2013 (3) TMI 575 - HC - VAT and Sales Tax

Treatment to the stranded rods as items of iron and steel falling under section 14 of the Central Sales Tax Act 1956 - Whether in common parlance wire rods and stranded rods are one and the same or are they two different distinct commercial commodities as understood in the market? Held that - When under the heading of iron and steel when iron rods and wire rods are drawn galvanized aluminized tinned or coated such as by copper was introduced as a specific entry if wire rods are clubbed or twisted together so as to form stranded rods certainly the same cannot be included in the wire rods . The reason being when the Parliament has minutely brought about the difference between the 16 items which are enumerated therein and if they have not chosen to include in the list stranded rods the reason is obvious. They have no intention of extending the said benefit to stranded rods. Though stranded rods are formed out of wire rods it cannot be said that in market parlance both of them are treated as the same. Further the said product is not used by the people at large throughout the country. It is a specialized product meant for a specific purpose which is not commonly used by the people at large throughout the country. In that view of the matter the authorities were justified in holding that the stranded rods do not fall within the word wire rod and is not entitled to the benefit of concessional rate of tax and therefore it falls under general category under section 4(1)(b) of the Karnataka VAT Act. In fact all the three authorities have recorded a concurrent finding of fact though by giving different reasons no fault could be found with the ultimate finding recorded by them. Accordingly the substantial question of law framed is answered in favour of the Revenue and against the assessee.

Issues Involved:
1. Classification of stranded rods under Section 14 of the Central Sales Tax Act, 1956.
2. Tax rate applicability on stranded rods.
3. Interpretation of "wire rods" and "stranded rods" in market parlance.
4. Applicability of judgments and statutory amendments to the case.

Issue-Wise Detailed Analysis:

1. Classification of Stranded Rods under Section 14 of the Central Sales Tax Act, 1956:
The primary issue revolves around whether stranded rods can be classified under Section 14(iv)(xv) of the Central Sales Tax Act, 1956, which lists "wire rods and wire-rolled, drawn, galvanized, aluminized, tinned or coated such as by copper" as goods of special importance. The assessee argued that stranded rods, being composed of multiple wires, should be classified as wire rods and thus benefit from the reduced tax rate of 4%. However, the authorities and the court found that stranded rods are not specifically listed under Section 14 and should not be considered the same as wire rods.

2. Tax Rate Applicability on Stranded Rods:
The assessee was initially taxed at a general rate of 12.5% by the assessing authority, which was later upheld by the Joint Commissioner of Commercial Taxes (Appeals) and the Karnataka Appellate Tribunal. The assessee contended that stranded rods should be taxed at the reduced rate of 4% applicable to wire rods under Section 14 of the Central Sales Tax Act. The court, however, upheld the authorities' decision, stating that stranded rods do not fall under the specified items of iron and steel in Section 14 and should be taxed at the general rate.

3. Interpretation of "Wire Rods" and "Stranded Rods" in Market Parlance:
The court examined whether wire rods and stranded rods are considered the same commodity in market parlance. The court referred to the Supreme Court judgment in State of Tamil Nadu v. Pyare Lal Malhotra, which emphasized that each specified item in Section 14 constitutes a separate commercial commodity. The court concluded that wire rods and stranded rods are distinct commodities in the market, with stranded rods being a specialized product used for specific purposes, unlike wire rods which have broader usage.

4. Applicability of Judgments and Statutory Amendments to the Case:
The court reviewed several judgments, including the Supreme Court's ruling in State of Tamil Nadu v. Pyare Lal Malhotra and the Karnataka High Court's decision in Bahri Steel Wires v. Additional Commercial Tax Officer. The court noted that the amendments to Section 14 aimed to clarify the classification of various iron and steel products. The court also referred to an unreported Supreme Court judgment in Collector of Central Excise, Indore, M.P. v. Anand Behari Steel Wires & Other Products Limited, which held that stranded wires remain classified as wires unless proven otherwise in market parlance. However, the court found that the specific listing of items under Section 14 does not include stranded rods, and thus the benefit of reduced tax rates does not apply to them.

Conclusion:
The court dismissed the revision petitions, affirming that stranded rods do not qualify as wire rods under Section 14 of the Central Sales Tax Act, 1956, and are subject to the general tax rate of 12.5%. The court emphasized the importance of market parlance and statutory interpretation in determining the classification and tax rate applicability of commodities.

← Previous Next →