2011 (1) TMI 1050 - HC - VAT and Sales Tax

Cable tray - Whether covered by the term Iron & steel within the meaning of CST Act 1956? - According to Department, sub-section (iv) would apply to only those items of iron and steel which are specified in Clauses (i) to (xiv) thereunder - Held that - One of the tests would be as to whether the article produced is regarded in trade, by those who deal in it as distinct in identity from the commodity involved in its manufacture - The cable trays of different types and shapes come of the manufacturing process. There cannot be any doubt that the plates have undergone transformation into cable trays and the process involved was manufacturing. These are sold in the market to meet different mechanical and engineering needs as distinct from the plain or chequered plates - cable trays cannot be said to be declared goods within the meaning of Section 2(c) of the Act - thus the cable trays are not iron and steel as per section 3 of the Second Schedule of Sales Tax Act, 1975 read with section 14(iv) of the Act. Decided against the assessee Interest under Section 27(1) of the Delhi Sales Tax Act, 1975 - Held that - The dealer had chosen to withhold full payment of turnover tax by obtaining an interim order merely because a lot of others had done so, as it had paid turnover tax, giving full particulars thereof for the previous years - The provisions regarding interest were statutory provisions and there being no order against the running of interest from the time of default, the dealer could not now claim that the demand for interest by the Department was illegal or unauthorized - Decided against the assessee

Issues Involved:
1. Whether "Cable Tray" is covered by the term "Iron & Steel" under Section 14(iv)(vii) of the Central Sales Tax Act, 1956.
2. Whether the dealer was liable to pay interest under Section 27(1) of the Delhi Sales Tax Act, 1975.

Detailed Analysis:

Issue 1: Classification of "Cable Tray" under "Iron & Steel"
1. Background: The petitioner was assessed for the assessment year 1987-88, and an additional tax demand was raised. The petitioner sold cable trays without charging tax, claiming they were covered under "Iron & Steel" as per Section 14(iv)(vii) of the Central Sales Tax Act, 1956. The Department disagreed, leading to reassessment and further legal proceedings.

2. Petitioner's Argument: The petitioner argued that cable trays, whether perforated or ladder type, are essentially iron and steel plates, thus falling under Clause (vii) of Section 14(iv). The petitioner cited several judgments to support the claim that the transformation of plates into cable trays did not constitute "manufacture," and the goods retained their original identity as iron and steel plates.

3. Department's Argument: The Department contended that cable trays do not fall under the specified categories of iron and steel in Section 14(iv). They argued that the transformation involved in making cable trays from iron plates constituted "manufacture," resulting in a new product distinct from the original plates.

4. Court's Analysis: The court examined the relevant provisions of the Act and various judicial precedents. It emphasized that the term "iron and steel" in Section 14(iv) is exhaustive, covering only the items explicitly listed. The court noted that the processes involved in manufacturing cable trays (cutting, punching, bending, welding, and galvanizing) resulted in a new product with distinct commercial identity and use.

5. Conclusion: The court held that cable trays, whether perforated or ladder type, do not fall under the category of "iron and steel plates" as specified in Section 14(iv)(vii). Therefore, they are not "declared goods" under Section 2(c) of the Act. The first question was answered in favor of the Department.

Issue 2: Liability to Pay Interest under Section 27(1) of the Delhi Sales Tax Act, 1975
1. Background: The petitioner was assessed additional tax and interest for failing to charge tax on the sale of cable trays. The petitioner contested the liability to pay interest under Section 27(1) of the Delhi Sales Tax Act, 1975.

2. Legal Provision: Section 27(1) mandates that if a dealer fails to pay the tax due, they are liable to pay simple interest on the amount due from the date following the last date for submission of the return until the tax is paid or assessment is completed.

3. Court's Analysis: The court referred to the judgment in J.K. Synthetics Ltd. v. Commercial Taxes Officers, which held that tax due is related to the information furnished in the return, which must be correct and complete. The court also cited Hindustan Heavy Chemicals Ltd. v. Commercial Tax Officer, where it was held that interest is payable from the date the tax was due under the statute, regardless of any interim court orders.

4. Tribunal's Finding: The Tribunal found that the returns filed by the petitioner were not true and correct, indicating a willful omission and malafide intention. The Tribunal noted that the petitioner and the purchasing dealer were closely related family concerns, and the returns were filed with the intention to evade tax.

5. Conclusion: The court upheld the Tribunal's finding and ruled that the petitioner was liable to pay interest under Section 27(1). The second question was also answered in favor of the Department.

Final Judgment:
Both questions were answered in the affirmative, in favor of the Department and against the petitioner. The court affirmed the Department's position that cable trays are not classified under "Iron & Steel" as per Section 14(iv)(vii) and upheld the liability to pay interest under Section 27(1) of the Delhi Sales Tax Act, 1975.

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