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The State of Tamil Nadu Vs. S. Syam Steel Rolling Mills (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectSales Tax
CourtChennai High Court
Decided On
Case NumberTax Case No. 327 of 1976 (Revision No. 61 of 1976)
Judge
Reported in[1977]40STC156(Mad)
AppellantThe State of Tamil Nadu
RespondentS. Syam Steel Rolling Mills (P.) Ltd.
Appellant AdvocateK.S. Bakthavathsalam, Additional Government Pleader
Respondent AdvocateC. Natarajan, Adv.
Cases ReferredState of Punjab v. Krishna Cotton
Excerpt:
.....(v) of the amended entry 4 read as follows :4. iron and steel, that is to say,-(iv) steel bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or twisted, in coil form as well as straight lengths); (v) steel structurals (angles, joists, channels, tees, sheet piling sections, z sections or any other rolled sections). 3. the contention of the learned additional government pleader is that the various entries and the categories in each entry constituted separate commercial commodities for taxation and that so long as a particular item is a different commercial commodity from the other item which suffered tax already, there cannot be any exemption in respect of the former item. we are clearly of the opinion that for the purpose of enjoying the benefit of single point..........from tiruchirapalli. having so held on the question of fact, the tribunal also held that the goods sold by the assessee, namely, m.s. rounds, m.s. angles and m.s. squares would fall within the ambit of entry 4 of the second schedule, namely, 'iron and steel', read with section 4 of the act and that, therefore, the turnover in question was exempt from tax. it is the correctness of this conclusion that is challenged in the present tax revision petition.2. the assessment year in question is 1973-74. by that time, the relevant entry in the second schedule to the act has been amended by tamil nadu act no. 39 of 1973. the relevant items, namely, items (iv) and (v) of the amended entry 4 read as follows :4. iron and steel, that is to say,-...(iv) steel bars (rounds, rods, squares, flats,.....
Judgment:

Ismail, J.

1. This is a revision petition preferred by the State under Section 38 of the Tamil Nadu General Sales Tax Act (1 of 1959), hereinafter referred to as the Act, against the order of the Sales Tax Appellate Tribunal (Main Bench), Madras, dated 7th May, 1975. The facts lie within a very narrow compass. The assessee, whose factory is in Bangalore, purchased in Tamil Nadu State M.S. rounds of the weight of 468.199 metric tonnes and transported them to Bangalore from Tiruchirapalli. It subsequently sold within the Tamil Nadu State M.S. rounds, M.S. angles and M.S. squares of the weight of 260.331 metric tonnes. It claimed that in respect of sales of M.S. rounds, M.S. angles and M.S. squares of the said weight no tax was payable, since the M.S. rounds which it purchased in Tamil Nadu had already suffered tax and the goods were liable only to a single point taxation. The assessing authority as well as the appellate authority held that the assessee had not proved that the goods of the weight of 260.331 metric tonnes which it sold in Tamil Nadu State came out of 468.199 metric tonnes which it purchased in Tamil Nadu and which suffered tax and, consequently, negatived the claim of the assessee. However, when the assessee preferred a second appeal to the Sales Tax Appellate Tribunal, the Tribunal found that the said goods of the weight of 260.331 metric tonnes were rolled at the rolling mills of the assessee out of the quantity of 468.199 metric tonnes goods transported to Bangalore from Tiruchirapalli. Having so held on the question of fact, the Tribunal also held that the goods sold by the assessee, namely, M.S. rounds, M.S. angles and M.S. squares would fall within the ambit of entry 4 of the Second Schedule, namely, 'iron and steel', read with Section 4 of the Act and that, therefore, the turnover in question was exempt from tax. It is the correctness of this conclusion that is challenged in the present tax revision petition.

2. The assessment year in question is 1973-74. By that time, the relevant entry in the Second Schedule to the Act has been amended by Tamil Nadu Act No. 39 of 1973. The relevant items, namely, items (iv) and (v) of the amended entry 4 read as follows :

4. Iron and steel, that is to say,-...

(iv) steel bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or twisted, in coil form as well as straight lengths);

(v) steel structurals (angles, joists, channels, tees, sheet piling Sections, Z sections or any other rolled sections).

3. The contention of the learned Additional Government Pleader is that the various entries and the categories in each entry constituted separate commercial commodities for taxation and that so long as a particular item is a different commercial commodity from the other item which suffered tax already, there cannot be any exemption in respect of the former item. In other words, even on the finding of the Tribunal that the M.S. rounds, M.S. angles and M.S. squares sold in Tamil Nadu came out of the M.S. rounds purchased from Tamil Nadu earlier, still those items were commercially different from the items purchased by the assessee from Tamil Nadu, namely, M.S. rounds and that, therefore, they could not get the benefit of a single point taxation. We are of the opinion that the contention is partly correct. We have already referred to items (iv) and (v) of entry 4 of the Second Schedule to the Act. Each one of them refers to a main article and the other articles mentioned therein will fall within the scope of the main article. As far as entry 4(iv) is concerned, the main article is 'steel bars' and within brackets thereafter are included 'rounds, rods, squares, flats, etc.'. In the present case, the articles sold were rounds, squares and angles. Consequently, 'rounds and squares' will fall under entry 4(iv). 'Angles' are mentioned only in entry 4(v) and, therefore, they will fall within that entry. But the question is whether they are entitled to exemption from tax on the ground that the steel rods out of which they were made had suffered tax already. We are clearly of the opinion that for the purpose of enjoying the benefit of single point taxation, the various articles mentioned in the different entries must retain their identity as a commercial commodity. Once that identity is lost and a different commercial commodity emerges as a result of manufacturing process or as a result of any other process, then the resultant commodity cannot be said to be the same commodity as the one from which it resulted and, therefore, the assessee cannot claim exemption from tax in respect thereon on the ground that the original commodity suffered tax. In other words, in the present case, the assessee cannot claim exemption from tax in respect of sales of M.S. angles and M.S. squares on the ground that the M.S. rounds out of which they were produced had suffered tax already. The position will be different as far as M.S. rounds sold in this State are concerned. They are commercially the same as the M.S. rounds that were purchased from the State out of which the M.S. rounds sold were made. Consequently, we are of the opinion that out of the three articles sold in the State of Tamil Nadu, namely, M.S. rounds, M.S. angles and M.S. squares, only M.S. rounds will be entitled to the benefit of exemption from tax on the ground that the M.S. rounds had suffered tax already and that the M.S. angles and M.S. squares will not get the benefit of such exemption.

4. Mr. Natarajan, the learned counsel for the respondent-assessee, contended that what is necessary for the purpose of the benefit of exemption is the statutory identity in the sense that the goods involved must find a place in the same category or in the same entry and that so long as they are so found, they will certainly be entitled to the benefit of exemption. Even on the basis of this argument, the learned counsel had to concede that M.S. angles formed part of steel structurals only and would not form part of steel bars and that, therefore, they would not get the benefit of exemption, while M.S. rounds and M.S. squares would get the benefit of exemption. We are of the opinion that this argument is not sound. What is necessary for the benefit of a single point taxation is the retention of the identity of the goods as the same commercial commodity. Once this identity is lost, the commodity becomes commercially different and there is no question of that commodity being exempt from tax on the ground that the commodity from which it was made or it came out had suffered tax already. The following observations of the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 S.T.C. 319 will support our conclusion in this behalf:

As we all know, sales tax law is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entities for purposes of sales tax. 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.

5. Thus it will be seen that the emphasis is on the retention of the identity as a particular commercial commodity and that once that identity is lost, there is no question of the commodity being exempt on the ground that the commercial commodity from which it was changed into a new commodity had already suffered tax. On the other hand, Mr. Natarajan drew our attention to another passage in the same judgment, as supporting the order of the Tribunal in the present case. That passage occurs at page 323. With reference to entry (iv)(d) of Section 14 of the Central Sales Tax Act, 1956, before its amendment in 1972, the Supreme Court observed at page 323 :

Although, we have looked at the subsequent amendment of 1972 in order to find an indication of the original intention, because subsequent history of legislation is not irrelevant, yet, we think that, even if we confine our attention to Section 14, at it originally stood at the relevant time, with which we are concerned in the cases before us, the object was not to lay down that all the categories or sub-items of goods, as specified separately even before the amendment of 1972, were to be viewed as a single salable commodity called 'iron and steel' for purposes of determining a starting point for a series of sales. On the other hand, the note against the brackets in front of the five smaller sub-divisions of (d) makes it clear that even each sub-category of a sub-item retains its identity as a commercially separate item for purposes of sales tax so long as it retains the sub-division. The more natural and normal meaning of such a mode of listing special or declared kinds of goods seems to us to be that the object of specifications was to enumerate only those categories of items, each of which was to serve as a new starting point for a series of sales, which were to be classed as 'declared' goods. If one were to state the meaning in different words, it would seem to us to be : 'iron and steel goods of various types enumerated below'.

6. We are of the opinion that the above observation of the Supreme Court does not in any way conflict with the other observation, which we have already extracted and as a matter of fact there is nothing in this observation which goes contrary to the conclusion of the Supreme Court that the retention of the identity as a particular commercial commodity is indispensable for enjoying the benefit of single point taxation.

7. The learned counsel for the respondent-assessee then drew our attention to another decision of the Supreme Court in State of Punjab v. Chandu Lal Kishori Lal; State of Punjab v. Krishna Cotton, Dal and Oil Factory [1970] 25 S.T.C. 52. In that case, the relevant entry was :

Cotton, that is to say, all kinds of cotton (indigenous or imported) in its unmanufactured state, whether ginned or unginned, baled, pressed or otherwise, but not including cotton waste.

8. Section 5(2)(a)(vi) of the Punjab General Sales Tax Act, 1948, stated:

In this Act the expression 'taxable turnover' means that part of a dealer's gross turnover during any period which remains after deducting therefrom-

(a) his turnover during that period on....

(vi) The purchase of goods which are sold not later than six months after the close of the year, to a registered dealer, or in the course of inter-State trade or commerce, or in the course of export out of the country.

9. In that particular case, unginned cotton was ginned and, therefore, in that process, cotton seeds were separated and thereafter the cotton seeds were sold. In respect of the cotton seeds sold, the assessee claimed deduction of the turnover under Section 5(2)(a)(vi) of the Punjab General Sales Tax Act, extracted already. The Supreme Court negatived the contention holding that even though the cotton seeds formed part of the unginned cotton, which was purchased, still once the seeds were separated, they became a different commodity altogether and, therefore, the turnover relating to the sale of cotton seeds could not be deducted. The Supreme Court observed :

'Cotton ginned or unginned' is treated as a single commodity under one item of declared goods. It is evident that cotton ginned or unginned being treated as a single commodity and as a single species of declared goods cannot be subject under Section 15(a) of the Central Sales Tax Act to a tax exceeding two per cent of the sale or purchase price thereof or at more than one stage. But so far as cotton seeds are concerned, it is difficult to accept the contention that the sale of cotton seeds must be treated as a sale of declared goods for the purpose of Section 15(a) or (b) of the Central Sales Tax Act, 1956. It is true that cotton in its unginned state contains cotton seeds. But it is by a manufacturing process that the cotton and the seed are separated and it is not correct to say that the seed so separated is cotton itself or part of the cotton. They are two distinct commercial goods though before the manufacturing process the seeds might have been a part of the cotton itself. There is hence no warrant for the contention that cotton seed is not different from cotton.

10. We are of the opinion that, in view of the above observation of the Supreme Court, the said decision is not of any assistance whatever to the respondent-assessee to support the order of the Tribunal.

11. Under these circumstances, we allow the tax revision petition and set aside the order of the Sales Tax. Appellate Tribunal. At the same time, since we have held that the turnover relating to the sale of M.S. rounds will be entitled to exemption from tax because the M.S. rounds sold and the M.S. rounds purchased out of which the M.S. rounds sold came, constituted the same commodity, the matter will have to go back to the Tribunal for the purpose of separating the turnover relating to the sale of M.S. rounds from the turnover relating to the sale of M.S. angles and M.S. squares and for giving exemption from tax in respect of the turnover relating to M.S. rounds only.

12. The tax revision petition is allowed, as indicated above. There will be no order as to costs.


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