JUDGMENT
P.R. Balasubrsmsnian, Technical Member
1. These two applications, involving common points of fact and law and the same parties, were heard together and are accordingly disposed of by this common judgment. The point at issue relates to disallowance of claims for deduction from gross turnover under Section 5(2)(a)(va) and 5(2)(a)(vd) of the Bengal Finance (Sales Tax) Act, 1941 (for short, “the 41 Act”) read with Sections 14 and 15 of the Central Sales Tax Act, 1956 (for short, “the 56 Act”). While RN-34 of 1995 is for the period quarter ending June 30, 1993, RN-35 of 1995 is for the period quarter ending September 30, 1993.
2. The case of the applicant, inter alia, is that it carries on the business of manufacturing pipes, tubes and Hamilton poles at its factory in West Bengal. For such manufacture, it purchases raw materials, namely, H.R. coils, C.R. coils, skelp, strips and sheets from various dealers in West Bengal on which, at the time of purchase, sales tax is paid to the seller at the rate of 2 per cent or 4 per cent as the case may be, together with the forward declaration forms under the 41 Act. Necessary returns were filed for the quarter ending June 30, 1993 claiming deduction under Section 5(2)(a)(va) and for the quarter ending September 30, 1993 under Section 5(2)(a)(vd) of the 41 Act. Such claims were made since Hamilton poles are nothing but strips in a rolled and riveted condition and both the raw materials used and the manufactured goods are declared goods falling within the same sub-clause, namely, Section 14(iv)(vi) of the 56 Act. Since tax has been paid already on strips, no tax is payable on the sale of Hamilton poles in terms of Section 15(a) of the 56 Act, On the sale of pipes and tubes, the claim was made on the ground that pipes and tubes are manufactured out of H.R. coil, C.R. coil, skelp, strips and sheets and all these items fall within Section 14(iv) of the 56 Act. However, the respondent No. 1 refused to issue declaration forms against the purchase of raw materials when applied for after verifying the returns on the ground that the applicant is not entitled to claim exemption under Section 5(2)(a)(va) and Section 5(2)(a)(vd) of the 41 Act as the goods purchased and the goods manufactured are commercially different products. The respondent No. 1 also passed an order dated November 26, 1993 rejecting the claims of the petitioner in both the returns. The revision petitions were rejected by the Assistant Commissioner (respondent No. 2) by an order dated June 6, 1994. The second revision petitions of the applicant were also rejected by an order dated November 30, 1994 of the Deputy Commissioner (respondent No. 3) and the orders passed by the respondents Nos. 1 and 2 were confirmed. Being aggrieved, the present applications have been filed for setting aside the orders passed by the respondents and for a declaration that no tax is payable on the sale of pipes, tubes and Hamilton poles manufactured out of purchase of declared goods on payment of tax under the 41 Act.
3. It has been contended that under Section 15(a) of the 56 Act, no sales tax can be charged under the State Act in respect of declared goods at a rate of more than 4 per cent and at more than one stage. Even if it is assumed but not admitted that the applicant is liable to pay tax at the time of sale at the rate of 2 per cent on the manufactured goods since only 2 per cent tax has been paid at the time of purchase, it would still be contrary to Section 15(a) of the 56 Act. For, in that event, the total tax payable would be more than 4 per cent at the time of purchase and sale of the goods being the sum of 2 per cent of Rs. 100, say, and 2 per cent of (Rs. 100+2=102). It would also be contrary to Section 15(a) of the 56 Act as no tax can be charged at more than one stage on the purchase of declared goods as raw materials and sale of declared goods manufactured out of those raw materials. It is alleged in the petition that for the purpose of levy and tax on declared goods “the existence of new commercial commodity is not a condition precedent. Strips when made in a riveted condition, becomes Hamilton pole and used for certain purpose. Although strips and Hamilton poles serve different purposes and have different use in the market, no tax can be charged on Hamilton poles made out of strips on which tax is paid at the time of purchase as both strips and Hamilton poles are within the same sub-clause of Section 14(iv) of the 56 Act”. It has also been alleged that irrespective of the fact that pipes and tubes and H.R. coil, C.R. coil, sheet, strip and skelp from which they are manufactured fall under different sub-clauses of Section 14(iv) of the 56 Act, no tax can be levied on the sale of the pipes and tubes, being declared goods, once tax is paid on the H.R. coil, C.R. coil, skelp, sheet and strip. It is a well-settled principle of law that no tax is payable on the sale of goods specified under Section 14(iv) of the 56 Act if the said goods are manufactured out of the purchase of declared goods specified in that section on payment of tax provided they fall within the same sub-clause of Section 14(iv) of the 56 Act. Hence, the claims under Section 5(2)(a)(va) and 5(2)(a)(vd) are justified and cannot be rejected.
4. In their affidavit-in-opposition, the respondents have pleaded that the contentions of the applicant are based 06 a wrong understanding of the law. The restriction of Section 15(a) of the 56 Act will apply only if the new commercial commodity produced falls in the same sub-clause of Section 14(iv) of the 56 Act as that of the raw materials used as held by the Supreme Court in the case of Pyare Lal Malhotra [1976] 37 STC 319 and Telangana Steel Industries [1994] 93 STC 187. If the raw materials used and the resultant product fall under different sub-clauses of Section 14(iv), the embargo envisaged in Section 15(a) of the 56 Act does not come into play, since a new commercial commodity is coming into existence as a result of manufacturing process. It is not correct that Hamilton poles is an item covered by Sub-clause (vi) of Section 14(iv) of the 56 Act since it is not merely “strips in rolled and riveted condition”. A strip of iron and steel has to undergo various processes of manufacturing, other than mere rolling and riveting to assume the form of a Hamilton pole and a number of components and fixtures are attached to it before it can be identified as Hamilton pole in the commercial world. Since Hamilton pole and strips have different uses in the market as even admitted by the applicant, it implies that Hamilton poles are understood in the commercial world as a different commodity from strips. Since Hamilton poles are commercially a different commodity from strips and are not enumerated in Sub-clause (vi) or any other clause of Section 14(iv) of the 56 Act, it is not a “declared goods” at all. As for pipes and tubes, the raw materials, namely, H.R. coil, C.R. coil, skelp, strips and sheets used in their manufacture, fall in a sub-clause different from Sub-clause (xi) of Section 14(iv) of the 56 Act which covers the items, pipes and tubes. Such being the case, the claim for exemption from payment of tax under Section 5(2)(a)(va), 5(2)(a)(vd) or any other provision of the 41 Act is not tenable in the eyes of law. The impugned orders of the respondents suffer from no lacuna as they have all been passed on a correct interpretation of the law and are legally valid and folly justified in the circumstances.
5. In the affidavit-in-reply, the applicant has reiterated its case that, since pipes, tubes and Hamilton poles are specified in Section 14(iv) of the 56 Act, no tax can be realised on the sale of these items as the raw materials from which these goods are manufactured, being specified in Section 14(iv) of the 56 Act, have already suffered taxes. It has also been alleged that the judgments of the Supreme Court in the case of Pyare Lal Malhotra [1976] 37 STC 319 and Telangana Steel Industries [1994] 93 STC 187 are not at all applicable in the facts and circumstances of the present case.
6. It is the admitted position that the raw materials used, namely, H.R. coils, C.R. coils, skelp, strips and sheets, used in the manufacture of pipes, tubes and Hamilton poles are declared goods, falling under Sub-clause (vi) of Clause (iv) of Section 14 of the 56 Act and have been subjected to tax at the rate of 2 per cent or 4 per cent, as the case may be, at the time of purchase. The dispute is on the question whether the goods manufactured by the applicant, namely, pipes tubes and Hamilton poles, can be said to be “declared goods” and, if so, eligible for exemption from tax at the time of their sale.
7. The first contention of Mr. P.K. Pal, the learned advocate for the applicant, is that under Section 5(2)(a)(va) of the 41 Act, deduction from gross turnover has been allowed on the sale of goods specified in Section 14 of the 56 Act on a prior sale wherever in West Bengal due tax is shown to have been paid. Section 14(iv) of the 56 Act refers to iron and steel and has proceeded to enumerate 16 categories by way of illustration, which is the meaning of the words “that is to say”, used after the words “iron and steel” in Section 14(iv) of the 56 Act. Therefore, so long as both the raw materials used and the finished products are “iron and steel”, they will be “declared goods” within the meaning of this section even though the raw materials used and the finished products may fall under different sub-clauses of Section 14(iv) of the 56 Act. Since, in the instant case, the raw materials used, being “declared goods” falling under Section 14(iv)(vi) of the 56 Act have already been subjected to tax, the finished goods, namely, pipes, tubes and Hamilton poles, being iron and steel, are also “declared goods” within the meaning of Section 14(iv) of the 56 Act and cannot be subjected to tax again, In any case, Hamilton poles, being nothing but sheets, etc., in rolled and riveted condition, fall within the same sub-clause, namely, (vi) of Clause (iv) of Section 14 of the 56 Act. He cited the rulings reported in Konark Steel Industries v. Sales Tax Officer [1988] 69 STC 187 (Orissa), Hindustan Wires Limited v. State of Tamil Nadu [1992] 86 STC 1 (Mad.) and Mohta Ispat Ltd. v. Commissioner of Sales Tax [1992] 87 STC 125 (Guj) in support.
8. Mr. D.K. Chakraborty, the learned State Representative, referred to the decision of the Supreme Court in the case of Pyare Lal Malhotra reported in [1976] 37 STC 319 in which the interpretation of the words “iron and steel”, used in Clause (iv) of Section 14 of the 56 Act has been elaborated. This ruling holds the field and has been followed in a number of cases including those reported in Udata Narasimha Rao and Co. v. State of Andhra Pradesh [1982] 51 STC 127 (AP), Indian Wire & Steel Products v. Additional Commissioner of Commercial Taxes [1991] 80 STC 21 (WBTT), Telanganna Steel Industries v. State of Andhra Pradesh [1994] 93 STC 187 (SC), Hindusthan Wires Limited v. Commercial Tax Officer [1995] 97 STC 652 (WBTT) and Vasantham Foundry v. Union of India (1995) 5 SCC 289. According to these decisions, the items listed under each of the sub-clauses of Clause (iv) of Section 14 of the 56 Act constitute a separate species under, the broad category of iron and steel. The items under each of these sub-clauses constitute a single commercial commodity for the purposes of Section 14(iv), though they may have undergone various stages of processing or manufacture and might otherwise be construed as constituting different commercial commodities. However, each sub-clause denotes separate commercial commodities and the benefit of single point taxation subject to a minimum of 4 per cent as envisaged in Section 15(a) of the 56 Act will apply only if both the raw materials used in the manufacture and the finished products are “declared goods” falling within the same sub-clause of Section 14(iv) of the 56 Act.
9. According to us, there is no scope for any doubt as to the meaning of “iron and steel” as used in Section 14 of the 56 Act after the landmark judgment of the Supreme Court in the case of State of Tamil Nadu v. Pyare Lal Malhotra reported in [1976] 37 STC 319, which has been followed in numerous decisions since including the judgment of this Tribunal in the case of Hindusthan Wires Limited v. Commercial Tax Officer, Assessment Wing reported in [1995] 97 STC 652 ; (1994) 27 STA 190. Since Mr. Pal has, nonetheless, chosen to raise this point, we can do no better than quote the following observations of the Supreme Court at pages 324-325 of that judgment :
“………….The ordinary meaning to be assigned to a taxable item in a list of specified items is that each item so specified is considered as a separately taxable item for purposes of single point taxation in a series of sales unless the contrary is shown. Some confusion has arisen because the separate items are all listed under one heading ‘iron and steel’.
If the object was to make iron and steel taxable as a substance, the entry could have been : ‘Goods of iron and steel’. Perhaps even this would not have been clear enough. The entry, to clearly have that meaning, would have to be : ‘Iron and steel irrespective of change of form or shape or character of goods made out of them’. This is the very unusual meaning which the respondents would like us to adopt. If that was the meaning, sales tax law itself would undergo a change from being a law which normally taxes sales of ‘goods’ to a law which taxes sales of substances out of which goods are made. We, however, prefer the more natural and normal interpretation which follows plainly from the fact of separate specification and numbering of each item. This means that each item so specified forms a separate species for each series of sales although they may all belong to the genus : ‘iron and steel’. Hence, if iron and steel ‘plates’ are melted and converted into ‘wire’ and then sold in the market, such wire would only be taxable once so long as it retains its identity as commercial goods belonging to the category ‘wire’ made of either iron or steel. The mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity, would make no difference for purposes of the law of sales tax. The object appears to us to be to tax sales of goods of each variety and not the sale of the substance out of which they are made.
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.”
The first contention of Mr. Pal has, therefore, to be rejected.
10. Now, the question remains whether the pipes, tubes and Hamilton poles manufactured by the applicant are “declared goods” and if so, fall in the same sub-clause of Section 14(iv) of the 56 Act which cover the raw materials for their manufacture. The admitted position is that the raw materials, namely, H.R. coil, C.R. coil, strips, skelp and sheets fall within Sub-clause (vi) of Clause (iv) of Section 14 of the 56 Act. Mr. Pal has contended that Hamilton poles are nothing but sheets in rolled and riveted condition and, therefore, fall in the same sub-clause. He has not made any such claim regarding galvanized pipes and tubes but has merely described them as falling within Section 14(iv) without pinpointing any particular sub-clause to which they belong. Mr. Pal also drew our attention to the following observation of the last fact finding authority, namely, the Deputy Commissioner, at page 3 of his order dated November 30, 1994 which reads thus :
“…………Apart from iron and steel tubes and pipes, the petitioner also sold steel tubes more commonly known as ‘Hamilton poles’ which is manufactured by rolling and riveting steel sheets………..”
Citing the decision of the Supreme Court in the case of Mohinder Singh Gill v. Chief Election Commissioner, New Delhi reported in AIR 1978 SC 851, he contended that it was not, therefore, open at this stage for the respondents to improve on this and plead that Hamilton poles are not sheets in rolled and riveted condition. Mr. D.K. Chakraborty, the learned State Representative, argued that none of the items manufactured and sold by the applicant finds any mention in Sub-clause (vi). The observation of the Deputy Commissioner cannot also be interpreted to mean that he had found Hamilton pole to be only steel sheets in rolled and riveted condition. While the raw materials used by the applicant fall under Sub-clause (vi), the iron and steel tubes and pipes manufactured and sold by him fall under Sub-clause (xi). However, Mr. Pal submitted that Sub-clause (xi) refers only to steel tubes, both welded and seamless, of all diameters and lengths, including tube fittings and the tubes and pipes manufactured and sold in the present case do not fall in that category.
11. The question as to when a different commercial commodity comes into being for the purposes of Sections 14 and 15 of the 56 Act has been dealt with by the Supreme Court in the case of Vasantham Foundry v. Union of India reported in (1995) 5 SCC 289, referred to by Mr. D.K. Chakraborty, the learned State Representative. The issue before the Supreme Court was whether “cast iron” in the list of declared goods in Tamil Nadu General Sales Tax Act would include “cast iron castings”. In deciding the matter, the Supreme Court held :
“25. Therefore, in our view, cast iron castings in its basic or rough form must be held to be ‘cast iron’. But, if thereafter any machining or polishing or any other process is done to the rough cast iron casting to produce things like pipes, manhole covers or bends, these cannot be regarded as ‘cast iron casting’ in its primary or rough form, but products made out of cast iron castings. Sudi products cannot be regarded as ‘cast iron’ and cannot be treated as ‘declared goods’ under Section 14(iv) of the Central Sales Tax Act, 1956. This view is not in conflict with the view taken in the case of Bengal Iron Corporation [1993] 90 STC 47 (SC) but it is in consonance with the decision in that case”. Earlier, in para 21 the Supreme Court had also observed that it cannot be said that cast iron after it is machined and finished and sold as different goods, e.g., bends, pipes, manhole covers, motor parts, etc., will still be treated as cast iron, the test being whether the goods are being dealt as cast iron or as different goods made out of cast iron in the market place.
12. Applying the logic of the above case to the case before us, we note that the goods in question, namely, pipes, tubes and Hamilton poles do not find any mention in Sub-clause (vi) of Clause (iv) of the 56 Act, which reads as follows :
“………………….
(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 riveted condition.”
It is not even the case of the applicant that pipes and tubes fall in this sub-clause, his contention being that they do not fall under Sub-clause (xi) and that they are declared goods within the meaning of Section 14(iv) without reference to any of the sub-clauses. Since we have already rejected this contention, it has to be held that pipes and tubes are not declared goods at all under any of the sub-clauses of Section 14(iv). As far as Hamilton poles are concerned, apart from the fact that there is no mention of Hamilton poles in Sub-clause (vi) of Clause (iv), even according to the applicant’s own admission, strips and Hamilton poles serve different purposes and have different uses in the market which makes it clear that they are a commercially different commodity, known as such and other than “strips or sheets” from which they are made. The observation of the Deputy Commissioner that Hamilton poles are manufactured by rolling and riveting steel sheets cannot also in our opinion be construed to mean that they are only sheets in riveted condition. On the other hand, by confirming the order of the Commercial Tax Officer and the revisional order of the Assistant Commissioner, he has held that pipes, tubes and also Hamilton poles are “new marketable goods with separate nature of commercial commodity from that of purchased goods”. We, therefore, hold that Hamilton poles cannot also be said to be “declared goods” within the meaning of Sub-clause (vi) or any other sub-clause of Section 14(iv). In such view of the matter, there cannot be any claim for deduction of the sales turnover on any of these items from the gross turnover either under Section 5(2)(va) or Section 5(2)(vd) of the 41 Act.
13. In the result, the application fails and is dismissed accordingly. The respondents are at liberty to adjust the security deposit of Rs. 10 lakhs in cash, if furnished, by the applicant and also encash the bank guarantee of Rs. 10 lakhs, if furnished, by the applicant in terms of the interim order dated March 10, 1995 of this Tribunal in RN-34 of 1995 against any tax that may be due from the applicant.
14. There will be no order for cost.
On the prayer of Shri Sumit Chakraborty, the learned Advocate for the applicant, which is opposed by the State Representative, stay of operation of the judgment is allowed for ten weeks.
S. N. Mukherjee, Judicial Member
15. I agree.