1968 (2) TMI 107 - HC - VAT and Sales Tax

Summary

Issues:
1. Whether the sale of 'fabricated mild steel round/flat bars' qualifies as 'resale' under section 2(26)(iii) of the Bombay Sales Tax Act, 1959?
2. Whether fabricated mild steel bars are used for the same purpose as mild steel bars directly produced from rolling mills?
3. Whether fabricated mild steel round/flat bars fall under clause (c) of entry No. 3 of Part 1 of Schedule B to the Bombay Sales Tax Act, 1959?

Analysis:
The case involved a reference to the High Court by the Sales Tax Tribunal regarding the classification of 'fabricated mild steel round/flat bars' for sales tax purposes. The key issue was whether these bars qualified as 'resale' under the Act. The respondents, who operated a re-rolling mill, sought clarification on the tax treatment of their fabricated material. The definition of 'resale' under section 2(26) was crucial, particularly sub-clause (iii) which referred to Schedule B, specifically entry No. 3 in Part 1. The contention was whether the fabricated bars fell under sub-entry (b) or (c) of item No. 3. The department argued that the bars should be classified under (b) due to additional processes like bending or drilling, while the respondents maintained they still qualified as steel bars under (c).

The Court delved into the interpretation of Schedule B and the distinction between different sub-entries. It was noted that while sub-entry (d) required goods to be sold in the same form as produced in the rolling mill, no such condition applied to sub-entry (c) which covered steel bars. The Court agreed with the respondents that the fabricated bars retained their essential nature as steel bars despite additional processes, aligning with the purpose of Schedule B to prevent double taxation on essential goods in inter-State trade. A similar case precedent from the Gujarat High Court was cited to support this interpretation, emphasizing that minor alterations like riveting did not change the fundamental nature of the steel sections.

Ultimately, the Court ruled in favor of the respondents, affirming that the fabricated mild steel bars fell within entry 3(c) of Schedule B and qualified as 'resale' under section 2(26)(iii) of the Act. The judgment favored the respondents, and the Commissioner was directed to bear the respondents' costs. The decision clarified the tax treatment of the fabricated bars and highlighted the importance of interpreting tax laws in line with the intended scope and purpose of relevant provisions.