for sale or otherwise (sandalwood oil)". These words find place in Section 5-A(1) of the 1963 Act.

When raw material is converted into a final product one of the important tests to be applied to ascertain whether the process of conversion amounts to manufacture is whether the raw mater is subsumed into the final product. In this case, the highest fact finding body is the Appellate Tribunal under the 1963 Act. After examining the process, it has come to the conclusion that sandalwood oil (final product) can be brought back to the original state, namely, red oil by adding impurities, therefore, the process is revisable. Therefore, red oil is not subsumed into sandalwood oil. Keeping in mind this basic test, it is clear that red oil is not consumed/used in the manufacture of sandalwood oil. Hence, Section 5-A(1)(a) or (b) of the 1963 Act has no application.

In Tungabhadra Industries Ltd. v. CTO the question which arose for determination was whether hydrogenated groundnut oil continues to be groundnut oil notwithstanding the hydrogenation process. It was held that hydrogenation process eliminated impurities and, therefore, in its essential nature there was no change amounting to manufacture. We quote hereinbelow relevant portion of the said judgment which reads as follows: (AIR p. 415, para 8)

8. ...When new groundnut oil is converted into refined oil, there is no doubt processing, but this 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 in the non-oily content of the oil 100 per cent. For this reason refined oil continues to be groundnut oil within the meaning of Rules 5 (1) (k) and 18(2) notwithstanding that such oil does not process the characteristic colour, or taste, odour, etc. of the raw groundnut oil.

18. The judgment of this Court in Tungabhadra Industries Ltd. has been considered once again by this Court in Shyam Oil Cake Ltd. v. CCE. We quote hereinbelow para 18 of the said judgment in Shyam Oil Cake Ltd. which reads as follows: (SCC p. 269)

18. Thus, this Court has held that prior to refining, it was raw groundnut oil and after refining even though the characteristic colour, taste and odour may have changed it remained groundnut oil. In other words, this Court held that there was no manufacture of a new and distinct commodity.

19. Section 5-A (1) (a) of the 1963 Act is similar to Section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act, 1959. That Section 7-A(1)(a) of the Tamil Nadu General Sales Tax Act , 1959 came for interpretation before the Madras High Court in State of T.N. v. Subbaraj and Co. in which it was held that the very use of the word "consume" contemplates that the goods purchased should have been devoured or exhausted in the process of manufacture with the result, its identity must have been completely lost.

20. The "test of irreversibility" is an important criterion to ascertain as to when a given process amounts to manufacture. In the present case that test is not satisfied. In the present case, the Tribunal has examined the process and has come to the conclusion that by adding impurities to the sandalwood oil the product could become red oil once again. In the circumstances, it cannot be said that red oil and sandalwood oil are two separate and distinct products as held by the High Court overruling the judgment of the Tribunal."

21. Relying upon the aforesaid principles laid down by the Apex Court, the process of cleaning did not amount to manufacturing. By the process of cleaning no new commercial commodity comes into being. The used mobil oil with impurities was not consumed in the process of manufacturing and a new product was not being emerged. The used mobil oil which was with impurities by the processing becomes free from impurities but mobil oil before cleaning and after cleaning remains mobil oil. There was no change in its form, nature and characteristic. The old mobil oil before cleaning and mobil oil after cleaning remained same and was covered under the entry of "All kind of oil including used oil" liable to tax @ 4% under the Notification No. Notification No. ST-II-5785/X-10(1)-80-U.P. Act XV-48-Order-81 dated 7.9.1981 at the point of manufacturer or importer, therefore, the provisions of Section 3AAAA of theprior to amendment in the 1998 was inapplicable. In this view of the matter, the provision of Section 3AAAA of thewas not applicable and since the mobil oil, which was obtained as a result of cleaning, was not a manufactured product, thus its sale was not liable to tax. The Tribunal has rightly held so.

22. In the result, T.T.R. No. 161 of 2002 filed by the dealer is allowed and T.T.R. No. 429 of 2002 filed by the Commissioner, Trade Tax, U.P. is dismissed.