1994 (3) TMI 108 - SC - VAT and Sales Tax

Whether wire is a different commercial commodity from rod? Held that - Iron wires cannot be taken as a separate taxable commodity and, if wire rods which were purchased by the appellants had suffered sales tax, the same could not be realised from the sale of wires. Shri Lahoty indeed brought to our notice Notifications No. 1 and II issued by the Government of Andhra Pradesh under G.O. Ms. No. 176 dated 13-2-1986 as per which sale of wires was exempted from sales tax starting from 1-4-1976 if the wire rods used by the wire drawing units in the State for the manufacture of wire had been subjected to tax under the State Act. The appeals are allowed by setting aside the impugned judgments and by leaving the appellants to pursue the matter of refund

Issues Involved:
1. Whether iron wires are separate commercial goods from wire rods for the purpose of sales tax.
2. Interpretation of sub-clause (xv) of clause (iv) of Section 14 of the Central Sales Tax Act, 1956.
3. Application of the single point sales tax principle on declared goods.
4. The relevance of the precedent set in the case of State of Tamil Nadu v. Pyare Lal.
5. The process of manufacturing wire from rods and its impact on taxability.
6. The nature of the order to be passed on the prayer of refund.

Detailed Analysis:

1. Whether iron wires are separate commercial goods from wire rods for the purpose of sales tax:
The court examined whether iron wires should be considered as separate commercial commodities from wire rods, which would impact their taxability under the single point sales tax principle. The court noted the complexity of determining when a new commercial commodity comes into existence due to manufacturing processes. The judgment referenced several precedents, including Tungabhadra Industries Ltd. v. Commercial Tax Officer and State of Karnataka v. Raghuram Shetty, to illustrate the varying interpretations of what constitutes a new commercial commodity.

2. Interpretation of sub-clause (xv) of clause (iv) of Section 14 of the Central Sales Tax Act, 1956:
The court focused on the interpretation of sub-clause (xv) of clause (iv) of Section 14, which lists "Wire rods and wires - rolled, drawn, galvanised, aluminised, tinned or coated such as by copper." The court concluded that the legislature intended to treat wire rods and wires as one commodity for the purpose of sales tax, as they are mentioned together in the same sub-item.

3. Application of the single point sales tax principle on declared goods:
The court emphasized that the single point sales tax principle aims to prevent multiple taxation on the same commodity. It was noted that if wire rods and wires are treated as the same commodity, taxing wires again after wire rods have already been taxed would violate this principle.

4. The relevance of the precedent set in the case of State of Tamil Nadu v. Pyare Lal:
The court extensively discussed the precedent set in State of Tamil Nadu v. Pyare Lal, where it was held that different products of iron and steel should be treated as separate commodities for tax purposes. However, the court noted that in Pyare Lal's case, the products in question were listed under different sub-items, unlike wire rods and wires which are listed together in the same sub-item.

5. The process of manufacturing wire from rods and its impact on taxability:
The court acknowledged the arguments regarding the manufacturing process of wire from rods and the contention that this process results in a new commercial commodity. However, the court decided not to base its judgment on the manufacturing process but rather on the legislative intent reflected in the sub-item grouping of wire rods and wires.

6. The nature of the order to be passed on the prayer of refund:
The court addressed the issue of refund, noting the order dated 6-1-1986, which directed consideration of the terms for refund. The court referred to Section 33-B of the Andhra Pradesh General Sales Tax Act, which deals with refunds in such cases. The appellants were left to pursue their refund claims in accordance with this provision.

Conclusion:
The Supreme Court concluded that iron wires cannot be taken as a separate taxable commodity from wire rods. If wire rods have already been subjected to sales tax, the same cannot be realized from the sale of wires. The appeals were allowed, setting aside the impugned judgments, and the appellants were directed to pursue their refund claims as per the relevant statutory provisions. Each party was ordered to bear its own costs.

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