1982 (3) TMI 238 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Classification of cold rolled steel strips under the Tamil Nadu General Sales Tax Act, 1959.
2. Applicability of the principle of promissory estoppel based on a previous communication from the Commissioner of Commercial Taxes.

Issue-wise Detailed Analysis:

1. Classification of Cold Rolled Steel Strips:

The primary issue in this case is whether cold rolled steel strips fall within item 4(d)(iv) of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959. The assessee, T.I. & M. Sales Limited, was assessed on an escaped turnover for the year 1970-71, with the Commercial Tax Officer holding that the cold rolled steel strips and metal sections were fabricated materials liable to tax at multi-point and additional sales tax. The assessee contended that these items fell under item 4(d)(iv) of the Second Schedule, which includes "rolled steel sections."

The court examined the definition and scope of "rolled steel sections" under item 4(d)(iv) and determined that the cold rolled steel strips sold by the assessee do indeed fall within this category. The court noted that the term "section" refers to a division or portion of a larger whole, and thus the cold rolled steel strips marketed by the assessee could be considered rolled steel sections. The court referenced the Gujarat High Court's decision in Vaiswaner Trading Co. v. State of Gujarat, which held that pieces of rolled steel sections joined together by riveting still retain the form in which they are produced by rolling mills.

The court also considered the decision of the Allahabad High Court in Commissioner of Sales Tax v. Ashwini and Co., which emphasized that the classification of an article as a rolled steel section does not depend on its end use. The court disagreed with the Madhya Pradesh High Court's decision in Commissioner of Sales Tax v. Hirji Nainsee & Co., which restricted the definition of rolled steel sections to items used for structural construction.

The court concluded that the cold rolled steel strips sold by the assessee were obtained in the same form in which they were produced by the rolling mills and therefore satisfied the requirements of item 4(d)(iv) of the Second Schedule to the Act. The court set aside the order of the Appellate Tribunal and allowed the tax revision case, entitling the assessee to costs.

2. Applicability of Promissory Estoppel:

The second contention raised by the assessee was based on a communication from the Commissioner of Commercial Taxes, dated 16th August 1962, which stated that cold rolled steel strips would fall under item 4(d)(iv) of the Second Schedule to the Act and be liable to tax at 2% single point. The assessee argued that based on this ruling, they had not collected sales tax on the cold rolled steel strips, and therefore, the respondent should be barred from asserting otherwise under the principle of promissory estoppel.

The court referenced the decision in Motilat Padampat Sugar Mills Co. Ltd. v. State of U.P., which dealt with the principle of promissory estoppel. However, the court also noted the decision in Subbier v. State of Madras, which stated that the government is not bound by circulars issued by departmental authorities. Given the court's conclusion on the merits of the classification issue, it found it unnecessary to decide on the applicability of promissory estoppel and left this question open.

Conclusion:

The court held that the cold rolled steel strips marketed by the assessee fall within item 4(d)(iv) of the Second Schedule to the Tamil Nadu General Sales Tax Act, 1959. The court set aside the order of the Appellate Tribunal, allowed the tax revision case, and awarded costs to the assessee. The second issue concerning promissory estoppel was left open, as the court's decision on the classification issue rendered it unnecessary to address this contention.