2010 (5) TMI 760 - HC - VAT and Sales Tax

Whether Stainless steel wire is one of the species of iron and steel under section 14(iv) of the Central Sales Tax Act and, therefore, cannot be subjected to tax in excess of four per cent in view of section 15 of the Central Sales Tax Act? Held that - Stainless steel wire is not covered under the entry of alloys and special steel on sub-item (ix) and, therefore, does not fall under iron and steel as defined under section 14(iv) of the Central Act. It cannot be treated as a declared commodity under section14 of the Central Act and, therefore, the provision of section 15 of the Central Act does not apply. Appeal dismissed.

Summary

Issues Involved:
1. Legality of Entry No. 8 of Notification No. S.T.I.F.-22375/XI-9(251)/97-U.P. Act-15-48-Order-98 dated November 23, 1998, and Entry No. 5 of Notification No. 306 dated January 29, 2001, regarding tax on stainless steel wires.
2. Validity of notices issued under section 21 of the U.P. Trade Tax Act, 1948.
3. Classification of stainless steel wire under section 14(iv) of the Central Sales Tax Act and its tax implications.

Detailed Analysis:

1. Legality of Entry No. 8 and Entry No. 5 Regarding Tax on Stainless Steel Wires:
The petitioners challenged the imposition of tax on stainless steel wires in excess of four percent as per the mentioned notifications. They argued that stainless steel wire should be classified under "iron and steel" as per section 14(iv) of the Central Sales Tax Act, thus limiting the tax to four percent under section 15 of the same Act. The court examined the relevant notifications and the statutory provisions to determine the legality of the tax rate imposed.

2. Validity of Notices Issued Under Section 21 of the U.P. Trade Tax Act, 1948:
The petitioners sought to quash the notices dated March 27, 2006, issued by the Deputy Commissioner (Assessment) and the Additional Commissioner, Trade Tax, Ghaziabad, under section 21 of the U.P. Trade Tax Act for the assessment year 1999-2000. The court needed to assess whether these notices were issued in accordance with the law and whether the petitioners were liable to the tax as per the disputed notifications.

3. Classification of Stainless Steel Wire Under Section 14(iv) of the Central Sales Tax Act and Its Tax Implications:
The core issue was whether stainless steel wire falls under the category "tool, alloy and special steels of any of the above categories" in item (ix) of clause (iv) of section 14 of the Central Sales Tax Act. The court analyzed various judgments and expert opinions to determine if stainless steel wire qualifies as a declared commodity under section 14(iv), which would restrict the state tax to four percent under section 15.

Court's Findings:
- The court referred to the decision in Raj Steel Rolling Mill, Moradabad, and the Madras High Court's ruling in Hindustan Wires Limited v. State of Tamil Nadu, which classified stainless steel as a special steel.
- The court also considered the Government of India's clarification that stainless steel is a type of alloy steel.
- However, the court noted that the apex court in Pyare Lal Malhotra's case held that the list of items under "iron and steel" is exhaustive and each item retains its commercial identity.
- The court concluded that stainless steel wire, being mentioned in sub-clause (xv), does not fall under "alloy and special steel" of sub-clause (ix) as it is not in the primary form but a derivative product.

Conclusion:
The court held that stainless steel wire is not covered under "alloys and special steel" in sub-item (ix) and thus does not fall under "iron and steel" as defined in section 14(iv) of the Central Sales Tax Act. Consequently, it is not a declared commodity under section 14, and the tax imposed by the state notifications is valid. The writ petition was dismissed, upholding the state's tax imposition on stainless steel wires beyond four percent.