2022 (2) TMI 1066 - HC - VAT and Sales Tax

Classification of goods - rate of Tax - steel tubes, steel strips etc. - taxable only at 4% falling under item No.4 of the second schedule of the Act or otherwise? - whether the bent steel supplied by the petitioner to Ashok Leyland Limited is a declared goods or not? - HELD THAT - This was answered by the Division Bench of this Court in the case of the petitioner in Tube Investments of India Limited vs. Deputy Commercial Tax Officer, Group III, Enforcement-I, Greams Road, Chennai and others 2002 (8) TMI 822 - MADRAS HIGH COURT wherein it was held that the fact that the specification of the tube or pipe supplied was given by the buyer would also make no difference, as what is supplied in fact, is the steel tube conforming to the specification given by the buyer and nothing more. The sales tax levied on steel tubes supplied by the petitioner, though put to use by the buyer as exhaust pipes, cannot exceed four per cent. Thus, it is evident that the issue involved in these writ petitions is no longer res integra as it was already answered by the Division Bench of this Court - petition allowed.

Summary

Issues:
1. Classification of steel tubes as declared goods.
2. Dispute over proper classification of bent steel tubes.
3. Validity of orders imposing additional sales tax.

Issue 1: Classification of steel tubes as declared goods
The petitioners, a registered company under the Tamil Nadu General Sales Tax Act, engaged in manufacturing and selling various items, including steel tubes. A dispute arose regarding the classification of bent steel tubes sold to Ashok Leyland Limited. The first respondent considered these sales as non-declared goods, relying on a previous tribunal order. The petitioners argued that the sales should be treated as declared goods taxable at 4%. The second respondent initially observed bent steel as declared goods but rejected the appeal based on the tribunal's order. However, a previous court decision in a similar case held that such steel tubes should be considered declared goods, and this decision was not challenged by the Revenue.

Issue 2: Dispute over proper classification of bent steel tubes
The primary issue in the writ petitions was whether the bent steel tubes supplied by the petitioners to Ashok Leyland Limited should be classified as declared goods. The Division Bench of the Court had previously addressed a similar issue in Tube Investments India Limited vs. Deputy Commercial Tax Officer, where it was held that the steel tubes supplied, even if used as part of a chassis/engine, should still be considered as steel tubes of a specific shape and length. The court emphasized that the State cannot impose a higher tax rate on declared goods based on their end use and that the sales tax on such steel tubes should not exceed 4%.

Issue 3: Validity of orders imposing additional sales tax
The orders imposing additional sales tax on the sale of bent steel tubes were challenged by the petitioners, citing the previous court decision that had already settled the issue of classification. The court, in light of its previous decision, set aside the impugned orders, concluding that the classification of the steel tubes as declared goods had already been determined and should not be subject to additional tax. The writ petitions were allowed, and no costs were imposed.

In conclusion, the High Court of Madras addressed the classification issue of steel tubes sold by the petitioners, confirming that the sales should be treated as declared goods based on previous court decisions. The court set aside the orders imposing additional sales tax, emphasizing that the State cannot impose higher tax rates on declared goods based on their end use.