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TMI Blog1981 (6) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... point. If the assessee were merely to resell those very goods, then such resales would be second or subsequent sales, and hence exempt from liability for assessment. What happens in the case, however, is that after the assessee purchases R.S. joists, angles, M.S. plates, flats and channels, the assessee does not resell them as such, but puts them into a process of manufacture. Outcomes, from this process, fully manufactured aircompressors, which the assessee thereafter sells in the market. The manufacturing process also leaves behind certain waste products or by-products of iron and steel, such, for instance, as bits of M.S. rods, plates, shavings, cuttings and other leavings. The assessee does not allow these materials to go to waste, but sells them for whatever price they fetch in the market. In the year 1972-73, the assessee sold for a total sum Rs. 1,13,130.68 iron and steel scrap which emerged out of its manufactory, in the manner aforesaid, either as a by-product, or as factory-waste. In its assessment to sales tax for that year, the assessee claimed that the sales turnover of these iron and steel waste products was exempt from sales tax since it only represented second or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcial exploitation, and so become different subjects of charge. The statutory scheme of single point levy is in recognition of the commercial reality that there might be a chain of sales of the self-same goods, passing from hand to hand, in the course of trade. The statute selects one particular point in the series of sales and imposes the liability at that point. In these events, the inquiry is whether the same goods career from one sale transaction into another in a sequence of sales. In other words, the successive sales in a series must not only be made of the same substance; it is necessary that they must bear the character of being the same marketable commodity as well. It is not to the point therefore to urge, as it is being argued in this case, that in the process of being turned over from one dealer to another, the intrinsic substance of the commodities is not lost, although their commercial identity might get altered sometimes beyond recognition. Single point taxation under our sales tax enactments is by no means based on the principle of the witticism that "drinking milk is only our way of eating grass". If this view were accepted, then not only the sale of the factory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver was entitled to exemption as second or subsequent sales of declared goods. When, on appeal, the Appellate Assistant Commissioner held that the scrap represented declared goods, what he did was to order the sales turnover in question to be completely exempt, as a necessary consequence. The Board, when it disagreed with the basis of the Appellate Assistant Commissioner's decision, ruled out the exemption and restored the assessment in which tax was charged at multi-point rate. The endeavour of the assessee's learned counsel now is to question this particular tax treatment which the Board has given to the turnover of Rs. 1,13,130.68, adopting the line of the assessing authority. His submission is that even on the footing that the items of iron and steel scrap sold by the assessee from out of its factory scrap-heap do not represent the self -same declared goods as R.S. joists, angles, M.S. plates, flats and channels, which were earlier purchased by the assessee in the State to serve as raw material, yet it cannot be gainsaid that their sale by the assessee is the first sale in the State, since the first time they emerged as iron and steel scrap in this State was in the assessee's f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59, following the recovery of incriminating slips of paper from the dealer's business place. The dealer appealed against the assessment. The Appellate Assistant Commissioner reversed the order of assessment, apparently without examining the materials to which reference was made in the assessment order. The Board of Revenue then took up the matter in revision, set aside the Assistant Commissioner's order, and restored the order of the assessing authority. The dealer took the order of the Board in appeal before this Court under section 37 of the Act. Before the learned Judges who heard the appeal an attempt was made on behalf of the assessee to put forward certain contentions of a factual nature which had not been raised at earlier stages of the proceedings. Ramaprasada Rao, J. (as he then was), speaking for the Bench, observed, in his characteristic style, that the High Court sitting in appeal under section 51 of the Act cannot "assist" an assessee by reopening the whole process when the assessee himself is shown not to have "assisted" the lower authorities with the relevant materials. The learned Government Pleader relied on this passage in the judgment and said that we too in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestions of fact and on questions of law. The Bench summed up the position by saying that the appeal from the Board to the High Court was, in effect, a first appeal. We regard this decision as laying down correctly the ambit of the appellate powers of this Court under section 37 of the Act. We hold that admitting or shutting down novel points raised by an appellant, which have not been raised in the court of first instance, is not a matter touching the jurisdiction of the appellate body. At the worst, it can only be a matter calling for the exercise of discretion by the appellate authority. Even the judgment of Ramaprasada Rao, J., to which reference has been made earlier, may be regarded as emphasising only this aspect of discretion, and not the basic question of jurisdiction. The learned Government Pleader then submitted that this Court should not exercise its discretion in the assessee's favour in the present case since all along, and even in this Court, the assessee had pursued an extreme position and had argued for the wholesale exemption of the turnover, a stand which cannot be sustained either on principle or by authority. It is not a legitimate exercise of this Court's di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cretion can legitimately be exercised is to entertain that plea and examine it on merits. For, whatever might be the role of discretion of other Appellate Tribunals, and whatever be the manner of its exercise in other proceedings for appeal, so far as this Court's appellate jurisdiction under section 37 of this Act is concerned, this Court has a responsibility, all its own, to see that not a pie more is levied or collected by the authorities than is imposed by the Act. It is this concern for correctitude in tax assessment which must punctuate the discretion of this Court in the matter of entertaining additional or new pleas in the appeal, as it must govern the court's ultimate decision on the merits of the case as well. We accordingly overrule the learned Government Pleader's objection and proceed to examine the assessee's contention on merits. We may observe, to start with, that it is surprising that an elementary position such as is now being argued should have so far eluded both the parties for so long. For, here is a simple case where iron and steel scrap are produced as an inevitable concomitant of factory production. You can call the scrap an industrial waste, or a by-produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint levy as declared by the charging provisions of section 3(1) would not apply to any sales turnover, if such turnover properly falls within any exemption provision or within any special taxing provision. Section 3(1) itself has an express saving clause, or parenthesis, to that effect. It follows, therefore, that when once it is found that the turnover falls to be taxed under item 4 of the Second Schedule at 3 per cent, the assessment made by the assessing authority, and restored by the Board, which levies tax at the rate of 3.5 per cent under section 3(1) of the Act must be set aside as illegal. This conclusion of ours finds support in an unreported decision of a Bench of this Court in T.C. No. 17 of 1964 decided on 23rd March, 1967, (P.S. Ramalingam v. Commissioner of Commercial Taxes, Madras). The Bench had to deal with more or less a similar case as ours. In that case too, the assessee in question had purchased iron and steel raw material such as rounds, angles, patti, channels, plates and the like. After putting them to a process of manufacture, the assessee was left with a quantity of scrap which he sold as such. The question was whether the scrap thus sold was to be as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , J., in the unreported case. We do not, however, think there is any conflict between the two decisions. As in the unreported case, so too in the later Bench case, the assessee in question was a manufacturer of finished goods from out of M.S. steel rounds and bars which were purchased in the State. In the process of manufacture of these rounds and bars into finished goods, steel scrap was left over, which the assessee sold within the State. The assessing authority brought to assessment the sale of scrap at single point, as first sale of scrap, invoking for the purpose, item 4(c) of the Second Schedule to the Act. It was the contention of the assessee that the sale of scrap was only a second sale of declared goods since the M. S. rods and bars from out of which the scrap was produced had already been subjected to single point levy as first sales in the State. This contention, however, was rejected by the assessing authority and the assessee's claim for exemption was negatived. It is clear from the judgment, as reported, that the Bench agreed entirely with this determination of the assessing authority and they upheld the assessment of tax at a single point under item 4(c) of the Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, must be subjected to multi-point levy. The question of multi-point levy was not, and could not have been, the subject of discourse in that case. For the one and only controversy between the revenue and the assessee in that case was whether the sale of converted steel scrap was completely exempt from sales tax as second sales of declared goods, as contended for by the assessee, or whether they were properly assessable to single point levy under item 4(c) of the Second Schedule, as maintained by the revenue. It is inconceivable that counsel for the assessee in that case could have invited an assessment to be made on his client under the multi-point rate of 3.5 per cent, when the assessment under revision had actually been made at the lesser rate of 3 per cent under item 4(c) of the Second Schedule. We are accordingly satisfied that there is nothing in this judgment which even remotely supports the contention of the learned Government Pleader that declared goods of one class converted into another class are liable for assessment, at the point of first sale after conversion, only under the multi-point rate of levy. In the result, we hold that the sales of scrap in the sum of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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