1976 (1) TMI 151 - SC - VAT and Sales Tax

Whether the iron and steel scrap, out of which the manufactured goods sought to be subjected to sales tax? Held that - On an amendment of section 14(iv) of the Central Act, serial No. 4 of the Second Schedule of the Tamil Nadu Act was also correspondingly amended so as to reproduce the sixteen items found in section 14(iv) of the Central Act. Hence, the decision of these cases really depends on an interpretation of section 14 of the Central Act, which we have already given above. Other provisions only fortify our conclusion. The result is that we allow these appeals. We set aside the orders of the High Court and restore the orders of the assessing authorities in cases giving rise to Civil Appeals Nos. 880-883 of 1971. In cases out of which Civil Appeals Nos. 58-59 of 1971 arise, we set aside the judgment of the High Court but maintain its order dismissing the writ petitions and order that the assessing authorities will now proceed to determine such questions of fact and law as still survive for determination after the decision given above of the question considered by us.

Issues Involved:
1. Whether the iron and steel scrap used to manufacture goods that are subject to sales tax has already been taxed.
2. Interpretation of Section 14 of the Central Sales Tax Act regarding the classification of iron and steel goods.
3. Applicability of Section 15 of the Central Sales Tax Act on the Tamil Nadu Sales Tax Act.
4. Determination of whether a new commercial commodity is formed for the purposes of sales tax.

Issue-wise Detailed Analysis:

1. Whether the iron and steel scrap used to manufacture goods that are subject to sales tax has already been taxed:
The core issue was whether iron and steel scrap, already taxed, could be taxed again when converted into different forms like "steel rounds, flats, angles, plates, bars." The Madras High Court held that these goods could not be taxed again if the material had already been subjected to sales tax. However, this decision was contested by the State of Tamil Nadu, which argued that each type of "iron and steel" goods was a commercially different and separately taxable species.

2. Interpretation of Section 14 of the Central Sales Tax Act regarding the classification of iron and steel goods:
Section 14 of the Central Act declares certain goods of special importance in inter-State trade or commerce, listing various forms of iron and steel. The court examined the original and amended versions of Section 14(iv) and concluded that the intention was to enumerate separately taxable goods rather than treating all forms as a single taxable substance. The court noted that the purpose of listing specific categories was to indicate that each item constitutes a separate class for a series of sales, thus subject to separate taxation.

3. Applicability of Section 15 of the Central Sales Tax Act on the Tamil Nadu Sales Tax Act:
Section 15 imposes restrictions on State enactments imposing sales tax on declared goods, ensuring that the tax does not exceed three percent and is not levied at more than one stage. The court found that the Tamil Nadu Sales Tax Act did not violate Section 15 of the Central Act. The Tamil Nadu Act's provisions were consistent with the Central Act, and the amendments to the Tamil Nadu Act's Second Schedule were in line with the Central Act's amendments.

4. Determination of whether a new commercial commodity is formed for the purposes of sales tax:
The court emphasized that sales tax laws are intended to tax sales of different commercial commodities, not the substances out of which they are made. When a new commercial commodity emerges through manufacturing, it becomes a separate taxable entity. The court referred to previous judgments, such as Devi Dass Gopal Krishnan v. State of Punjab, to support the principle that a change in the form of a substance, resulting in a new marketable commodity, constitutes a new taxable event. The court concluded that each category of iron and steel, as specified in Section 14(iv), represents a separate species of commercial commodity for sales tax purposes.

Judgment:
The court allowed the appeals, set aside the orders of the High Court, and restored the orders of the assessing authorities in Civil Appeals Nos. 880-883 of 1971. In Civil Appeals Nos. 58-59 of 1971, the court set aside the High Court's judgment but maintained its order dismissing the writ petitions, directing the assessing authorities to determine any remaining questions of fact and law. The parties were ordered to bear their own costs. Appeals allowed.

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