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TMI Blog1986 (7) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... first sale turnover of M.S. rounds is four per cent, if such M.S. rounds had been manufactured out of the scrap iron, on the sale or purchase of which tax had been paid to this State, no tax is payable. (ii) For the period on and after 1st April, 1978, in respect of M.S. rounds manufactured within the State, though the rate of tax is 4 per cent, a deduction to the extent of the amount of tax paid on the turnover of scrap iron, out of which M.S. rounds were manufactured, is allowed. (iii) In respect of M.S. rounds manufactured outside the State and brought for sale within the State, the levy is 4 per cent, both prior to 1st April, 1978, and after 1st April, 1978. 3.. On the basis of the above facts and circumstances, the plea raised by the petitioner is that there is discrimination in the rate of tax on sales of M.S. rounds manufactured within the State and M.S. rounds manufactured outside the State and brought within the State and sold, and therefore the provision is violative of article 304(a) of the Constitution. The stand of the State is that the same rate of 4 per cent at single point is levied on locally manufactured as well as imported items of iron and steel and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (4) Notwithstanding anything contained in sub-section (1), a tax under this Act shall be levied in respect of the sale or purchase of any of the declared goods mentioned in column (2) of the Fourth Schedule at the rate and only at the point specified in the corresponding entries of columns (4) and (3) of the said Schedule on the dealer liable to tax under this Act on his taxable turnover of sales or purchases in each year relating to such goods." The relevant part of the IV Schedule referred to in section 5(4) of the State Act reads: -------------------------------------------------------------------------------------- Sl. Description of the goods Point of levy Period for Rate No. which of tax applicable 1 2 3 4 5 -------------------------------------------------------------------------------------- *** *** *** 2. Iron and steel, that is to say,- (i) Pig iron and cast iron including Sale by the 15-7-75 4% ingot moulds, bottom plates, iron first or earliest to scrap, cast iron scrap, runner scrap of successive 31-10-82 iron skull scrap dealers in the State liable to tax under this Act -------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above categories; do. do. do. -------------------------------------------------------------------------------------Act 13 of 82 (1-10-57 to 31-3-78) Explanation II.-Where tax has been paid in respect of the sale or purchase of- (i) iron scrap, cast iron scrap, runner scrap and iron skull scrap referred to in entry (i) of serial number 2 or in respect of steel melting scrap in all forms including steel skull turnings and borings referred to in entry (x) of serial number 2 and out of the said scrap, steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes) referred to in entry (ii) of serial number 2 are manufactured and sold; or (ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes) referred to in entry (ii) of serial number 2 and out of the said steel semis any re-rolled products of iron and steel referred to in any one or more of the entries at (iii), (iv), (v), (vi), (vii) and (xv) of serial No. 2 are manufactured and sold, no tax shall be leviable on the sale of the said steel semis or the re-rolled products as the case may be: Provided that the dealer claiming exemption of tax under this explanation furnishes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in respect of the period after 1st April, 1978, though the rate of tax was 4 per cent on the sale turnover of the concerned items, deduction is required to be given to the extent of the amount of tax paid on items of iron and steel out of which the concerned item of iron and steel in respect of which tax is being levied was manufactured. 7.. The petitioner has produced three assessment orders for the period commencing from 1st September, 1978, to 30th August, 1979 (annexure-A), from 1st September, 1981, to 31st August, 1982 (annexure-B), and from 1st September, 1982, to 31st August, 1983 (annexure-C). Thus, the grievance of the petitioner relates to the period subsequent to 1st April, 1978. Therefore, we shall proceed to consider as to whether the impugned provision in so far it prescribes the rate of tax on items of iron and steel after 1st April, 1978, is violative of article 304(a) of the Constitution. 8.. As pointed out earlier, the restriction imposed under section 15 of the Central Act is that, in respect of declared goods there can only be a single point levy by the State concerned and such levy cannot exceed 4 per cent of the turnover. The relevant part of the IV Sch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f iron and steel, the levy is 4 per cent on its sale turnover and nothing short. The fact that deduction is given in respect of tax already paid on items of iron and steel, out of which the latter goods were manufactured, is no basis to hold that the rate of tax on the latter goods is less than 4 per cent. Therefore, the very basis on which the contention is advanced by the petitioner is untenable. In fact, as stated earlier, the provision is intended to avoid repetitive tax at 4 per cent when every item of iron and steel is converted into another item and therefore obviously intended to give full effect to the object and purpose with which the restriction is imposed on the power of the State to levy tax on the sales of declared goods. 9. Learned counsel for the petitioner, however, strenuously contended that the challenge to the constitutionality of the impugned provision has to be upheld in view of the ratio of the decisions of the Supreme Court in the following cases: (i) Firm A.T.B. Mehtab Majid Co. v. State of Madras [1963] 14 STC 355 (SC); AIR 1963 SC 928. In the said case, the validity of rule 16(2) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat on and after 1st April, 1978, there had been no difference in the rate of tax and the provision for giving deduction to the extent of amount of tax paid on items of iron and steel out of which some other item, the sale turnover of which constituted the subject-matter of levy in a given case, was manufactured, could not be regarded as discriminatory. He relied on the following decisions: (i) V. Guruviah Naidu and Sons v. State of Tamil Nadu [1976] 38 STC 565 (SC). This was a case in which the rate of tax on dressed hides and skins manufactured outside the State and brought within the State of Madras for sale, was questioned. The contention raised in the said case was similar to the one raised in this case. The relevant provisions of the Madras General Sales Tax Act provided for deducting the tax paid on the raw hides and skins out of the total amount of tax payable on the sale turnover of dressed hides and skins. The appellant in the said case placed reliance on the decisions in Mehtab's case [1963] 14 STC 355 (SC); AIR 1963 SC 928 and Abdul Shukoor's case [1964] 15 STC 719 (SC); AIR 1964 SC 1729. The Supreme Court upheld the validity of the provision. The relevant portion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch also we are bound, we have to uphold the validity of entry 9(b)." It may be seen from the above decision that the court expressed the view that though the argument received support from the earlier judgment of the Supreme Court in Mehtab's case [1963] 14 STC 355 (SC); AIR 1963 SC 928, the subsequent decisions of the Supreme Court in State of Madras v. Nataraja Mudaliar [1968] 22 STC 376 (SC) and Rattan Lal and Co. v. Assessing Authority [1970] 25 STC 136 (SC), struck a different note and the view taken in those decisions must prevail. In these two decisions the Supreme Court held that in order that the levy is violative of article 304(a) of the Constitution, there must be difference in the rate of tax as between goods manufactured within the State and those manufactured outside the State. 11.. As pointed out by us earlier, there is no difference in the rate of tax at all in so far it relates to the period on and after 1st April, 1978. The rate is 4 per cent whether the particular item of iron and steel is manufactured within the State or brought from outside the State. The fact that deduction is given in respect of tax already paid on the. sale turnover of a particular item ..... X X X X Extracts X X X X X X X X Extracts X X X X
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