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Indian Steel and Wire Products Ltd. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 205 of 1973
Judge
Reported in[1977]108ITR802(Cal)
ActsFinance Act, 1965; ;Income Tax Act, 1961 - Section 80E
AppellantIndian Steel and Wire Products Ltd.
RespondentCommissioner of Income-tax
Appellant AdvocateBanerjee, Adv.
Respondent AdvocateSuhas Sen, Adv.
Cases ReferredDevi Dass Gopal Krishnan v. State of Punjab
Excerpt:
- dipak kumar sen, j.1. this reference under section 256(1) of the income-tax act, 1961, initiated at the instance of the assessee in respect of the assessment years 1965-66, 1966-67 and 1967-68 involves the question whether the assessee. the indian steel & wire products ltd., calcutta, who manufactures and processes wire rods will be entitled to rebate allowed under the 1965 finance act and deduction allowed in the 1966 finance act incorporating section 80e in the income-tax act, 1961, by reason of its products, namely, wire rods, coming within the definition of the item or an article or thing in item 1 of part iii of the 1965 finance act and under item 1 of the fifth schedule to the income-tax act, 1961. the description of item 1 in both part iii of the 1965 finance act as also in the.....
Judgment:

Dipak Kumar Sen, J.

1. This reference under Section 256(1) of the Income-tax Act, 1961, initiated at the instance of the assessee in respect of the assessment years 1965-66, 1966-67 and 1967-68 involves the question whether the assessee. The Indian Steel & Wire Products Ltd., Calcutta, who manufactures and processes wire rods will be entitled to rebate allowed under the 1965 Finance Act and deduction allowed in the 1966 Finance Act incorporating Section 80E in the Income-tax Act, 1961, by reason of its products, namely, wire rods, coming within the definition of the item or an article or thing in item 1 of Part III of the 1965 Finance Act and under item 1 of the Fifth Schedule to the Income-tax Act, 1961. The description of item 1 in both Part III of the 1965 Finance Act as also in the Fifth Schedule of the Income-tax Act, 1961, is as follows :

'Iron and steel (Metal), ferro alloys and special steel.'

2. The facts found and/or admitted as appearing in the statement of the case and the annexures thereto may be shortly stated as follows :

The assessee manufactures steel wire rods in coils and straight lengths. These wire rods are sold as such and are also further processed in wire mills for the manufacture of annealed wire, galvanised wire, barbed wire, nails, bolts, nuts and rivets.

3. In the assessments for the said assessment years the assessee claimed that its product, that is, wire rods, came within item 1 of the list of articles specified in Part III of the First Schedule under the Finance Act, 1965, and, therefore, it was entitled to the extra rebate for the assessment year 1965-66. For the assessment years 1966-67 and 1967-68, the assessee claimed deduction on similar provisions under the subsequent Finance Act of 1966 read with Section 80E and the Fifth Schedule of the Income-tax Act, 1961. For the assessment year 1965-66 the Income-tax Officer rejected the assessee's claim holding that the assessee only manufactured products of iron and steel and such products did not come within the said item 1 in the specified list in Part III of the First Schedule to the Finance Act, 1965, and as such the assessee was not entitled to the extra rebate.

4. For the assessment years 1966-67 and 1967-68, the Income-tax Officer did not allow the deduction claimed without any further discussion on the subject.

5. On appeal the Appellate Assistant Commissioner upheld the decision of the Income-tax Officer.

6. There was a further appeal by the assessee before the Tribunal. The contentions of the assessee before the Tribunal were again that the articles manufactured by the assessee came within item 1 of the specified list of articles under Part III of the Finance Act, 1965, and also under item 1 of the Fifth Schedule of the Income-tax Act, 1961.

7. It was contended that the industry of iron and steel as envisaged underthe Industries (Development & Regulation) Act, 1951, covered all kinds ofundertakings engaged in producing articles itemised in the First Schedule.The assessee relied on the chemical definition of 'steel' as appearingin the Encyclopaedia of Chemical Technology.

8. It was contended that the meaning of the expressions used in the statute should be understood in the commercial sense and not in the technical or chemical sense.

9. Provisions in other statutes were cited and it was contended that the assessee in any event was an industry in iron and steel and as such deemed to be a part of the iron and steel industry. The assessee was in fact registered under the Industries (Development & Regulation) Act, 1951, as an iron and steel industry. The Ministry of Commerce and Industry had issued a certificate in favour of the assessee describing the assessee as a scheduled industry under the item 'iron and steel'. On the strength of a public notice dated the 22nd December, 1966, issued under the Import Trade Control Act, 1947, the assessee was issued licence under the Import Trade Control. The assessee was treated as falling under item 10 of the Schedule mentioned in the said notification as 'Basic metal--Iron and steel, copper, aluminium, zinc and lead' or item 12 thereof being 'Iron and steel castings, forgings, pipes and structures '.

10. A circular No. 57, dated 23rd March, 1971, issued by the Central Board of Direct Taxes was cited as an analogy where the item 'mineral oil' appearing as item No. 3 in Part III of the First Schedule of the Finance Act, 1965, was held to cover both crude oil and the petroleum products derived therefrom. It was contended that the wire products manufactured by the assessee would also come within the item 'iron and steel (metal)', On behalf of the revenue it was contended that the word 'metal' used in the said items had a significance. Up to the stage of production of billets or ingots, iron and steel could be considered as metal and thereafter any further product manufactured or produced therefrom would cease to be understood as metal. In the items in issue the words used would cover all iron and steel in the stage of metal but not when they were in the stage of a product. A number of reported decisions of High Courts and the Supreme Court were cited before the Tribunal.

11. The Tribunal rejected the plea of the assessee that its product came within item 1 of Part III of the First Schedule of the Finance Act, 1965, or item 1 of the Fifth Schedule of the Income-tax Act, 1961.

12. From the definition of the words 'metal', 'element', 'iron' and 'steel' as appearing in the Readers' Digest Great Encyclopaedic Dictionary, the Tribunal held that iron as a basic product can alone be classified as a 'metal'. Steel was primarly an alloy. 'Iron' and 'steel' in their basic forms only could be classified as metals and the products manufactured therefrom would not be metal and as such the product of the assessee fell outside the purview of the said items.

13. The Tribunal noted that in the Industries (Development and Regulation) Act, 1951, the entry under item 4 in the First Schedule appeared as 'iron and steel'. The word 'metal' was not appended to this item. After amendment in 1957, the new entries read as follows :

' 1 A(1) Iron and steel (metal) and 1A(7) Other products of iron and steel.'

14. In the certificate issued by the authorities concerned the assessee was found to come under the amended item 1 A(7).

15. The Tribunal held that the Import Trade Control Act, 1947, as interpreted in the official letter dated the 5th January, 1957, could not be relied on for interpretation of the provisions of a different statute.

16. The Tribunal rejected all the contentions of the assessee.

17. From this order of the Tribunal the following questions have been referred to the court : For the assessment year 1965-66 :

'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the articles manufactured by the assessee did not fall within the description 'Iron and Steel (Metal)' as appearing in item No. 1 in the List in Part III of the First Schedule to the Finance Act of 1965, and further whether the Tribunal was right in holding that the assessee was not entitled to any rebate of tax in terms of item II of Paragraph F of Part I of the First Schedule to the said ' Finance Act'?' For the assessment years 1966-67 and 1967-68 : 'Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the articles manufactured by the assessee did not fall within the description 'Iron and Steel (Metal)' as appearing in item No. 1 in the Fifth Schedule to the Income-tax Act, 1961, and further whether the Tribunal was right in holding that the assessee was not entitled to any relief in terms of Section 80E of the aforesaid Act ?'

18. In order to appreciate the point in dispute and the submissions of the learned counsel for the parties thereon it will be convenient to set out the relevant provisions of the Finance Act, 1965, and Section 80E of the Income-tax Act, 1961. The Finance Act, 1965, came into force on the 11th May, 1965 ; under Paragraph F of the Finance Act, 1965, the rate of income-tax in the case of every company was 80% on the whole of the total income. But a rebate was provided in the case of companies wholly or mainly engaged in the manufacture or processing of goods on so much of the total income as would consist of profits and gains attributable to the manufacture or production of any one or more of the articles or things specified in the List in Part III of the Act as follows :

'PART III

List of articles and things

(1) Iron and steel (metal), ferro-alloys and special steels.

(2) Aluminium, Copper, Lead and Zinc (metals).......

(4) Industrial machinery specified under the heading '8. Industrial machinery 'sub-heading 'A. Major items of specialised equipment used in specific industries', of the First Schedule to the Industries (Development and Regulation) Act, 1951......

(8) Machine tools and precision tools (including their attachments and accessories, cutting tools and small tools) dies and jigs............

(11) Steel castings and forgings and malleable iron and steel castings

(22) Gears.

(23) Ball, roller and tapered bearings...... '

Section 80E which was introduced by the Finance Act, 1966, which came into force on 13th May, 1966, provided as follows : '80E. Deduction in respect of profits and gains from specified industries in the case of certain companies,--(1) In the case of a company to which this section applies, where the total income (as computed in accordance with the other provisions of this Act) includes any profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent. thereof, in computing the total income of the company......'

19. The specified list in the Fifth Schedule contained identical items as in Part III of the earlier Finance Act of 1965. Even the numbers of the items were the same.

20. Mr. S.R. Banerjee, learned counsel for the assessee, has urged before us the following points ;

21. Firstly, he submitted that for the interpretation of the items in the relevant Schedules, viz., the Schedule contained in Part III of the Finance Act, 1965, and the Fifth Schedule of the Income-tax Act, 1961, referred to in the Finance Act, 1966, judicial interpretation of identical expressions in earlier statutes would be of relevance and should be taken into account.

22. Secondly, he contended that the treatment of the identical subject-matter in earlier statutes may be taken into account to ascertain the object of the legislature in promulgating a subsequent statute in respect of the same subject-matter.

23. Thirdly, he contended that if there was any ambiguity, the interpretation should be in favour of the taxpayer.

24. Elaborating on the above contentions Mr. Banerjee urged that item No. 1 in Part III of the 1965 Finance Act and item No. 1 of the Fifth Schedule of the Income-tax Act, 1961, referred to iron and steel (metal), ferro-alloys and special steels. These expressions and, in particular, the expression 'iron and steel (metal)', he submitted, were ambiguous because, chemically or metallurgically speaking, steel was not a metal. Even iron, as commercially known, would not be pure metal. He contended that the expression 'iron and steel (metal)' must be held to include products made out of iron or steel. To give the items a limited or literal meaning would restrict the benefit conferred by the statute only to the few primary producers of such metals in the country. This, according to Mr. Banerjee, was not the object of the legislature. Similar benefits conferred by other statutes using similar expressions have been extended to industries manufacturing articles out of iron and steel. One of the statutes which Mr. Banerjee brought to our notice was the Industries (Development and Regulation) Act, 1951, which empowered the Union of India to take under its control industries specified in the First Schedule to the Act. This Act defined an 'existing industrial undertaking' to be an industrial undertaking pertaining to any of the industries specified in the First Schedule and a 'scheduled industry' to be any of the industries specified in the First Schedule of this Act under item No. 1A and specified the following :

'1. Iron and steel (Metal).

2. Ferro-alloys.

3. Iron and steel castings, and forgings.

4. Iron and steel structurals.

5. Iron and steel pipes.

6. Special steels.

7. Other products of iron and steel.'

25. Mr. Banerjee also drew our attention to the authorised Import Trade Control Policy of the Ministry of Foreign Trade, Government of India. In 1970-71, 59 industries were listed in Appendix I in the Handbook as prority industries, inter alia, as follows :

'Industries engaged in the manufacture of :

............No. 10 Basic metal--iron and steel, copper, aluminium, zinc and lead.

......11. Industrial and mining machinery.

......12. Iron and steel castings, forgings, pipes and structures.........

20. Ball and Roller Bearings.

28. Wire ropes.'

26. Lastly, Mr. Banerjee drew our attention to Section 14 of the Central Sales Tax Act, 1956, which declared certain goods to be of special importance in inter-State trade or commerce. Sub-clauses (iv) to (xiv) of this section read as follows :

(iv) iron and steel, that is to say-

(i) pig iron and cast iron including ingot, moulds, bottom plates, iron scrap, cast iron scrap, runner scrap and iron skull scrap ;

(ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes;

(iii) skelp bars, tin bars, sheet bars, hoe-bars and sleeper bars ;

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

(v) steel structural (angles, joists, channels, tees, sheet piling Section, Z sections or any other rolled section);

(vi) sheets, hoops, strips and skelp, both black and galvanised, hot and cold, rolled, plain and corrugated, in all qualities, in straight lengths and in coil form, as rolled and in rivetted condition ;

(vii) plates both plain and chequered in all qualities ;

(viii) discs, rings, forgings and steel castings;

(ix) tool alloy and special steels of any of the above categories ;

(x) steel melting scrap in all forms including steel skull, turning and bearings ;

(xi) steel tubes, both welded and seamless, of all diametres and lengths, including tube fittings;......

(xv) wire rods and wires--rolled, drawn, galvanised, aluminised, tinned or coated...... '

27. Mr. Banerjee cited a number of decisions to establish the proposition that an expression used in a statute would primarily be given its popular or commercial meaning and not its technical, i.e., chemical or metallurgical meaning. Mr. Suhas Sen, learned counsel for the revenue, has not disputed this proposition. This proposition is well settled and appears to have been reiterated from time to time by different courts including the Supreme Court. In the premises we only note the decisions cited on this point.

(a) Ramavatar Budhaiprasad v. Assistant Sales Tax Officer reported in : [1962]1SCR279 . Here the Supreme Court held that the word 'vegetables' must be construed not in any technical sense nor from the botanical point of view but as in common parlance and consequently betel-leaves were not held to be vegetable within the meaning of the C.P. and Berar Sales Tax Act.

(b) Commissioner of Sales Tax v. Jaswant Singh Charan Singh reported in : [1967]2SCR720 . Here the Supreme Court held that for the purposes of the Madhya Pradesh General Sales Tax Act, in the absence of a technical term of science or art, the legislature must be presumed to have used an ordinary term according to common parlance. It was held that the item 'charcoal' should be ordinarily understood as and included in the expression 'coal'.

(c) Deputy Commissioner (Sales Tax) v. R.A. Akbar Alikhan and Abdul Raheem and Co. reported in [1971] 27 STC 167 (Mad). Here the Madras High Court held that in a taxing statute the popular meaning or commercial understanding of a word should prevail in spite of the meaning which may be secured by the application of the principles of geology, physics or chemistry. An item processed from lignite commercially known as 'coal' and used as domestic fuel was held to come within the meaning of the expression 'charcoal' and thus exempt from sales tax under the Pondicherry General Sales Tax Act, 1967.

(d) India Carbon Ltd. v. Superintendent of Taxes reported in : [1972]1SCR316 . In this case, the Supreme Court considered and applied the dictionary meaning of the expression 'coke' and held that the item in Clause (i) of Section 14 of the Central Sales Tax Act, i.e., 'coal, including coke in all its forms' was enough to include petroleum coke.

(e) Binod Mills Co. Ltd. v. Commissioner of Sales Tax reported in . Here the Madhya Pradesh High Court held that for the purpose of the Madhya Pradesh General Sales Tax Act, 1958, the product 'coal ash' was included within the ambit of the expression 'coal' in entry 1, Part III of Schedule II to the Act.

(f) Avadh Sugar Mills Ltd. v. Sales Tax Officer reported in : [1973]3SCR546 . Here the Supreme Court took note of commercial journals and newspapers and held that 'groundnuts' came within the item 'oilseeds' in the U.P. Sales Tax Act, 1948.

(g) Mangulu Sahu Ramahari Sahu v. Sales Tax Officer reported in : AIR1974SC390 . Here the Supreme Court held that the products 'chillies' and 'lemons' in common parlance were considered to be vegetables and, therefore, came within the item 'vegetables' being item 5 of the Schedule to the Orissa Sales Tax Act, 1947.

28. Mr. Banerjee also cited other decisions and contended that the expressions 'iron' and 'steel' had been interpreted in other statutes. He also cited decisions where other items in other statutes were extended to cover products made out of the items. These decisions are considered hereafter in their chronological order.

29. The first was the case of Tungabhadra Industries Ltd. v. Commercial Tax Officer reported in : [1961]2SCR14 . Rule 18 of the Madras General Sales Tax (Turnover a'nd Assessment) Rules, 1939, provided as follows:

' 18. (1) Any dealer who manufactures groundnut oil and cake from groundnut and/or kernel......be registered as a manufacturer of groundnut oil and cake.

(2) Every such registered manufacturer of groundnut oil will be entitled to a deduction...... 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.'

30. The appellant produced raw, refined and hydrogenated oil and claimed deduction under the above rule in respect of all such products. The Supreme Court went into the question whether after hydrogenation the product which was originally raw groundnut oil still remained groundnut oil. The Supreme Court noted the chemistry of hydrogenation and held that absorption of hydrogen in the oil did not affect the identity of the substance, but made the product more suitable for use. It was held that hydrogenated groundnut oil was still groundnut oil within the meaning of the above rule.

31. The next case was Vaiswaner Trading Company v. State of Gujarat, reported in [1964] 15 STC 586 (Guj). In this case the Gujarat High Court was considering the Bombay Sales Tax Act, 1953, and the Central Sales Tax Act, 1956. The item involved was rolled steel sections joined together by rivetting. The question arose whether the steel sections after rivetting retained the same form as when produced by the rolling mills within the meaning of entry 4 in Schedule AA of the Bombay Sales Tax Act, 1953. This particular entry included rolled steel sections sold in the same form in which they were directly produced by the rolling mill. On the facts the court held that rivetted bailing hoops, which were nothing but pieces of rolled steel sections joined together by rivetting, fell within the category of the entry. There was no dispute on the point that rivetted bailing hoops were rolled steel sections. The court held that rolled steel sections were only made into a greater length by joining the pieces but the form in which they emerged from the mill remained unchanged.

32. The next decision cited was State of Madhya Bharat v. Hiralal reported in : [1966]2SCR752 . The facts before the Supreme Court in this case were that locally purchased scrap iron and imported iron were converted into bars, flats and plates in the respondent's mill and sold. The question arose whether the respondent was entitled to exemption from sales tax under item 39 of Notification No. 58, dated the 24th October, 1953, issued under the Madhya Bharat Sales Tax Act. The notification provided as follows:

' No tax shall be payable on the sale of the following goods : S. No. 39......Description of goods. (Iron and Steel)'

33. It was contended on behalf of the sales tax authorities that the expression 'iron and steel' meant iron and steel in the original condition and not iron and steel in the shape of bars, flats and plates. The Supreme Court compared another serial number in the same Act being serial No. 9 which read as follows:

'......Goods prepared from any metal other than gold and silver...'

34. On comparison of these two items the Supreme Court held that there was a distinction between iron and steel as raw materials and goods made from iron and steel. As long as iron and steel continued in the state of raw material they would enjoy the exemption. Scrap iron and imported iron processed into bars, flats and plates only changed its form and made it more attractive and acceptable. They did not lose their character of a raw material and as such was entitled to exemption under section serial No. 39. The next decision cited was that of the Supreme Court in the case of Devi Dass Gopal Krishnan v. State of Punjab reported in : [1967]3SCR557 . The assessee in this case was a registered dealer under the Punjab General Sales Tax Act, 1948. He used to purchase oil-seeds and after crushing the same sold the oil as also the oil-cake as a by-product. For purchase of oil-seeds the assessee had to pay a purchase tax. In respect of sales tax payable on the sale of oil and oil-cake by the assessee it was contended that the goods which the assessee purchased being identical with the goods sold, the same could not be taxed at two stages. The Supreme Court negatived this contention and held that the assessee by manufacturing oil and oil-cake out of oil seeds had changed the identity of the goods. The Supreme Court observed that if scrap iron or steel ingots were made into rolled steel sections the original material would lose its identity and the product would become a new marketable commodity.

35. The next decision cited was State of Gujarat. v. Shah Veljibhai Moti-chand reported in [1969] 23 STC 288 (Guj). Entry 15 of Schedule B of the Bombay Sales Tax Act, 1953, at the material time read: 'Iron and steel '.

36. The dispute before the Gujarat High Court was, whether corrugated iron sheets would come under this entry. On a difference of opinion between two learned judges the matter was decided by a third learned judge. It was held that corrugated iron sheet was merely 'iron' in another shape or form and could not be regarded as article or product manufactured or fabricated out of iron. It was further held that merely because iron is given the shape of sheet and subjected to corrugation it did not cease to be iron but merely assumed another form.

37. The next decision was that of the Madras High Court in the case of Pyarelal Malhotra v. Joint Commercial Tax Officer reported in [1970] 26 STC 416 (Mad). Here the assessee purchased iron and steel scraps from registered dealers and converted the same into mild steel rounds, flats, angles, etc., by rerolling them. It was claimed that the scraps purchased by them having already suffered tax on their first sale, the sale of manufactured articles not different materially should not be again liable to tax by reason of Section 15 of the Central Sales Tax Act.

38. It was held by the court that the goods which were sold by the assessee were 'iron and steel' as defined in entry (iv) of Section 14 and, therefore, they could not be taxed again if they had suffered tax in the raw or unmanufactured stage under the same head.

39. The next decision cited was of the High Court of Andhra Pradesh in the case of G. Ramaswami v. State of AP reported in . Following earlier decisions of the same court it was held in this case that item No. 63 in the First Schedule of the Andhra Pradesh General Sales Tax Act, 1957, reading 'timber' read with Section 5(2)(a) of the Act included planks, rafters and cut sizes. It was held that the said items could not be treated as general goods. Planks, rafters and cut sizes though sawn or cut from logs of wood did not undergo any alteration in character and continued to be raw material classifiable as timber.

40. The next decision cited was of the same High Court in the case of State of Andhra Pradesh v. Sri Durga Hardware Stores reported in . Entry No. 2 of Schedule III to the Andhra Pradesh General Sales Tax Act, 1957, related to iron and steel and was more or less in the same terms as in the similar entries in the other sales tax statutes referred to above.

41. In view of the wide ambit of the language of the entry No. 2 it was held by the High Court that by galvanisation or corrugation of sheets the product did not lose their essential character as iron and steeel and came within item (d)(ii) of entry No. 2 which included steel sheets.

42. Mr. Banerjee contended that in the absence of any definition of the words 'iron', 'steel' or 'metal' in the Finance Act, 1965, Part III, and in the Fifth Schedule of the Income-tax Act, the expression 'iron and steel (metal)' in the items in question was ambiguous. Whether the chemical or the metallurgical or the popular meaning was ascribed, such ambiguity could not be resolved.

43. This ambiguity had to be resolved by taking the interpretation of similar expressions in other statutes. As in the decisions cited, an extended meaning had to be given to this expression for its proper interpretation.

44. Mr. Banerjee also contended that, in any event, such interpretation ought to be one beneficial to the taxpayer on well-known principles of construction of taxing statutes. On this point he cited three decisions of the Supreme Court as follows: Controller of Estate Duty v. R. Kanakasabai : [1973]89ITR251(SC) . Central India Spinning, Weaving and . v. Municipal Committee, Wardha : [1958]1SCR1102 and Commissioner of Income-tax v. Karamchand Premchand Ltd. : [1960]40ITR106(SC) .

45. Mr. Banerjee also cited a decision of the Punjab and Haryana High Court in the case of Commissioner of Income-tax v. Strawboard Mfg. Co. Ltd. , which is directly on the Fifth Schedule of the Income-tax Act, 1961.

46. In this case the product 'straw-board' was sought to be included in the Fifth Schedule of the Income-tax Act, 1961, under item No. 16 which read as 'paper and pulp'. The High Court took into consideration that there was no definition of the product 'paper ' in the Act, that the manufacture of paper was a priority industry and that in item 24 of the Industries (Development and Regulation) Act, 1951, paper included paper products.

47. The High Court also noted that, after amendment, the item No. 16 read 'paper and pulp including newsprint'. On these considerations and on a beneficial construction of the statute it was held that the product 'straw-board' was covered by the term 'paper and pulp' in item 16 of the Fifth Schedule.

48. Mr. Suhas Sen, learned counsel for the revenue, has contended on the other hand that the items in the schedules of the Finance Act, 1965, and the Finance Act, 1966, were quite clear and there was no ambiguity. Taking their plain language it was not difficult to understand what articles or things were intended to be included in the items. Mr. Sen further contended that it was not necessary to invoke the chemical, technical or metallurgical meaning of the expressions 'iron', 'steel' or 'metal' or to borrow the interpretation of expressions from other statutes which may or may not be in pari materia with the statute in question.

49. In support of his contentions Mr. Sen relied on some of the cases cited on behalf of the assessee. In particular he has relied on the decisions in State of Madhya Bharat v. Hiralal : [1966]2SCR752 , State of Gujarat v. Shah Veljilhai Motichand [1969] 23 STC 288 (Guj), Devi Dass Gopal Krishnan v. State of Punjab : [1967]3SCR557 and State of A.P. v. Sri Durga Hardware Stores . Apart from these, he cited a decision of the Supreme Court in the case of State of Punjab v. O. G. D. Syndicate Ltd. reported in : [1964]5SCR387 . In this case the Supreme Court was construing the Displaced Persons (Debts Adjustment) Act, 1951. There was an earlier statute, viz., the Displaced Persons Suits Act, 1948. It was not disputed that the subject-matter of both the statutes were displaced persons. Yet the Supreme Court held that in view of the difference in their respective objects the two Acts could not be stated to be in pari materia and expressions interpreted in one Act may not be similarly interpreted in the other.

50. It appears to us that on a plain reading of the items in dispute reading 'iron and steel (metal)', it cannot be said that the same would include wire rods. Wire rods in the ordinary meaning are commercial products made out of the metals in question. This is so if we construe the expression 'metal' in its popular sense. Even if we take the technical or metallurgical meaning, the expression ' iron and steel (metal) ' cannot be said to include wire rods.

51. It is to be noted that the other items in the Schedule, e.g., item No. 11, steel castings and forgings and malleable iron and steel castings, are undoubtedly the products of iron and steel, yet they have been separately itemised in the Schedule. Similar items are ball bearings, boilers, automobile ancillaries, gears. If we interpret item No. 1 as suggested by Mr. Banerjee and extend its meaning then there would have been no necessity of including such other specific items which are all products of iron and steel. These items become redundant.

52. But an interpretation which renders a part of the statute redundant should if possible be avoided. It seems to us that the legislature used the word 'metal' in conjunction with 'iron and steel' with a specific intention. From the decisions reported in Vaiswaner Trading Co. Ltd. v. State of Gujarat [1964] 15 STC 586 (Guj) and State of Madhya Bharat v. Hiralal : [1966]2SCR752 , it appears that iron and steel can be treated up to a certain stage as raw material which can take many shapes and forms like billets, slabs, ingots, etc. But there comes a stage when by further processing or manufacture it ceases to be a raw material and enter into the category of a finished product. The items in question have to be construed from this point of view. The assessee after obtaining iron and steel in the form of raw material or metal is manufacturing wire rods. It is the raw material or metal which comes under item 1 and not the finished product.

53. The heading of the Schedule is 'list of articles and things'. Therefore, in item 1 iron and steel (metal) is to be considered separately as a thing or an article but articles made or produced from such a ' thing ' or an 'article' ought not to come within the same item.

54. The other statutes noted earlier do not appear to throw much light on the problem before us. The Schedule of the Industries (Development and Regulation) Act, 1951, specifies the industry pertaining to iron and steel (metal) but the same Schedule separately itemises products of iron and steel like castings, forgings, structural and pipes and lastly includes a general item 'other products of iron and steel'. In this statute there is hardly any scope' for giving any extended meaning to the expression 'iron and steel (metal) '.

55. The Central Government's Import Trade Control Policy gives a list of priority industries Here the emphasis is not so much on the product but on the industry. Even so, this statute makes a distinction between an industry engaged in the manufacture of 'basic metal--iron and steel' and other industries engaged in the manufacture of machinery, industrial or mining, castings, forgings, pipes and structural, bearings, wire ropes, etc.

56. Lastly, we have the Central Sales Tax Act, 1956, which has classified certain goods being of special importance in inter-State trade or commerce. Under the heading 'iron and steel' there comes 14 different specified items of iron and steel products starting from pig iron and ending in wire rods. The items are so specific that there is again no scope for extending the meaning of any particular item.

57. It is in this background we have to consider the various decisions cited on behalf of the assessee. The Groundnut Oil case, Tungabhadra Industries Ltd. v. Commercial Tax Officer : [1961]2SCR14 , was concerned with the Madras Sales Tax Act where the only item was 'groundnut oil', no product or derivative of groundnut oil was separately included in the statute. The Supreme Court for the purpose of that statute and in the facts of that case gave an extended meaning to the item. Nothing more ought to be read from this decision. The Rivetted Bailing Hoops case, Vaiswaner Trading Co. v. State of Gujarat [1964] 15 STC 586 (Guj), was decided in the context of the Bombay Sales Tax Act, 1959. It was found as a fact that such hoops were nothing but rolled steel sections joined together and could fall within the expression in entry 4 of the Schedule to that Act. The High Court held that such joinder was not a part of further processing.

58. Similarly, in the case of Iron Bars, Flats and Plates case, State of Madhya Bharat v. Hiralal : [1966]2SCR752 it was found as a fact that iron or steel in the shape of bars, flats and plates retained their character as a raw material and could not be held to be goods manufactured from iron and steel. To be noted is that the item in the Madhya Bharat Sales Tax Act did not read 'iron and steel (metal)' as in the statute before us and no other goods made out of iron and steel was specifically exempted.

59. The Corrugated Sheet cases are a class by themselves : State of Gujarat v. Shah Veljibhai Motichand [1969] 23 STC 288 (Guj) and State of A.P. v. Sri Durga Hardware Stores . These cases were decided in the context of the Bombay Sales Tax Act, 1953, and the Andhra Pradesh Sales Tax Act, 1957. In the first statute the entry at the relevant time was only 'iron and steel' which was ultimately extended to cover all types of iron and steel goods in the Central Sales Tax Act. In the Andhra Pradesh Act the entry in question specifically included steel sheets.

60. In Pyarelal Malhotra v. Joint Commercial Tax Officer [1970] 26 STC 416 (Mad), the Madras High Court was concerned with the Central Sales Tax Act and under that statute no distinction was made between iron scrap and items rerolled therefrom as both came within the definition of 'iron and steel' in the statute.

61. In the Timber case, G. Ramaswami v. State of A.P. , the item in the statute read only 'timber' and no product of timber was mentioned or included separately and the Andhra Pradesh High Court held that items like planks, rafters and cut sizes were raw materials and retained their character as 'timber'

62. The Oil Seeds case, Devi Dass Gopal Krishnan v. State of Punjab : [1967]3SCR557 , is a decision against the assessee. The observations of the Supreme Court to the effect that conversion of scrap iron and steel ingots into rolled steel sections results in the genesis of a new marketable commodity does not advance the contentions of the assessee in the instant case.

63. In the instant case the Tribunal has specifically found as a fact that in common parlance the words 'iron and steel (metal)' do not include wires and rods. This finding has not been challenged. Whether this finding was without any evidence or based only on the dictionary makes no difference to its finality.

64. Lastly, Mr. Banerjee faintly argued that from the order of the Tribunal it appeared that the assessee had been allowed development rebate under Section 33(1)(b)(B)(i). This development rebate has been allowed on the basis of the same Schedule. Mr. Banerjee contended that if the assessee was entitled to development rebate for this item in the Schedule there was no reason why the assessee should be deprived of the benefit under Section 80E or the Finance Act, 1965, on the identical item in the same Schedule.

65. This particular point was not raised before nor considered by the Tribunal. The questions before us cannot be said to include this aspect. The revenue has not come up against the allowance of development rebate. Full facts in respect of such development rebate are not before us and we cannot go into such question.

66. For the reasons stated above, the revenue succeeds in the instant case. Both the questions referred to us are answered in the affirmative and in favour of the revenue. In the facts and circumstances of the case, we do not make any order as to costs.

Deb, J.

I agree.


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