Tipco Industries Ltd. And Anr. vs The Commissioner, Municipal ...
2002 Latest Caselaw 870 Del

JUDGMENT

C.K. Mahajan, J.

1. By way of this petition, petitioner seeks restraint order against the respondents from levying the Octroi duty on the petitioner's product Phenolic Resins, for declaration that the product of the petitioner does not fall within the purview of the entry and the schedule, directions to the respondents to refund a sum of Rs. 1,68,850.62 or any other amount recovered by them from the petitioners between 1963 to 1978 and for restraining the respondents from recovering any octroi duty on the products of the petitioners entering into the State of Delhi and to permit the product of the petitioners to be brought in the State of Delhi without payment of octroi duty.

2. Petitioner is manufacturing "Tipcolite" Phenol Formalidehyde Resins/Compounds (hereinafter referred to as "Phenolic Resins"). The product is used in manufacture of electrical appliances, domestic wiring and electric wiring accessories and auto parts etc. The products are manufactured at Bombay and sold and exported to various parts of India. By virtue of Section 178 of the Delhi Municipal Corporation Act (hereinafter referred to as the "DMC Act"), Corporation is empowered to levy octroi on good entering into the territory of Delhi as per prescribed rate schedule consisting of different classes of goods. Item 19 of Caption IX relating to Misc. Classification reads as under :-

"19. Rubber goods including Rubber gloves and "Bakelite goods" Rate 2.89 Rupees per quintal of gross weight except where otherwise stated w.e.f. 1.2.78".

3. Product of the petitioner does not fall within the entry either rubber goods or "bakelite goods". Petitioners have committed mistake in paying octroi and the respondents have been levying octroi duty at Rs. 2.89 per quintal since the year 1969. In June, 1978, petitioner came to know that no octroi is chargeable in respect of petitioner's product because there has been no entry or item which attracts octroi duty. The product of the petitioner is neither "Bakelite" nor "Bakelite goods" or even "Goods" within the meaning of the entry and the list.

4. The word "Bakelite" is a registered trademark of a manufacturer Bakelite Xylonite Ltd., a firm of manufacturers in U.K. The word "Bakelite" by itself is not the name of any product as such but is a tradename. The products of the petitioners are not Bakelite and do not bring into existence any Bakelite. Petitioner's product is not goods as they are dimensional, constituting any form of length, breadth and height and in order that the "goods" may come into existence it has to be moulded in shape or form by application of various processes of heat and pressure to give it a definite dimensional form. Once moulded form is brought into existence, the product loses its particular non-dimensional character and cannot at all revert to its own being. Bakelite goods means goods made from Bakelite and octroi is not attracted on its raw material whether the said raw material is Bakelite or not. "Bakelite goods" is the ultimate thing that comes into existence out of Bakelite. If the Legislature wanted to levy octroi on Bakelite, then there was no need for the legislature to use the term "Bakelite goods". Petitioner's product is Bakelite and not "Bakelite goods" and therefore does not fall within the entry for levying of octroi.

5. Petitioner through their lawyer called upon the respondent to desist from levying the octroi duty but the respondents have not paid any heed thereto. Petitioner have paid a sum of Rs. 1,78,850.62 by way of octroi duty between the period January 1963 to 22.10.1978 which they are entitled to get refund of.

6. In its counter affidavit, various objections have been raised by the respondent, inter alia, that the petitioner has not availed the remedy of appeal provided under the rules. If the petitioner is aggrieved by the assessment of terminal tax, he is entitled to file an appeal under Rule 36 of the Rules. Thus the petitioner's claim for refund is time barred. Assessment is made in respect of any consignment of goods brought into Delhi under the relevant entries of the Schedule to the DMC Act. The Act does not levy octroi but terminal tax. All goods of any description are subject to tax according to the rates prescribed. The goods of the petitioners are liable to tax under the Act. The rate of tax depends on the character of goods which the petitioners import.

7. Bakelite, which was originally a trademark, has now become a generic name for a particular product. The term "Bakelite" has been used in the commercial sense in the entry in the Schedule and not in the sense Bakelite manufactured by a particular company. The Legislature has classified the Bakelite goods as rubber goods. Bakelite goods means any goods containing Bakelite or its components.

8. I have heard learned counsel for the parties and perused the documents on record.

9. Learned counsel for the petitioner contends that its product being Phenol Formalidehyde Resins/Compounds is a synthetic product of reaction between Phenol and Formalidehyde processed with fillers, hardners, Plasticizers etc. Resins is a solid or a semi solid complex amorphous mixture of organic substances having no definite melting point and showing no tendency to crystalise. The product is composed of Phenol and Formalidehyde in a given proportion. Whereas "Bakelite goods" are goods made from Bakelite and octroi is not attracted on its raw material, whether the raw material is bakelite or not.

10. Learned counsel for the petitioner has placed reliance on a judgment of Bombay High Court reported as Industrial Plastic Corporation Pvt. Ltd. and Ors. v. Union of india and Anr. 1983 E.L.T. 425 (Bom) in support of the contention that phenolic resin cannot be termed as a plastic material. The phenolic resin is a result of phenol and Phenol Formaldehyde being reacted with one another. Mere modification of pure resin does not necessary lead to a product which ceases to have the characteristics of resin. The Court, in the aforesaid matter, was considering the question of exemption from payment of excise duty as provided by the notification dated June 1, 1971. It was also held that "mere powder has no shape, therefore, as long as powder is not used to form an article of shape, phenolic moulding powder cannot be termed as plastic material". The court quoted the observations of the book of Modern Plastics by Harry Barron as under :-

"often it is the plasticisers rather than the resin components which become the determining factor in the availability of the final plastic. Another controlling factor is the equipment required to manufacture the various items.

When these (resins) are mixed with modifying agents such as plasticisers, fillers, or the like, the resulting product is usually called a plastic material after it is formed to shape.

The term 'plastic material' is usually reserved for the end product of the process, even though there may only be a plastic intermediate stage."

11. In the present case, we are concerned with the levy of duty on Phenolic Resin and Compounds. The term "bakelite goods" does not cover the commodity and accordingly the products of the petitioner are not covered in the entry 19 of the Schedule. Bakelite has been classified as "rubber goods". The expression "phenolic resin' means and includes Chemically phenolic resin. The expression "plastic" is generally broader than the expression "resin". Accordingly, the petitioner's product would fall in the category of "Chemicals" and not "bakelite goods". The basic component of phenolic resin by addition of other materials like plasticizers, filler, wood, etc. would change and the end product ceased to be the phenolic reason but becomes a plastic material. The intention of the legislature was not to include resin for the purposes of terminal tax but for a product when it ceases to become phenolic resin and becomes a plastic material. The submissions of the petitioner are supported by a passage at a page 676 of the Condensed Chemical Dictionary by Aurther R. Ross. The relevant portion reads as under :-

"Thus, the properties of the resins depend largely on the starting materials and processing conditions used. The properties are further modified by the addition of fillers, plasticizers, and other monomers of polymers."

12. Another extract of the compilation from the book "Plastics Technology" by Robert v. Milby, at page 32, reads as under:-

"A pure phenolic resin is rarely moulded without modification to overcome limitations imposed by the moulding process and end use requirements.

Without alternation, phenolic resins are brittle and have high shrinkage caused by polymerization and elimination of water dimensions are difficult to control and parts stick badly to hot mould surfaces, making ejection difficult in order to overcome these problems, resin manufacturers resort to the use of additives to produce a compound".

13. It is thus apparent that when ingredients are mixed with phenolic resin, it makes it more useful. It ceases to be phenolic resin and the end product becomes a plastic material. What was sought to be taxed was the plastic material.

14. In the aforesaid circumstances, the levy of terminal tax on the product of the petitioner under Item 19 is bad. The petitioner claims that they are liable to pay tax under Item 31 in the category "all other articles not chargeable under any other clause". As long as phenolic powder is not used to form an article of shape, it cannot be termed as a plastic material.

15. Accordingly, following the decision of Bombay High Court in Industrial Plastic Corporation (supra), the petition is allowed. The matter is remanded back to the respondents for determining as to under which head would the petitioner's products fall. The claim of the petitioner for excess duty paid should be computed and the excess amount received should be refunded to the petitioner within six weeks.