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State of Gujarat Vs. Shah Veljibhai Motichand, Lunawada - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtGujarat High Court
Decided On
Case NumberSales Tax Reference No. 3 of 1996
Judge
Reported in[1969]23STC288(Guj)
ActsBombay Sales Tax Act, 1959 - Sections 5 and 14; Central Sales Tax Act, 1956 - Sections 14
AppellantState of Gujarat
RespondentShah Veljibhai Motichand, Lunawada
Appellant Advocate J.M. Thakore, Adv.-General and; H.V. Chhatrapati, Adv. i/b., Bhaishanker Kanga and Girdharlal
Respondent Advocate S.L. Mody, Adv.
Cases ReferredThe State of Madhya Bharat v. Hiralal
Excerpt:
sales tax - classification - entry 80 of schedule b and entry 15 of schedule b to bombay sales tax act, 1953, section 14 of central sales tax act, 1956 and sections 5 and 14 of bombay sales tax act, 1959 - whether sale of corrugated sheets covered by entry 80 or entry 15 - mere alteration of shape wholly immaterial - assessee sold iron in shape of corrugated sheets - corrugated sheets are iron in another shape - cannot be regarded as articles manufactured or fabricated out of iron - corrugated sheets fall within entry 15. - - it was assessed according to best judgment for the period from 1st april, 1956, to 31st march, 1957, by an order passed by the sales tax officer, godhra, on 30th june, 1962. the assessee appealed to the assistant commissioner of sales tax which was dismissed and.....mehta, j.1. the short question which has been referred to us is :- 'whether on the facts and in the circumstances of the case the sale of corrugated sheets by the opponent-firm was covered by entry 80 of schedule b or entry 15 of schedule b to the bombay sales tax act, 1953, prior to its amendment by bombay act 16 of 1957 ?' 2. the short facts which have given rise to this reference are :- the opponent-firm is a registered dealer dealing in iron and steel, gold and silver, vegetable ghee, corrugated iron sheets etc. it was assessed according to best judgment for the period from 1st april, 1956, to 31st march, 1957, by an order passed by the sales tax officer, godhra, on 30th june, 1962. the assessee appealed to the assistant commissioner of sales tax which was dismissed and its revision.....
Judgment:

Mehta, J.

1. The short question which has been referred to us is :-

'Whether on the facts and in the circumstances of the case the sale of corrugated sheets by the opponent-firm was covered by entry 80 of Schedule B or entry 15 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957 ?'

2. The short facts which have given rise to this reference are :-

The opponent-firm is a registered dealer dealing in iron and steel, gold and silver, vegetable ghee, corrugated iron sheets etc. It was assessed according to best judgment for the period from 1st April, 1956, to 31st March, 1957, by an order passed by the Sales Tax Officer, Godhra, on 30th June, 1962. The assessee appealed to the Assistant Commissioner of Sales Tax which was dismissed and its revision was only partially allowed by the Deputy Commissioner of Sales Tax. The Deputy Commissioner held that entry 15 of Schedule B relating to iron and steel only included primary products of the rolling mills which are not subjected to any process after rolling and, therefore, corrugated sheets were covered by entry 80 of Schedule B to the Act. In revision the Tribunal has however held that the corrugated sheets sold by the opponent would be 'iron and steel' within the meaning of entry 15 of Schedule B to the Act. The State has, therefore, required the Tribunal to make the aforesaid reference to this Court.

3. The relevant entry 15 at the relevant time was as under :- 'Iron and steel'. The said entry was subsequently amended to bring it in line with section 14 of the Central Sales Tax Act which declared 'iron and steel' as goods of special importance in inter-State trade or commerce. Under section 14 of the Central Sales Tax Act, 1956, the said entry is iron and steel, i.e.,

(a) pig iron and iron scrap.

(b) iron plates sold in the same form in which they are directly produced by the rolling mills.

(c) steel scrap, steel-ingots, still billets, steel bars and rods.

(d) (i) steel plates. (ii) steel sheets. Sold in the same form (iii) steel bars and till bars. in which they are directly (iv) rolled steel sections. produced by the rolling (v) tool alloy steel. mills.

4. The residuary entry 80 covers those items which did not fall under any specific item. Therefore, once a commodity in question would be covered under entry 15, there would be no question of residuary entry 80 being attracted. It is only if we hold that the commodity in question has ceased to be 'iron and steel' or is not 'iron and steel' that we can answer that it falls under the residuary entry 80 in this case.

5. The question before as relates to corrugated iron sheets. Corrugated only means wrinkled. It is still iron as it is only in wrinkled condition and the form which it has taken is the sheet form. Therefore, the corrugated iron sheets would be 'iron', which has been given a treatment of corrugation and which is in the form of sheets. The question before us is whether it can be said to be iron and steel within the meaning of entry 15. Entry 15 uses two words in close association, i.e., iron and steel. Steel is made from iron by processing it. On a plain literal construction, this entry must cover iron and steel in all its forms. So long as the commodity continues to retain the character of iron and steel and it is only when it is manufactured into a different finished product or fabricated into a different article that it would cease to fall under this entry. The question of interpretation of similar entries is now well settled. In Tungabhadra Industries Limited v. Commercial Tax Officer, ([1960] 11 S.T.C. 827.) the Supreme Court had to interpret the expression 'groundnut oil' within the meaning of rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, in the context of hydrogenated groundnut oil. It was contended that the hydrogenated oil was not 'groundnut oil'. At page 834 their Lordships pointed out that the physical state did not determine the identity of the commodity and so merely because Hydrogenated groundnut oil assumed a semi solid form, it did not cease to be groundnut oil. At page 835 their Lordships further pointed out that it was true that the change was both additive and inter-molecular and still it could hardly be said that rancid groundnut oil was not groundnut oil. It would undoubtedly be very bad groundnut oil but still it would be groundnut oil and if so it did not seem to accord with logic that when the quality of the oil was improved in that its resistance to the natural processes of deterioration through oxidation was increased, it should be held not to be oil. Thus, though the hydrogenated oil was refined groundnut oil after this process of hydrogenation, it was held that hydrogenated oil still continued to be groundnut oil notwithstanding the processing which was merely for the purposes of rendering the oil more stable, thus improving its keeping qualities for those who desire to consume groundnut oil. On a parity of reasoning, even if iron had been corrugated or put in there form of sheets it will still continue to be iron and shall corrugation or conversion into sheets to make it more acceptable to the customers would riot turn it into a different manufactured product of iron so lone as iron continues its essential character and the only change was one of corrugation or in shape, i.e., of sheets. In State of Gujarat v. Sakarwala Bros. ([1967] 19 S.T.C. 24 at page 28.) this Court had to deal with entry 47 of Schedule A to the Bombay Sales Tax Act, 1959, which was 'sugar in all its forms'. The Court hall to deal with patasa, harda and alchidana and to determine whether these commodities fell within the definition of 'sugar' in entry 47. At page 28 this Court followed the decision of the Assam High Court in Kapildeoram Baijnath Prosad v. J. K. Das and Others, ([1954] 5 S.T.C. 365.) where the question had arisen regarding chira and muri as to whether they could be said to be covered by tile words 'all cereals and pulses' including all forms of 'rice'. 'Muri' was parched, beaten rice, which involved the process of boiling paddy, its dehydration, frying and flattening. 'Muri' involved the process of soaking, boiling and dehydration of paddy and the removal of husks. As a result of these processes the article, rice, became edible and could the taken as food without any more cooking. Even the article, when so transformed, bore a different name and could not be commonly recognised as rice. Sarjoo Prosad, C.J., observed that those commodities could be regarded more as forms of rice than products thereof and were, there fore, exempt from tax under the Assam Sales Tax Act, 1947. Relying upon this decision, this Court held that the word 'form' would connote a visible aspect in which the thing existed or manifested itself. Sugar might manifest itself in the form of patasa as a result of certain simple processes being carried out. It might similarly manifest itself in the form of alchidana or small lumps of sugar or as harda. If sugar so manifests itself it could not be said that sugar had ceased to be sugar merely because it takes a particular shape or form which appeals to certain class of people on festive occasions. The ratio of this decision of this Court was approved by their Lordships of the Supreme Court at page 33 in the decision in State of Gujarat v. Sakarwala Bros., ([1967] 19 S.T.C. 24.) where their Lordships observed that the word 'sugar' in item No. 47 was intended to include within its ambit all forms of sugar, that is to say, anger of any shape or texture, colour or density and by whatever name it is called. It was held that the view of this High Court was correct. While referring to the decision in Tungabhadra Industries ([1960] 11 S.T.C. 827) at page 34 their Lordships pointed out that notwithstanding the processing which was merely for the purpose of rendering the oil more stable, to be groundnut oil two conditions had to be satisfied, that it must be from groundnut and it must be 'oil'. The hydrogenated oil was from groundnut and in its essential nature it remained an oil. It continued to be oil for use for the same purpose as groundnut oil which had not undergone the process, and the mere fact that hydrogenated oil was semi-solid did not alter its character as an oil. On a parity of reasoning when iron is corrugated to make it more acceptable to the customers or is put into the form of sheets, it still continues to retain the essential character of iron and we cannot hold that it would fall under the residuary entry 80 so long as it retained its essential character of 'iron'. We would also refer in this connection to the decision of the Supreme Court in State of Madhya Bharat v. Hiralal ([1966] 17 S.T.C. 313), where the question had arisen regarding scrap iron which was processed for convenience of sale. The raw materials were only re-rolled to give them attractive and acceptable forms. The question arose whether these bars, hats and plates sold were iron and steel exempted under the relevant notification. There was another entry, entry 39, relating to 'goods prepared from any metal other than gold and silver' and it, therefore, included goods prepared from iron. At page 315 their Lordships pointed on that a comparison of the said two notifications brought out the distinction between raw materials of iron and steel and the goods prepared from iron and steel; while the former is exempted from tax, the latter is taxed. Therefore, iron and steel used as raw materials for manufacturing other goods were held to be exempted from taxation. So long as iron and steel continue to be raw materials, they enjoy the exemption. Scrap iron purchased was merely re-rolled into bars, hats and plates and they were processed only for convenience of sale. The raw materials were only re-rolled to give them attractive and acceptable forms. They did not in the process lose their character as iron and steel. The dealer sold 'iron and steel' in the shape of bars, dots and plates and the customer purchased 'iron and steel' in that shape and, therefore, it was held that the bars, hats and plates sold by the assessee were iron and steel exempted under the notification. This decision would completely clinch the issue as it in terms held that mere alteration of the shape is wholly immaterial or even the processing which makes the article attractive and acceptable to the customers would not matter. The real test laid down by their Lordships is that so long as in any such processing the commodity does not lose the character as iron and steel, it must be held to be exempted. The learned Advocate-General vehemently relied upon the fact that their Lordships had in the earlier line made a distinction between raw materials of iron and steel and the goods prepared from iron and steel, and iron and steel was exempted from tax while the latter were taxed. That distinction was drawn by their Lordships on the facts of that case as their Lordships were dealing with the relevant entries where such distinction had to be spelt out. The test which their Lordships have relied is whether such processing, which is done to make the iron and steel attractive and acceptable to the customers by giving the shape of bars, flats and plates would make it lose the character of iron and steel. In fact relying on these conditions this very Division Bench in S.T.R. No. 19 of 1965 decided on 19th June, 1958, (Since reported as B. Das Laboratories v. The state of Gujarat [1968] 22 S.T.C. 160.) held that 'snuff' which was included in the definition of 'tobacco' in all its forms, manufactured or not, did not lose its essential character when it was put in the form of a paste, viz., creamy dental snuff, when the other ingredients were added, like flavouring agents, water and preservatives, to make the paste more marketable when the snuff was intended to be used for applying to the gums. It was in terms held that the said dental creamy snuff completely retained its essential character as snuff as flavoring agents, preservatives and water were added only to change its physical condition to make it more acceptable to the customers when intended for use as paste for application to the gums and there was no reason to hold that snuff had lost its essential character and a totally different article was produced which could not claim exemption. On a parity of reasoning we must hold that 'iron' does not lose its essential character when it is put merely in the form of corrugated iron sheets, as it is merely an alteration of form or shape to make it more acceptable to the customer. It may be capable of independent use but that does not change it into a totally different manufactured product or a new fabricated article in which it can be said that iron and steel has lost its essential character.

6. The learned Advocate-General next argued that we must interpret entry is, with the help of the amended entry in the light of section 14 of the Central Sales Tax Act, 1956. The ]earned Advocate-General relied upon the doctrine of parliamentary exposition. It is well settled that that doctrine could not apply where there is apparent reason to show why the Legislature introduced the amendment and when the whole object would be apparent that the amendment was not one by way of parliamentary exposition of the earlier statute. As I have already mentioned, section 14 was enacted by the Parliament and this amendment was done by the State Legislature to bring the entry of 'iron and steel' in line with that definition given in section 14. Even assuming that the learned Advocate-General was right in inviting our attention to that definition it is obvious even on a plain reading of that definition that even steel plates, steel sheets, steel bars and tin bars, rolled steel sections, and tool alloy steel are included along with pig iron, scrap iron and iron plates etc. That indicates that the Legislature has in terms included in the scope and ambit of this entry 'iron and steel' even when it is in different forms and shapes, so long as the character of 'iron and steel' is retained. Various kinds of iron and steel, i.e. pig iron, scrap iron and even steel in its various forms, including steel sheets are covered. If steel sheets could fall within the scope of this entry, it is difficult to follow the reasoning of the learned Advocate-General that iron sheets would not fall in it. The learned Advocate-General's argument is that it is only when 'iron and steel' is used as raw materials for the manufacture of products that it falls within the ambit of entry 15. That test is slightly misleading for the simple reason that those very raw materials which can go into fabrication of view articles or which produce finished manufactured products may equally be of direct use as such. The real test should be not the use that is made of these raw materials, whether in the process of manufacture or fabrication of these articles, but whether the commodity is still in the form of iron and steel and retains its essential character of iron and steel. The Division Bench of this High Court in Vaiswaner Trading Co. v. State of Gujarat, ([1964) 15 S.T.C. 586) had an occasion to consider this question, where pieces of rolled steel sections, joined together by rivetting, were held to retain the same form in which rolled steel sections were directly produced by rolling mills. It is, therefore, clear that on no principle of construction we can hold that this particular entry 'iron and steel' would not be applicable to tile case of corrugated iron sheets, when it can never be doubted that they continued to retain their essential character of iron and the only processing of corrugation was done or shape was given by turning them into iron sheets for the propose of making the commodity in question more acceptable to the customers in the market. It would be wholly immaterial whether such corrugated iron sheets could be put to direct use or they were to be used for turning out other articles from them. The Tribunal was, therefore, right in its view that the corrugated iron sheets sold by the assessee firm were 'iron and steel' and they did not fall within the residuary entry 80. With great respect to my learned brother, I beg to differ and I, therefore, record my opinion as under :

In the result this reference should be answered, in my opinion, by holding that the corrugated iron sheets sold by the opponent-firm were covered by entry 15 of Schedule B of the Act of 1953, prior to its amendment by Act No. 16 of 1957 and not by the residuary entry 80 of Schedule B. Reference is answered accordingly. The State shall pay the costs of this reference to the assessee.

Divan, J.

7. In this reference under section 54 of the Bombay Sales Tax Act, 1953 (hereinafter referred to as the Act), the following question has been referred to us by the Sales Tax Tribunal :-

'Whether on the facts and in the circumstances of the case the sale of corrugated sheets by the opponent-firm was covered by entry 80 of Schedule B or entry 15 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957.'

8. The short facts giving rise to this reference are as follows :-

The opponent-firm is a registered dealer dealing in iron and steel, gold and silver, vegetable ghee, corrugated iron sheets etc. The firm was assessed according to best judgment for the period from 1st April, 1956, to 31st March, 1957, by the Sales Tax Officer, Godhra, by his order dated 30th June, 1962. Against the order of the Sales Tax Officer, there was an appeal to the Assistant Commissioner of Sales Tax, Baroda. The appeal was dismissed. Thereafter, the assessee-firm went in revision to the Deputy Commissioner of Sales Tax. The Deputy Commissioner partially allowed the revision application and held that entry 15 of Schedule B to the Act related to iron and steel, which would include only primary products of the rolling mills which are not subjected to any process after rolling and that, therefore, corrugated sheets were covered by entry 80 of Schedule B to the Act. Against the order of the Deputy Commissioner, the assessee-firm went in revision to the Sales Tax Tribunal and the Tribunal held that entry 15 of Schedule B as it stood at the material time referred only to iron and steel and that corrugated iron sheets sold by the assessee-firm were iron within the meaning of entry 80 of Schedule B to the Act. Thereafter, at the instance of the State of Gujarat, the above question has been referred to us by the Tribunal.

9. At the time when the application for reference was heard by the Tribunal, a question of limitation was argued before the Tribunal but the Tribunal held that it had the power to condone the delay under section 5 read with section 29 of the Indian Limitation Act, 1963, and exercising the said power, the Tribunal condoned the delay and thereafter granted the application for reference to this High Court. At one stage of the hearing before us, Mr. S. L. Mody, on behalf of the assessee, wanted to argue before us that the reference was not competent inasmuch as the Sales Tax Tribunal had no power to condone the delay and hence the entire reference was incompetent. However, he subsequently gave up the point regarding limitation and the matter has been argued on merits before us.

10. Entry 15 in Schedule B to the Act read as follows :-

S.T. G.S.T. P.T. '15. Iron and steel Nil. Six pies. Three pies.'

11. This entry remained on the Statute Book during the period from 1st April, 1954, to 7th April, 1957. Since the period of assessment with which we are concerned in the instant case is the period from 1st April, 1956, to 31st March, 1957, it is this entry which would be applicable. We may point out that by an amendment the above entry No. 15 was substituted by the following entry :-

S.T. G.S.T. P.T.Nil. Two naye Two naye '15. Iron and steel, that is to say - paise. paise. (a) pig iron and iron scrap. (b) iron plates sold in the sameform in which they are directlyproduced by the rolling mills. (c) steel scrap,steel ingots, steel billets,steel bars and rods. (d) (i) steel plates. Sold in the same form in which(ii) steel sheets. they are directly produced by(iii) steel bars and tin bars. the rolling mills. (iv) rolled steel sections.(v) tool alloy steel.

12. This entry remained in force during the period from 8th April, 1957, to 30th September, 1958; and thereafter with effect from 1st October, 1958, this amended entry was deleted by Bombay Act No. 71 of 1958.

13. I have had the benefit of hearing the judgment of my learned brother Mehta, J., when the judgment was dictated in open Court and I regret that I cannot agree with his conclusion that corrugated iron sheets are a form of iron and steel and not, as I hold, an article of iron. I agree with my learned brother that the principle of legislative interpretation which was contended for by the learned Advocate-General cannot help the Taxing Authorities in the instant case.

14. The whole principle lying behind the doctrine of legislative interpretation as set out in a subsequent piece of legislation is that the Legislature interprets that which was already there on the Statute Book and the subsequent legislation is merely enacted with a view to explain and interpret the legislative intent as embodied in the earlier piece of legislation. The observations of the Gujarat High Court in State of Gujarat v. Keshavlal and Sons, ([1966] 17 S.T.C. 170 at page 174.) set out that principle.

15. As a result of the Central Sales Tax Act, being Act No. 74 of 1956, iron and steel as therein mentioned, was provided for and the entry which we have set out above as being in force during the period 8th April, 1957, to 30th September, 1958, is precisely the same entry that is to be found in section 14 of the Central Sales Tax Act; and it was with a view to bring the law in line with the provisions of the Central Sales Tax Act that entry No. 15 in the Bombay Sales Tax Act was amended as above with effect from 8th April, 1957. Under these circumstances, I agree with my learned brother that the principle of legislative interpretation cannot have any application in the instant case and the only question here is whether the words, 'iron and steel' as occurring in entry 15, as it originally stood, during the period 1st April, 1954, to 7th April, 1957, would cover 'corrugated iron sheets'. It is clear that if they did not fall within the entry of iron and steel, they would be falling within the residuary entry 80 covering all goods other than those specified from time to time in any of the preceding entries in Schedule B. Under entry 80 of Schedule B, the articles would attract sales tax of 2 nP., general sales tax of 3 nP., and purchase tax of 2 nP.; whereas under entry 15, as it originally stood, there was no sales tax but there was general sales tax of six pies in the rupee and purchase tax of three pies in the rupee.

16. Since the principle of subsequent legislation is not applicable to the facts of this case, we cannot say merely from the amended entry as was in force from 8th April, 1957, to 30th September, 1958, that iron and steel as it originally stood during the period 1st April, 1954, to 7th April, 1957, included merely basic raw material and not any iron and steel in its manufactured form or for production or consumption.

17. The rival contentions regarding the merits of the case can be stated in this form. It is contended on behalf of the assessee-firm that corrugated iron sheets are nothing else but iron or steel sheets which are wrinkled by hydraulic pressure or in a rolling mill and corrugation merely means wrinkling iron sheet. It was, therefore, contended on behalf of the assessee before us that a corrugated iron sheet is only a form of iron or steel sheet. On the other hand, it has been contended by the learned Advocate-General, on behalf of the State, that as shown by the standard books of reference like Encyclopaedia Britannica, an elaborate process has to be gone into in order to convert an iron sheet into a corrugated iron sheet; and further that a corrugated iron sheet cannot be used for the same purpose for which an ordinary iron sheet can be used; nor an ordinary iron sheet can be used for the purpose for which a corrugated iron sheet can be used. Under these circumstances, the learned Advocate-General has contended that once the process of corrugation is gone through, the corrugated iron sheet becomes a distinct article of iron and steel and ceases to be a form of iron and steel.

18. I agree with my learned brother Mehta, J., that the observations of the Supreme Court in State of Madhya Bharat v. Hiralal ([1966] 17 S.T.C. 313, at p. 315.) treating the words 'iron and steel' as indicating raw materials were made by the Supreme Court in the context of the notification with which the Supreme Court was dealing in that case; and in my opinion they do not help me in deciding the question arising before us in the instant case.

19. In Tungabhadra Industries Ltd. v. Commercial Tax Officer, ([1960] 11 S.T.C. 827.) the question before the Supreme Court was whether hydrogenated groundnut oil (commodity called vanaspati) is 'groundnut oil' within the meaning of rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939. Rule 18(2) of the said Rules provided as follows :-

'18. (2) Every such registered manufacturer of groundnut oil will be entitled to a deduction under clause (k) of sub-rule (1) of rule 5 equal to the value of the groundnut and/or kernel purchased by him and converted into oil and cake if he has paid the tax to the State on such purchases :

Provided that the amount for which the oil is sold is included in his net turnover :

Provided further that the amount of the turnover in respect of which deduction is allowed shall not exceed the amount of the turnover attributable to the groundnut and/or kernel used in the manufacture of oil and included in the net turnover.'

20. It was in the context of this sub-rule (2) of rule 18, that the question was considered by the Supreme Court; and the Supreme Court came to the conclusion, after considering the hydrogenating process, that hydrogenated groundnut oil was a form of groundnut oil and they held that the assessee-company was entitled to the benefit of the deduction of the purchase price of kernel or groundnut, which went into the manufacture of hydrogenated groundnut oil, from the sale turnover of such oil. At page 835 of the report, Rajagopala Ayyangar, J., delivering the judgment of the Supreme Court, observed :

'Both the Tribunal as well as the High Court have pointed out that except for its keeping quality without rancidity and ease of packing and transport without leakage, hydrogenated oil serves the same purpose as a cooking medium and has identical food value as refined groundnut oil. There is no use to which the groundnut oil can be put for which the hydrogenated oil could not be used, nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Similarly we consider that hydrogenated oil still continues to be 'groundnut oil' notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil.'

21. It is by the application of this test of what may be called possibility of substituting hydrogenated groundnut oil for groundnut oil and substituting groundnut oil for hydrogenated groundnut oil, that the Supreme Court decided whether hydrogenated groundnut oil was groundnut oil within the meaning of rule 18(2).

22. In The State of Gujarat v. Sakarwala Brothers, ([1967] 19 S.T.C. 24.) the decision of the Gujarat High Court in the matter and also the decision of the Supreme Court on appeal therefrom have been reported; and both this High Court as well as the Supreme Court came to the conclusion that patasa, harda and alchidana fall within the definition of 'sugar' in entry 47 of Schedule A to the Bombay Sales Tax Act, 1959; and therefore the sales are exempt from the payment of sales tax. Entry 47 in Schedule A is as follows :

'Sugar as defined in item No. 8 of the First Schedule to the Central Excises and Salt Act, 1944.'

Item No. 8 of the First Schedule to the Central Excises and Salt Act, 1944, defines sugar as under :-

'Sugar means any form of sugar containing more than 90 per cent of sucrose.'

23. Therefore the question that this High Court and thereafter the Supreme Court had to consider in that particular case was whether patasa, harda and alchidana could be regarded as forms of sugar containing more than 90 per cent of sucrose. In order to arrive at their conclusions, both the Gujarat High Court and the Supreme Court relied upon the decision of the Supreme Court in Tungabhadra Industries' case ([1960] 11 S.T.C. 827.) and in both the Courts, the test of substituting one article for the other was applied to find out whether patasa, harda and alchidana were forms of sugar or not.

24. The decision given by us in the snuff-paste case referred to by my learned brother in his judgment again dealt with the definition of tobacco occurring in the Sales Tax Act and incorporating in that deduction tobacco from the relevant entry in the Central Excises and Salt Act, 1944. Like the entry pertaining to sugar, the entry pertaining to tobacco in the Central Excises and Salt Act, 1944, defined tobacco to mean any form of tobacco manufactured or not and snuff was included in the definition of the word 'tobacco'. Therefore, any form of tobacco, i.e., any form of snuff would be covered by the definition of tobacco; and that was the conclusion which we arrived at in that particular case depending upon the particular entry. Ultimately the instant case will turn upon our decision whether corrugated iron sheets can be said to be a form of iron and steel or can be said to be an article of iron and steel.

25. In support of his argument, the learned Advocate-General relied upon the decision of the Punjab High Court in Devgun Iron and Steel Rolling Mills v. State of Punjab ([1961] 12 S.T.C. 590.). There the Punjab High Court was dealing with the entry relating to iron and steel and the provisions of the Central Sales Tax Act, 1956, had to be considered by the Punjab High Court. The petitioners before the Punjab High Court contended that they had purchased iron scrap or steel scrap and then rolled the same into rolled steel sections; and the Punjab High Court held that when the raw material, iron or steel, that was purchased by the petitioners was rolled into rolled steel sections, the outcome is a different and a new commodity and when it is sold, there is a sale of a different commodity and not a sale of steel over again. This decision of the Punjab High Court does not directly help us because in each case of this kind, the question is whether the process, through which the commodity passes, turns that commodity into a new article and changes its original form.

26. In Encyclopaedia Americana, 1958 Edition, Volume 8, at page 21, 'corrugated iron' has been shown to be sheet iron formed with parallel ridges and furrows, so that the cross-section is a continuous waved line. Flat sheet metal tends to buckle and get out of shape with every change in temperature. The corrugations, made in one direction, give it greatly increased stiffness and adapt it to numerous purposes for which it would otherwise be less suitable. The sheet metal is corrugated by passing between ridged rollers, whose ridges are opposed like the teeth of gear-wheels. It comes out in the commercial form and is frequently subjected to a process of coating with zinc, to protect it from oxidation, and is then known as galvanized corrugated iron. It is used widely for roofing and walling barns, sheds, warehouses, and other buildings. This passage from Encyclopaedia Americana makes it clear that greatly increased stiffness and adaptation to numerous purposes is brought about by the process of corrugation. In the absence of corrugation, flat iron sheet tends to buckle and get out of shape with every change in temperature, and more so in a tropical country like ours, and it is for the purpose of giving it greatly increased stiffness and also to adapt it to numerous purposes that the process of corrugation has to be gone through.

27. In Encyclopaedia Britannica, 14th Edition, Volume 6, at page 471, the process of corrugating iron sheets has been pointed out and it has also been pointed out that corrugation can be made by passing hat sheets either through powerful presses when several sheets are corrugated at a time or in rotary corrugating rollers usually doing one sheet at a time. It is also pointed out that the corrugating process enables much lighter gauges of sheets to be used because it makes them very rigid and portable. Thus it is clear that the whole idea of submitting the iron or steel sheet to corrugating process is to make the corrugated sheet very rigid and portable and to use the corrugated sheet for purposes for which the flat sheet could not have been need.

28. Thus, from these two works of reference it is clear that corrugated iron sheet can be used for the purposes for which hat sheets cannot be used because the hat sheet has not got the advantage of stiffness and rigidity and strength which corrugated iron sheet has got. Thus a hat sheet cannot be need for the purposes for which a corrugated iron sheet can be used. Contrariwise, it is common sense that a corrugated iron sheet cannot be used when for example boxes of flat iron sheets etc. are required to be made, because what is required is a flat surface inside and outside and not a corrugated surface in cases of that kind.

29. Thus the test which was applied by the Supreme Court in Tungabhadra Industries case. ([1960] 11 S.T.C. 827.) viz., the possibility of substituting one commodity for the other, viz. hydrogenated groundnut oil for groundnut oil and groundnut oil for hydrogenated groundnut oil so far as the consumers are concerned, is not applicable when we go to hat iron sheets and corrugated iron sheets. That test, from the standard works of reference, cannot apply, since a hat iron sheet cannot be substituted for use where a corrugated iron sheet is required to be used, particularly looking to the fact that corrugated iron sheet will not buckle or get out of shape with every change in the temperature. It is because of these reasons that in the light of the judgment of the Supreme Court in Tungabhadra Industries case ([1960] 11 S.T.C. 827.) and the test applied by the Supreme Court, that I am unable to agree with my learned brother regarding the final conclusion in this case.

30. In my opinion, in the light of the test indicated by the Supreme Court about the possibility of substituting one for the other, it is clear that in the instant case, a corrugated iron sheet is not a form of iron and steel but is an article of iron and steel and is a distinct commodity. In my opinion, the elaboration of processes through which a commodity has to pass before it can be classified as a different article is not the test. For example, every article made of iron and steel will possess all the characteristics of iron and steel, whatever the process it has gone through; but merely because the basic characteristic of and steel or the basic composition of iron and steel still remains, it cannot be said that the article of iron or steel still remains iron and steel. For example, the body of a motor car, it is well-known, is pressed out of steel sheets, but it cannot be said to be steel because by the very process through which it has undergone, it is turned out into a different article. The same test would apply to electric fans made out of steel or to almirahs and numerous other articles made out of steel. The real test applicable to such cases is the test of possibility of substituting one for the other and if there is a possibility, where articles can be used for one or the other and can be substituted one for the other, then in spite of the process being undergone the article would still remain the same; and if there is no possibility of any substitution to the consumer it would be a new commodity and would no longer be a form of the original article.

31. It is, therefore, with regret that I am unable to agree with my learned brother that corrugated iron and steel is merely a form of iron and steel. In my opinion, the only conclusion possible, in the light of the technical information available from the standard works of reference, and applying the tests laid down by the Supreme Court in Tungabhadra Industries case, ([1960] 11 S.T.C. 827.) is that corrugated iron and steel is an article of iron and Steel, and would, therefore, not fall within entry 15 of Schedule B but would fall within the residuary entry 80 of Schedule B to the Act. I would, therefore, answer the question referred to us by stating that the sale of corrugated iron sheets in question was covered by entry 80 of Schedule B to the Act and I would direct the assessee-firm to pay the costs of this reference to the State of Gujarat.

32. P.C. In view of the difference of opinion on the points which clearly emerge from our respective judgments, the case should now be placed under clause 36 of the Letters Patent of this High Court before one or more of the other Judges and the points should be got decided as laid down In that clause.

33. In pursuance of the abovesaid order, the reference came on for hearing before Bhagwati, C.J., and the learned Chief Justice delivered the following judgment on November 11/12 1968 :

Bhagwati, C.J.

34. The short question which arises for determination in this reference is whether corrugated iron sheets fall within entry 15 or entry 80 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957. Entry 15 reads 'iron and steel' while entry 80 is a residuary entry providing for all goods other than those specified in Schedule A, section 7A and the preceding entries of Schedule B. It was common ground between the parties that if corrugated iron sheets do not fall within entry 15, there is no other specific entry which covers them and they would fall to be governed by entry 80. The Sales Tax Officer assessing the assessee for the period 1st April, 1956, to 31st March, 1957, took the view that corrugated iron sheets were not covered by entry 15 and were therefore taxable under entry 80 which provides a higher rate of tax and this view was affirmed by the Assistant Commissioner of Sales Tax in appeal and the Deputy Commissioner of Sales Tax in revision. The Tribunal in further revision disagreed with the view of the revenue authorities and held that corrugated iron sheets were iron and steel within the meaning of entry 15 and were therefore taxable at the lower rate of tax provided in that entry. The State thereupon applied for a reference and on the application of the State the following question of law was referred for the opinion of this Court :

'Whether on the facts and in the circumstances of the case, the sale of corrugated sheets by the opponent-firm was covered by entry 80 of Schedule B or entry 15 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957 ?'

35. On the answer to this question there was a difference of opinion between Divan, J., and Mehta, J., and hence the reference was ordered to be placed before a third Judge. That is how the reference comes before me.

36. The question which I have to consider is whether corrugated iron sheets fall within entry 15 which reads 'iron and steel'. In order to determine this question it is necessary to understand the nature of the commodity known as corrugated iron sheets. Corrugated iron sheets are iron sheets with parallel ridges and furrows so that the cross-section is a continuous waved line. 'Flat sheet metal', points out Encyclopaedia Americana, 1958 Edition, Volume 8, at page 21, 'tends to buckle and get out of shape with every change in temperature. The corrugations, made in one direction, give it greatly increased stiffness and adapt it to numerous purposes for which it would otherwise be less suitable. The sheet metal is corrugated by passing between ridged rollers ............. It comes out in the commercial form, and is frequently subjected to a process of coating with zinc to protect from oxidation, and is then known as galvanized corrugated iron. It is used widely for roofing and walling barns, sheds, warehouses and other buildings'. Encyclopaedia Britannica, Fourteenth Edition, Volume 6, at page 471, also points out that corrugating process enables much lighter gauges of sheets to be used because it makes them very rigid and portable. Corrugated firm sheets are thus nothing but iron sheets-sheets of iron-corrugated, that is, wrinkled for the purpose of making them more rigid and giving them increased stiffness so that they become more suitable for roofing and walling than they would otherwise be as hat iron sheets. They are iron sheets with their shape altered to make them more adaptable and useful for being used as iron sheets for roofing and walling. Now flat iron sheets would certainly be covered by the entry 'iron and steel'. That indeed was not disputed by the learned Advocate-General on behalf of the revenue and indeed it could not be disputed in view of the decision of the Supreme Court in The Slots of Madhya Bharat v. Hiralal ([1966] 17 S.T.C. 313.) where iron and steel bars, hats and plates were held to be covered by the expression 'iron and steel' in the notification issued by the Government of Madhya Bharat under section 5 of the Essential Goods (Declaration and Regulation of Tax on Sale or Purchase) Act, 1952. If flat iron sheets are within the entry 'iron and steel', it is difficult to appreciate how they cease to be so by mere alteration of shape by corrugation, It is no doubt true that iron sheets when corrugated cease to be raw materials for manufacture or fabrication of goods and they can be used only as corrugated iron sheets for roofing and walling but on that account they do not cease to be iron sheets having the essential character of iron. It may be that by reason of alteration of shape, iron sheets may cease to be usable for any purpose other than roofing or walling but they still remain iron sheets and do not lose the essential character of iron which they possessed as flat iron sheets before corrugation. The process of corrugation is one of alteration of shape and it does not make iron sheets a different article or product of iron. The question in cases of this kind is always one of degree and where precisely to draw the dividing line when a commodity loses its essential character of iron and steel-ceases to be a form of iron and steel - and becomes an article or product of iron and steel, is by no means easy to decide. But on the whole, having regard to the various considerations above-mentioned, I think corrugated iron sheets fall on the right side of the dividing line and must, like flat iron sheets, be regarded as a form of iron rather than an article or product of iron. Even if I had any doubt about this conclusion, I would resolve it in favour of the assessee, taking resort to the doctrine which Lord Radcliffe has characteristically described as the last refuge of judicial hesitation, the doctrine that if two views are possible in a taxing statute, that which favours the assessee must be preferred.

37. This view which I am taking also finds support from the decision of the Supreme Court in Tungabhadra Industries Ltd. v. Commercial Tax Officers. ([1960] 11 S.T.C. 827.). The Supreme Court in that case was concerned with the question whether hydrogenated groundnut oil was groundnut oil within the meaning of rule 18(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1999. The Supreme Court held that hydrogenated groundnut oil was groundnut oil since it was from groundnut and in its essential nature it remained 'oil'. The Supreme Court pointed out that the physical state did not determine the identity of the commodity and merely because hydrogenated groundnut oil assumed semi-solid form it did not cease to be groundnut oil. Hydrogenated groundnut oil, said the Supreme Court, still contained to be groundnut oil notwithstanding the processing which was merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desired to consume groundnut oil. On the analogy of this decision, it may be said that even if iron is put in the form of sheet and subjected to corrugation for the purpose of making it more useful in the form of iron sheet by improving its rigidity and stiffness, it would not become a different article or product of iron but would continue to retain its essential character of iron notwithstanding the corrugation.

38. There is also a decision of the Assam High Court in Kapildeoram Baijnath Prosad v. J. K. Das, ([1954] 5 S.T.C. 365.) where the same approach has been adopted. There the question was whether chira and muri could be said to be covered by the words 'all cereals and pulses including all forms of rice'. Chira was parched beaten rice which involved the process of boiling paddy, its dehydration, frying and then flattening. Muri involved the process of soaking, boiling, dehydrating paddy and removal of husks. These commodities which were the result of processing of rice became edible and could be taken as food without any more cooking and they could not be commonly recognised as rice. And yet the Assam High Court held that these commodities were forms of rice rather than products thereof and were therefore exempt from tax under the Assam Sales Tax Act, 1947. This decision was referred to by a Division Bench of this Court with approval in The State of Gujarat v. Sakarwala Brothers ([1967] 19 S.T.C. 24.) The question in that case was whether patasa, harda and alchidana fell within the definition of 'sugar' in entry 47 to Schedule A to the Bombay Sales Tax Act, 1959. This Court pointed out that the word 'form' connotes a visible aspect in which the thing exists or manifests itself. Sugar may manifest in the form of patasa as a result of certain simple processes being carried out. It may similarly manifest itself in the form of alchidana or small lumps of sugar or harda. If sugar so manifests itself, it cannot be said that sugar has ceased to be sugar merely because it takes a particular shape or form which appeals to certain class of people on festive occasions. This decision was affirmed in appeal by the Supreme Court and the decision of the Supreme Court is reported at page 30 of the same volume, The Supreme Court pointed out that the word 'sugar' in entry 47 was intended to include within its ambit all forms of sugar, that is to say, sugar of any shape or texture, colons or density and by whatever name it was called. So also it can be said on a parity of reasoning that merely because iron is given the shape of a sheet and is subjected to corrugation for the purpose of giving it rigidity and increased stiffness so as to make it acceptable to a particular class of persons who might rant to use it in the form of an iron sheet for roofing and walling, it does not cease to be iron; it merely assumes another form, namely, that of a wrinkled sheet but it still continues to retain the essential character of iron.

39. The revenue however relied strongly on the decision of the Supreme Court in The State of Madhya Bharat v. Hiralal ([1966] 17 S.T.C. 313.) to which I have already made a reference earlier, but I do not think this decision in any way supports the contention of the revenue. The assessee in this case purchased scrap iron locally and imported iron plates from outside and after converting there into bars, flats and plates in his rolling mills, sold them in the market. The question arose whether the iron bars, flats and plates, re-rolled and sold by the assessee, were exempt from sales tax by virtue of a notification which inter alia exempted 'iron and steel' from liability to sales tax, or they were taxable under another notification which imposed tax at a particular rate on 'goods prepared from any metal other than gold and silver'. The Supreme Court held that iron bars, flats and plates sold by the assessee were covered by the expression 'iron and steel' and were exempted under the first notification. Subba Rao, J., speaking on behalf of the Supreme Court said :

'Scrap iron purchased by the respondent was merely re-rolled into bars, hats and plates. They were processed for convenience of sale. The raw materials were only re-rolled to give them attractive and acceptable forms. They did not in the process lose their character as iron and steel. The dealer sold 'iron and steel' in the shape of bars, flats and plates and the customer purchased 'iron and steel' in that shape. We, therefore, hold that the bars, flats and plates sold by the assessee are iron and steel exempted under the notification.'

40. These observations clearly show that mere alteration of shape is wholly immaterial and it does not matter whether iron is in the shape of bars, flats or plates and equally, one may say, it makes no difference whether it is in the form of flat sheets or corrugated sheets. When the assessee in the present case sold corrugated iron sheets, he sold 'iron' in the shape of corrugated sheets and the purchasers purchased 'iron' in that shape.

41. I am, therefore, of the view that corrugated iron sheets are merely 'iron' in another shape and form and they cannot be regarded as articles or products manufactured or fabricated out of iron. They must, therefore, be held to fall within entry 15 which reads 'iron and steel' and they cannot be taxed under the residuary entry 80. The question referred to this Court must therefore be answered by saying that the sale of corrugated iron sheets by the assessee was covered by entry 15 of Schedule B to the Bombay Sales Tax Act, 1953, prior to its amendment by Bombay Act 16 of 1957 and not by the residuary entry 80 of that Schedule. The State will pay costs of the reference to the assessee.

42. Reference answered accordingly.


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