1970 (4) TMI 134 - HC - VAT and Sales Tax

Issues Involved:
1. Validity of the levy of sales tax on iron flats, iron sheets, and iron bars made from iron scrap already subjected to tax.
2. Interpretation of "iron and steel" under Section 14 of the Central Sales Tax Act.
3. Determination of whether the process of converting iron scrap into rolled steel constitutes manufacturing.
4. Application of single-point tax as per Section 15 of the Central Sales Tax Act.

Detailed Analysis:

1. Validity of the Levy of Sales Tax:
The petitioners argued that the iron and steel scraps used to produce rolled mild steel rounds, flats, and angles had already suffered tax as first sale of declared goods. They contended that these items should not be taxed again as they are declared goods under Section 14 of the Central Sales Tax Act, which exempts them from tax on second and subsequent sales. The court examined the statutory provisions, particularly Section 3(1) and (2) and Section 4 of the Tamil Nadu General Sales Tax Act, 1959, and Schedule II of the Act, which specifies the point of levy and rate of tax for declared goods.

2. Interpretation of "Iron and Steel":
The petitioners contended that the term "iron and steel" in Section 14 of the Central Sales Tax Act includes all forms of iron and steel, whether in crude form or manufactured stage. They argued that the single-point tax should apply to the entire series of sales of iron and steel in all its forms. The court considered the explanatory note issued by the Government of India and various judicial precedents to interpret the scope of "iron and steel." It was concluded that the statute intended to treat all forms of iron and steel, from raw material to finished product, as "iron and steel."

3. Manufacturing Process:
The petitioners claimed that converting iron scrap into rolled steel does not constitute a manufacturing process. They argued that the process merely involves heating and beating the scrap into different shapes without changing its essential nature. The court referred to the Supreme Court's decisions in Devi Dass Gopal Krishnan v. State of Punjab and State of Madhya Bharat v. Hiralal to determine whether the process constitutes manufacturing. It was found that even if the process is considered manufacturing, the resulting product still qualifies as "iron and steel."

4. Single-Point Tax:
The substantial contention was that "iron and steel" should not be taxed at more than one stage and at more than the prescribed rate of 3% as per Section 15 of the Central Sales Tax Act. The court examined whether levying tax on rolled "iron and steel" bars and plates made from already taxed iron and steel scrap contravenes Section 15. It was concluded that the goods sold by the petitioners are "iron and steel" as defined in Section 14 of the Central Sales Tax Act and should not be taxed again if they had already suffered tax in their raw or unmanufactured stage.

Conclusion:
The court dismissed the writ petitions, giving liberty to the assessing authority to ascertain whether the iron and steel scrap used by the petitioners had already been subjected to tax and to proceed with the assessment in accordance with the law. The judgment emphasized that the goods, even in their manufactured state, did not cease to be "iron and steel" and should only be subjected to single-point tax.

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