- (1.) S. L. SARAF, J. The petitioner has raised, inter alia, two questions before this Court : 1. Whether the Tribunal was justified in law in holding that water methonol mixture (W. M. M.) is covered under the entry of methyl alcohol taxable at the rate of 26 per cent and not as unclassified goods ?
(2.) WHETHER the Tribunal was justified in law in holding that water methonol mixture is not commercially a different commodity than methyl alcohol ? 2. The case of the petitioner is that the petitioner purchases methyl alcohol from different distilleries and also from the open market and dilute the same by adding water in an exact proportion, i. e. , 43. 8 volumes of methonol and 56. 2 volumes of distilled water at a temperature of 16. 60' F and 10. 0' C or alternatively, a minimum of 36 per cent and a maximum of 38 per cent by weight of methonol in water. According to the petitioner, the said mixture of methonol and water is used for specific purpose for taking off of the aeroplanes. Such water is tested in laboratory for strict adherence to quality and proportion thereof at a particular temperature. By the said process a new product comes into existence which is used only for aviation purposes. The said product augments power in aeroplane, at the time of taking off of the aeroplanes and as such, the said item should be treated as an unclassified item under the U. P. Trade Tax Act, 1948 and should not be taxed as methyl alcohol under the said Act. The Standing Counsel appearing for the department argued that methyl alcohol has so many use and one of the use of methyl alcohol by adding water is for the aviation purposes. No new process for manufacture takes place by addition of water to methyl alcohol. It only dilutes the strength of methyl alcohol and nothing else. Mr. Bharat Ji Agrawal in support of his arguments asserted that addition of water in exact proportion and testing in laboratory is a process of manufacture within the meaning of section 2 (e-1) of the U. P. Trade Tax Act. He submits that mixing with distilled water in certain proportion and the use of the same for specific purpose, i. e. , for augmentation of power in aeroplane engines for the purposes of take-off is a new product and the said product cannot be used for any other purposes. It is not methyl alcohol that produces extra power for aeroplanes. It is the mixture of methyl alcohol and water in distinct proportion at a specific temperature which produces extra power. Thus it is a new product. In support of his argument Sri Agrawal placed before me a decision of the Bombay High Court in the case of Commissioner of Sales Tax v. Indian Oil Corporation Ltd. [1978] 41 STC 471, wherein the Bombay High Court has been pleased to hold that methonol mixed with distilled water in certain proportion, tested in the laboratory and sold it for specific purpose of using it as a power augmentation to it mainly in aeroplane engines for the purposes of take-off brings into existence a new product commercially and that should be considered manufacturing, of a new product.
(3.) MR. Bharat Ji Agrawal cited another decision in the case of Commissioner of Sales Tax v. Chandausi Chemicals, Moradabad 1984 UPTC 1278 where the distilled water used in injection is considered to be a new product and not water simpliciter. I have considered the submissions of the revisionist and the respondent carefully. The Bombay decision (Commissioner of Sales Tax v. Indian Oil Corporation [1978] 41 STC 471) cited by Mr. Bharat Ji Agrawal fully covers the facts of the present case. In Bombay decision it has been held that by mixing the water in exact proportion for use of aviation purposes methyl alcohol undergoes the change and a new product comes into existence. A new commercial commodity is brought into existence and the mixing of methonol with distilled water carried out by the petitioner does amount to manufacture within the meaning of clause (17) of section 2 of the Act. In the present case, the definition of word "manufacture" is equally wide and include processing and treatment. In the instant case methyl alcohol is being processed and treated for manufacturing of a new product. The petitioner purchases methyl alcohol and adds distilled water at a particular temperature in a particular proportion. It uses the mixture for aviation purposes. There is no use for the said mixture for any other purpose. It augments energy/power in an aeroplane for take-off. Thus, the said mixture is considered a new product and commercially, a new product comes into existence for a specific purpose. It has been held by several decisions of the Supreme Court that rectified or denatured spirit of more than a particular strength is meant for industrial purposes. Rectified or denatured spirit is unfit for use in manufacture of Indian-made foreign liquor though by diluting the same by mixing water it becomes a country liquor and a different commodity. The same is exigible to tax under the State law whereas the rectified spirit is taxable under the Central Act [air 1997 SC 1208 (Bihar Distillery v. Union of India)]. The nature character and use of a particular item is changed by mixing the same with water and a new product is born. The same cannot be said to be the same old undiluted product. Dilution of product makes it altogether different. As such taxable liability of the petitioner's product will fall under the heading as "unclassified item" and not under the heading of "methyl alcohol".;