Skip to content


K.A.C. Trading Corporation Vs. the State of Tamil Nadu - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 1314 of 1977 (Appeal No. 91 of 1977)
Judge
Reported in[1984]55STC62(Mad)
ActsTamil Nadu General Sales Tax Act, 1959; Orissa Sales Tax Act, 1947
AppellantK.A.C. Trading Corporation
RespondentThe State of Tamil Nadu
Appellant AdvocateN. Inbarajan, Adv. for ;R.N. Patil, Adv.
Respondent AdvocateK.S. Bakthavatsalam, Additional Government Pleader
Cases ReferredState of Tamil Nadu v. Pyare Lal Malhotra
Excerpt:
sales tax - identity - tamil nadu general sales tax act, 1959 - question relating to single point taxation under entry 4 (b) and d (ii) of second schedule to act - assessee in business of selling sheet and plate cuttings - assessee claimed that goods not liable to multi-point sales tax - cutting iron or steel plates into smaller sizes may involve change in size but not in form - goods sold in almost same form they were produced in rolling mills - no change in identity or form of goods in question - goods in question not liable to multi-point sales tax. - - 6. we are disposed to accept this submission of the assessee as well-founded......it is not quite clear whether the sheet cuttings and plate cuttings are out of steel plates or iron plates. but the assessee's contention before the assessing authority was that in either case they were not liable for multi-point sales tax. it was urged that the assessee had sold the iron and steel plates in the same form in which they were directly produced by the rolling mill. 2. the assessing authority, however, did not accept these contentions. the assessing authority held that the goods sold by the assessee were taxable at multi-point. the crucial findings of the assessing authority are as under : 'their contention that the goods are sold in the same form in which they are purchased in the rolling mills is not acceptable. they have also not proved their contention. sheet.....
Judgment:

Balasubrahmanyan, J.

1. In this appeal from the order of the Board of Revenue, the question relates to single point taxation under entry 4(b) and (d)(ii) of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959, before its amendment by Act 39 of 1973. Iron plates and steel plates are admittedly single point items. The assessee in this case sold sheet cuttings and plate cuttings in the course of its business. It is not quite clear whether the sheet cuttings and plate cuttings are out of steel plates or iron plates. But the assessee's contention before the assessing authority was that in either case they were not liable for multi-point sales tax. It was urged that the assessee had sold the iron and steel plates in the same form in which they were directly produced by the rolling mill.

2. The assessing authority, however, did not accept these contentions. The assessing authority held that the goods sold by the assessee were taxable at multi-point. The crucial findings of the assessing authority are as under :

'Their contention that the goods are sold in the same form in which they are purchased in the rolling mills is not acceptable. They have also not proved their contention. Sheet cuttings or plate cuttings are not produced in the rolling mills as cuttings. Cuttings are made only after the purchase of sheets from rolling mills. So it cannot be said that the plate cuttings and sheet cuttings are the same form as produced by the rolling mills.'

3. However, this assessment by the assessing authority was set aside by the Appellate Assistant Commissioner in appeal. The Appellate Assistant Commissioner treated the plate and sheet cuttings dealt in by the assessee as falling under entry 4 of the Second Schedule and since they were second sales by the assessee, granted exemption on the disputed turnover of Rs. 49,644.59.

4. The order of the Appellate Assistant Commissioner was called for by the Board of Revenue for scrutiny. The Board took the view that the exemption granted by the Appellate Assistant Commissioner to the turnover in question as second sales was not justified. According to the Board, once the plates were cut into smaller pieces, they cannot be said to retain the form in which they were directly produced by the rolling mill. In this view, the Board set aside the order of the Appellate Assistant Commissioner and restored the order of assessment.

5. In this appeal by the assessee, it is submitted by its learned counsel that notwithstanding the fact that the iron and steel sheets which were produced by the rolling mills were thereafter cut into pieces and sold by the assessee, there was no resultant change in the form of iron and steel plates, but they still retained the same form in which they were directly produced by the rolling mills. It was urged that the mere act of cutting the products from the rolling mills into smaller pieces cannot change either the identity of the goods or their nature as the same commercial product.

6. We are disposed to accept this submission of the assessee as well-founded. As a matter of construction, we must give a natural meaning and not a strained meaning to the words 'sold in the same form in which they are directly produced by the rolling mill', which qualify both the sub-items 'iron plates' and 'steel plates' occurring in entry 4 of the Second Schedule. We must also construe the expression consistent with the scheme of single point taxation espoused in the Second Schedule. According to the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra : 1983(13)ELT1582(SC) , the object of single point taxation under the Second Schedule to the Tamil Nadu General Sales Tax Act was 'to tax sales of goods of each variety and not the sale of the substance out of which they are made'. Elaborating on this theme, the Supreme Court observed as under :

'Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type.'

7. The above passage from the judgment of the Supreme Court shows that it would be a matter of indifference for entry 4 or any other entry in the Second Schedule if two articles of the same type falling under the same entry are merely joined together for the process of joining does not make for a different commercial commodity so as to subject it to multiple taxation. What we have in the present case is a fortiori case. It is simply the opposite process of iron and steel plates being cut into smaller sizes. In our view, therefore, the process of sizing or subdividing iron and steel plates does not make for a commodity different in form from iron and steel plates rolling down from the assembly line of a rolling mill.

8. We have adopted the construction of entry 4 in the Second Schedule following the approach of the Supreme Court, which, with respect, we regard as one of substance. Even if we address ourselves strictly to the qualifying words of entry 4 in the Second Schedule, namely, 'the same form in which they are directly produced by the rolling mill', we arrive at the same result. In our opinion, cutting iron plates and steel plates into smaller sizes may involve a change in the size, but not change in the form. Even on a strict adherence to the language of entry, therefore, we must differ from the views expressed by the assessing authority and the Board of Revenue.

9. The learned Government Pleader cited before us a decision of the Orissa High Court in Alguram Harinarayan Ram v. Assistant Commissioner of Sales Tax [1971] 27 STC 385. In that case a Division Bench of the Orissa High Court had had to construe the expression 'Iron plates sold in the same form in which they are directly produced by the rolling mill' occurring in a notification issued by the Orissa Government under the Orissa Sales Tax Act, 1947. The question before the learned Judges was whether B.P. sheets produced by the rolling mills, when cut into smaller sizes by the assessee can yet be regarded as retaining the same form in which they were directly produced by the rolling mills. The learned Judges expressed the view that once the plates were cut into pieces they cannot be said to retain the same form in which they were directly produced by the rolling mills. According to the learned Judges, the expression 'form' used in the relevant notification must carry a wide meaning so as to include any 'shape or configuration'.

10. We do not agree with the view expressed by the Orissa High Court on the construction of the phrase 'form' occurring in the single point entry. We would prefer, on the contrary, to rely on an observation of a Bench of this Court in Arkay's National Engineering and Foundry Co. v. State of Tamil Nadu [1980] 46 STC 394 in which it was said : 'Merely because the goods undergo the process of cutting, it may not follow that the goods have lost their identity.' This observation was made in the context of an enquiry by the Division Bench, whether mere steel scraps which were left over as leavings and shavings in the manufacturing must of a dealer can be said to retain the same form in which the goods came out of the steel rolling mills, within the meaning of entry 4(c) of the Second Schedule to the Act. While holding that the scrap in its very nature being the bye-product or industrial waste of a steel goods manufacturing unit was a different commercial commodity and cannot be said to retain the same form in which iron and steel articles have come out of the rolling mills, the learned Judges, however, took care to point out, in the passage we have earlier quoted that the mere process of cutting the iron and steel goods may not make for a change in the identity of the goods or the form in which those goods were produced by the rolling mills.

11. The learned Government Pleader cited an earlier decision of a Division Bench of this Court in State of Tamil Nadu v. Syam Steel Rolling Mills (P.) Ltd. [1977] 40 STC 156 as containing observations in support of the view expressed by the Board in this case. Having read through the said decision, we do not think that any different note has been struck by the learned Judges in that case from that expressed either by the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra : 1983(13)ELT1582(SC) or by this Court in the subsequent case of Arkay's National Engineering and Foundry Co. v. State of Tamil Nadu [1980] 46 STC 394. As a matter of fact, the learned Judges of this Court in the decision cited by the Government Pleader while restating the ruling of the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra : 1983(13)ELT1582(SC) relied on the self-same passage in the Supreme Court's decision which we have quoted earlier in this judgment.

12. For all the above reasons, we hold that the order passed by the Appellate Assistant Commissioner was the right one and the Board of Revenue was not justified in reversing that order. We accordingly allow the appeal, set aside the Board's order, and restore that of the Appellate Assistant Commissioner. The appellant will have its costs from the State. Counsel's fee Rs. 250.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //