JUDGMENT
H.L. Agrawal, C.J.
1. The writ applications, which raise common question of law and accordingly have been heard together, are being disposed of herewith.
2. Although in the prayer portion, complex reliefs have been unnecessarily prayed for, the short and simple question that was ultimately argued by the learned counsel for the petitioners was as to whether the Sales Tax Officer was right in imposing sales tax on the price of purchase of various iron and steel items, namely, scraps, which were subsequently sold after conversion as (i) M. S. rounds, (ii) M. S. bars and (iii) M. S. flats, on the ground that they were commercially different commodities of iron and steel.
3. The facts:
As the points raised in all the three cases are similar, I may notice the facts from 0. J. C. No. 518 of 1979. The petitioner in this case is a private limited company and a registered dealer under the Orissa Sales Tax Act (for short “the Act”). The petitioner also owns a rolling mill and manufactures iron and steel materials of the , nature indicated above and thereafter sells them in regular course of business. The petitioner had purchased scrap and rejected iron and steel materials, such as, rail and plate cuttings, commercially known as “scrap iron” from different registered dealers including M/s. Hindustan Steel Limited during the assessment year 1976-77, on furnishing a declaration in form No. XXXIV and after utilising the scrap in its mill and converting the same into M. S. rounds, plates, etc., had sold the product. The sales thus effected by the petitioner were also included in its taxable turnover. The assessing officer, however, issued notice to the petitioner under Section 12(4) of the Act and by the impugned order dated 30th January, 1979 (annexure 1) raised a further demand of sales tax to the tune of Rs. 98,740.81 on the ground that “the petitioner had violated the undertaking given in the declaration form in question.
In O. J. C. No. 619 of 1979, the period of assessment is 1975-76 and the further demand of tax is Rs. 63,117.66. In O. J. C. No. 973 of 1979, the period of assessment is 1976-77 and the further demand of tax is Rs. 262.96.
4. This bring us to the consideration of some provisions of the Act. Let us first see the form of declaration, i.e., form No. XXXIV.
"FORM XXXIV
COUNTER FOIL DUPLICATE ORIGINAL
To be furnished to the Sales To be furnished to the
Tax Officer, who issued the selling dealer,
forms.
DECLARATION FORM DECLARATION FORM
FORM XXXIV FORM XXXIV
[See Rule 27(2)] [See Rule 27(2)]
Name of the issuing circle Name of the issuing circle
... ...
* * * * * *
To
...(seller)
...(address in full)
* * * R. C. No...
Certified that the goods
ordered in my/our pur-
chase order No...dated
...purchased from
you as per cash memo/
bill No...dated...
for an amount of Rs...
are meant for the purpose
of resale in Orissa and are
covered by my/our
registration certificate
No...issued under the
Orissa Sales Tax Act, 1947.
* * * * *
5. The ground for rejecting the purchase by the petitioners free of tax on the basis of the above forms is that they did not sell the purchased material in the same form, and by the milling process of conversion, the material became “a different commercial commodity” from the scrap iron purchased by the petitioners, i.e., “within the process, the scrap iron lost its identity and became a new marketable commodity”. The Sales Tax Officer, therefore, thought that the second proviso to Section 5(2)(A)(a)(ii) of the Act was attracted to the facts of these cases.
6. Let us examine the proviso in question :
5. (1) …
(2)(A) 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-
(i) …
(ii) sales to a registered dealer of goods specified in the purchasing dealer’s certificate of registration for resale by him in Orissa in a manner that such resale shall be subject to levy of tax under this Act; and on sales to a registered dealer of containers or other materials for the packing of such goods:
Provided further that where any goods specified in the certificate of registration are purchased by a registered dealer free of tax after furnishing a declaration under the preceding proviso but are utilised by him for any other purpose, the price of the goods so purchased shall be allowed to be deducted from the gross turnover of the selling dealer but shall be included in the taxable turnover of the purchasing dealer.
* * * * *
This is how the assessing authority has proceeded and raised further demands of sales tax under the three assessment orders which are under challenge.
7. The contention raised by Mr. Agarwal appearing for the petitioner was that the changes effected by the manufacturing process by the petitioners did not render the materials purchased by them so different as to take them out of the relevant declared entry No. 46 of the notification issued under Section 6(1) of the Act prescribing different rates of sales tax payable by a dealer on account of sale of goods as specified in column No. (2) of the Schedule in question. Entry No. 46 reads as follows :
46. Iron and steel, that is to say Four per cent * * * * *
(iv) steel bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or twisted, in coil form as well as straight lengths);
* * * * * (xvi) defectives, rejects, cuttings or end pieces of any of the above categories.
It was accordingly submitted that what the petitioners purchased was “iron and steel” and what the materials became after milling, namely, steel bars, rounds and flats, still remained the species of the main item, i.e., “iron and steel”, the notified commodity. Referring to the definition of “business” occurring in Section 2(b) of the Act, which reads as follows:
2. (b) ‘business’ includes-
(i) any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, whether or not such trade, commerce, manufacture, adventure or concern is carried on with a motive to make gain or profit and whether or not any gain or profit accrues from such trade, commerce, manufacture, adventure or concern; and
(ii) any transaction in connection with, or incidental or ancillary to such trade, commerce, manufacture, adventure or concern;
It was submitted that the process of business included in its very essence the process of manufacture and the petitioners having been granted the certificates of registered dealers who carried on their trade and business, they are fully justified and authorised under the scheme of the Act to undertake the process of manufacturing of any commodity purchased by them. The undertaking in the declaration form (form No. XXXIV) that the purchased materials were meant for the purpose of resale and covered by the dealer’s registration certificate did not mean that it must be sold in the same form. The exigibility of sales tax would arise only when the nature of commodity would have undergone a change by bringing it outside the various descriptions and sub-descriptions of “iron and steel” mentioned in entry No. 46. The petitioners were authorised to purchase iron and steel free of tax on furnishing declaration forms on the basis of their registration certificates. If they ultimately sold iron and steel in any of its forms enumerated in the notification, there was no breach of the undertaking.
8. Let us now examine some decisions on the point.
The assessing officer, in support of his view, has relied upon the case of State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 (SC). This case went to the Supreme Court against the decision of the Madras High Court reported in [1970] 26 STC 416 (Pyarelal Malhotra v. Joint Commercial Tax Officer). This case is quite distinguishable as the list of declared goods given there at No. (iv) at the relevant time was :
iv) iron and steel, that is to say-
* * * * * (d) (i) steel plates, sold in the same (ii) steel sheets, form in which (iii) sheet bars and tin bars, they are directly (iv) rolled steel sections, and produced by the (v) tool alloy steel; rolling mill.
It is, therefore, obvious that conversion to a different category or form was not permissible under the Tamil Nadu Act. The following observations of the Supreme Court is relevant to be quoted :
…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.”
“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.
It may be mentioned that earlier the Supreme Court itself in the case of State of Madhya Bharat v. Hiralal [1966] 17 STC 313 has taken a similar view in favour of the dealer where the dealer after purchasing the scrap iron had converted the same into bars, flats and plates in his mills and sold them in the market. It was held that the raw materials having been only re-rolled to give them attractive and acceptable forms, they did not in the process lose their character as “iron and steel” exempted under the notification. This decision was distinguished in the case of State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319 (SC) on the ground that “language of the provisions giving the exemptions justified this interpretation”. But in the Tamil Nadu Statute, each commercial commodity became a separate object of taxation in a series of sales of that “commercial commodity” so long as it retained its identity as that commodity.
The Tamil Nadu case [State of Tamil Nadu v. Pyare Lal Malhotva [1976] 37 STC 319 (SC)] was considered by the Bombay High Court in the case of Shree Ram Steel Rotting Mitts v. State of Maharashtra [1983] 63 STC 202 and it was held that a particular transaction of sale of the purchased goods would be a resale if it falls under any of the three sub-clauses of Clause (26) of Section 2 of the Bombay Sales Tax Act. In the Bombay case also, two dealers had purchased ingots and rolling scrap from one registered dealer and another unregistered dealer and after re-rolling them into M. S. rounds sold them to customers paying sales tax at the lower prescribed rate of 4 per cent. It was held that neither of them was liable to pay sales tax on the sale of M. S. rounds, nor the 2nd dealer was liable to pay any purchase tax in respect of his purchase of rolling scrap from an unregistered dealer as the goods purchased by both the dealers were of the description specified in entry No. 3 in Part I of Schedule B to the Act. Equally, there was no dispute that the goods sold by both the dealers after processing the purchased goods were goods which were described in the very same entry.
9. Shri Agarwal cited a large number of decisions to show that the sub-items or various forms of the categories enumerated in the notified Schedule were held to mean the same item as a specified item.
Let us notice these decisions.
Commissioner of Sales Tax, Lucknow v. D.S. Bist [1979] 44 STC 392 (SC) is a case where the assessee owned some tea gardens in the State of U. P. and sold the tea leaves grown in his garden after processing and packing. A question arose as to whether on that account the tea leaves ceased to be an “agricultural produce” and liable to sales tax. It was held that the tea leaves continued to be an agricultural produce even after subjecting them to processing and therefore they were not exigible to sales tax.
In the case of Alladi Venkateswarlu v. Government of Andhra Pradesh [1978] 41 STC 394 (SC), a question arose as to whether “atukulu” (parched rice) and “muramaralu” (puffed rice) were “rice” within the meaning of entry 66(b) of the First Schedule to the Andhra Pradesh General Sales Tax Act, 1957. On a consideration of the entire scheme of the Act, it was held that the term “rice” as ordinarily understood in English language would include both parched and puffed rice.
Similarly, this Court in the case of State of Orissa v. Satyabadi Sahu & Sons [1982] 51 STC 75 held that “misri”, i.e., sugar-candy, would come within the meaning of “sugar”, and therefore, is a tax-free article coming within entry 34 of the list of exempted goods issued under the Orissa Sales Tax Act, 1947.
10. It is not necessary to cite all the other cases of this nature, e.g., the cases of “slices of pine-apple” and “pine-apple fruit” and “timber”, “log”, “paper”, “souvenir book”, etc., because on the facts and in the circumstances of the present case, we need not have to fall back upon any analogy of similarity inasmuch as entry 46 itself is wide and comprehensive enough to include the processed materials of the nature sold by the petitioners within its fold specifically as in spite of their conversion, they remain as one of the categories or sub-items of the various forms of the main item enumerated in the list.
11. The petitioners, in my view, therefore, have not committed any breach of the declaration given by them in the forms for purchasing the iron and steel materials which were utilised as raw materials and since undisputedly they have sold away the processed materials by utilising the purchased materials, they have not committed any violation of the second proviso to Section 5(2)(A)(a)(ii) of the Act.
12. As in my opinion, in spite of the conversion of the materials purchased by the petitioners from the selling dealers, the various commodities manufactured by them in their rolling mills although became by name different commercial commodities they being specifically enumerated and mentioned in the definition of “iron and steel”, the assessing authority has completely misdirected himself in holding that they ‘became different goods and therefore the petitioners violated the provisions of law.
13. The writ applications therefore must succeed. They are accordingly allowed. The further demands raised on this account under the impugned orders in annexure 1 to each of the writ applications are hereby quashed.
In the circumstances, however, I will not saddle the opposite parties with costs.
K.P. Mohapatra, J.
I agree.