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TMI Blog2011 (2) TMI 1253X X X X Extracts X X X X X X X X Extracts X X X X ..... ergy, and the Department of Atomic Energy cannot be said to have sold goods to itself. The STAT was, therefore, justified in holding that the transaction was in the nature of a stock transfer, and did not amount to inter-State sale - Tax Revision Case Nos. 198, 201 and 205 of 1988 and 15 and 133 of 1998 - - - Dated:- 23-2-2011 - V. V. S. Rao, Ramesh Ranganathan, JJ. R. S. Murthy for the Assessee Government Pleader for Taxes for the Department ORDER T. R. C. No. 198 of 1988 and batch:- Ramesh Ranganathan, J:- T. R. C. Nos. 198, 201 and 205 of 1988 are filed by M/s. Nuclear Fuel Complex, Hyderabad (hereinafter called NFC ), against the order of the Sales Tax Appellate Tribunal (STAT) in T. A. Nos. 1054, 1064 and 1060 of 1987. They arise under the Andhra Pradesh General Sales Tax Act, and relate to the assessment years 1981-82, 1982-83 and 1980-81, respectively. The questions which arose for consideration, before the STAT, included whether stainless steel tubes, seamless stainless steel tubes, stainless steel ball bearing tubes and stainless steel scrap fell under item 54 of the First Schedule or item 2 of the Third Schedule to the AP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainless steel, and did not fall within entry 2(ix) of the Third Schedule; entry 2 of the Third Schedule, mainly, dealt with iron and steel , and what was included in sub-item (xi) were steel tubes ; seamless stainless steel tubes did not fall within the ambit of that entry ; the Madras High Court, in R. K. Manufacturers v. Board of Revenue [1983] 54 STC 88 (Mad), had held that wires made out of stainless steel should be treated as articles of stainless steel ; and, therefore, seamless stainless steel tubes and stainless steel ball bearing tubes were also articles of stainless steel within the meaning of entry 54 of the First Schedule to the Act. T. R. C. Nos. 133 and 15 of 1998:- T. R. C. Nos. 133 and 15 of 1998 are preferred by the Revenue against the order of the STAT in T. A. Nos. 279 and 280 of 1994, respectively. A similar question, as in T. A. No. 1054 of 1987 and batch, arose for consideration in T. A. Nos. 279 and 280 of 1994. The other question was whether supply of goods, to various units of the Department of Atomic Energy in other States, amounted to inter-State sales or stock transfers. On the question of supply of goods to other units of the Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier decision of the STAT in T. A. No. 1054 of 1987 and batch dated January 21, 1988, and in view of the decision of the Madras High Court in R. K. Manufacturers [1983] 54. STC 88 (Mad) ; the said decision of the Madras High Court in R. K. Manufacturers [1983] 54 STC 88 (Mad) was held to be no longer good law by the Madras High Court in Hindustan Wires Limited v. State of Tamil Nadu [1992] 86 STC 1 (Mad) in the light of the judgment of the Supreme Court in Commissioner of Income-tax v. Krishna Copper and Steel Rolling Mills [1992] 193 ITR 281 (SC) ; the Madras High Court, in Hindustan Wires Limited [1992] 86 STC 1 (Mad), had held that the words iron and steel mentioned in the main item included all kinds of steel, like alloy steel, etc., and, if iron and steel occurring in the main item included non-alloy steel and alloy steel including stainless steel, the same construction should be placed on sub-items (xi) and (xv) also. The STAT, while noting the contention of the Revenue, that in view of sub-item (ix) the expression alloy and special steel applied only to sub-items (i) to (viii) and not to sub-items (x) to (xvi), observed that the Madras High Court, in Hindustan Wires Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sified. It is necessary, therefore, to first examine whether or not the goods in question fall within entry 2(xi) of the Third Schedule to the Act. Interpretation of an entry, under the tax laws, is a quasi-judicial function. (State of Kerala v. Kurian Abraham Pvt. Ltd. [2008] 13 VST 1 (SC); [2008] 3 SCC 582). While interpreting an entry, the court's role is to consider its effect after examining it from different angles. (Ponds India Ltd. (Merged With H. L. Ltd.) v. Commissioner of Trade Tax [2008] 15 VST 256 (SC) ; [2008] 8 SCC 369). Neither can one single universal test be applied nor can there be a static parameter for proper classification. Functional utility, design, shape and predominant usage have also to be taken into account while determining the classification of an item. (O. K. Play (India) Ltd. v. Commissioner of Central Excise [2005] 4 RC 293 (SC) ; [2005] 2 SCC 460 and A. Nagaraju Bros. v. State of Andhra Pradesh [1994] 95 STC 1 (SC); [1994] Supp (3) SCC 122). Different tests are laid down for interpretation of an entry in a taxing statute namely, dictionary meaning, technical meaning, user's point of view, popular meaning, etc. (Ponds India Ltd. [2008] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the First Schedule to the Act, as it stood at the relevant time, read as articles of stainless steel . Likewise entry 2 of the Third Schedule to the Act, (i.e., declared goods in respect of which a single point tax only is leviable under section 6 of the Act), read as under:- S. No. Description of goods Point of levy Rate of tax 2. Iron and steel, that is to say:- (i) Pig iron (sponge iron) and cast iron including ingot, moulds, and bottom plates; At every point of sale in the State 4 paise in the rupee (ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes); (iii) skelp bars, tin bars, sheet bars, hoe-bars and sleeper bars; (iv) steel bars (rounds, rods, squares, flats, octagons and hexagons; plain and ribbed or twisted, in coil form as well as straight length); (v) steel structurals (angles, joists, channels, tees, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of the pre-amended section 14(iv) of the CST Act fell for consideration before the Punjab and Haryana High Court in Devgun Iron and Steel Rolling Mills, Gobindgarh v. State of Punjab [1961] 12 STC 590 (P and H). The petitioners therein purchased steel and rolled it into rolled steel sections. They claimed that the process of rolling steel into rolled steel sections was not a process of manufacture ; this process amounted to no more than making the steel to be a more marketable commodity as such ; and the nature and character of the commodity did not undergo any alteration. It is in this context that the Division Bench held (page 592 in 12 STC):- . . .In section 14 of the Central Sales Tax Act (No. 74 of 1956), clause (iv) deals with 'iron and steel' as one of the goods declared of special importance in inter-State trade or commerce, and under this clause there are four heads, of which head (a) relates to pig iron and iron scrap, head (c) to steel scrap, steel ingots, steel billets, steel bars and rods, and head (d)(iv) to rolled steel sections sold in the same form in which they are directly produced by the rolling mills. It is dear that rolled steel sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h normally taxes sales of 'goods' to a law which taxes sales of substances out of which goods are made. We, however, prefer the more natural and normal interpretation which follows plainly from the fact of separate specification and numbering of each item. This means that each item so specified forms a separate species for each series of sales although they may all belong to the genus : 'iron and steel'. Hence, if iron and steel 'plates' are melted and converted into 'wire' and then sold in the market, such wire would only be taxable once so long as it retains its identity as commercial goods belonging to the category 'wire' made of either iron or steel. The mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity, would make no difference for purposes of the law of sales tax. The object appears to us to be to tax sales of goods of each variety and not the sale of the substance out of which they are made. As we all know, sales tax law is intended to tax sales of different commercial commodities and not to tax the production or manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 with effect from April 1, 1973. The reason given, in the Statement of Objects and Reasons of the 1972 Amendment Act, for an elucidation of the definition of iron and steel, was that the definition had led to varying interpretations by assessing authorities and the courts so that a comprehensive list of specified declared iron and steel goods would remove ambiguity. The Select Committee, which recommended the amendment, called each specified category a sub-item falling under iron and steel . Apparently, the intention was to consider each sub-item as a separate taxable commodity for the purpose of sales tax. The statement of reasons for amendment speaks of section 14(iv) as a definition of iron and steel . A definition is expected to be exhaustive. The object of section 14 is not to lay down that all the categories or sub-items of goods, as specified separately, are to be viewed as a single salable commodity called iron and steel for the purposes of determining a starting point for a series of sales. Each sub-category of a sub-item retains its identity as a commercially separate item for purposes of sales tax so long as it retains the sub-division. The more natural an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n expressed by the Madras High Court in Hindustan Wires Limited [1992] 86 STC 1 (Mad). This question can also be examined from another angle. Entry 2 of the Third Schedule to the Act uses the words that is to say . The expression that is to say is the commencement of an ancillary clause which explains the meaning of the principal clause. It has the following properties:- (1) it must not be contrary to the principal clause; (2) it must neither increase nor diminish it; (3) but where the principal clause is general in terms it may restrict it. (Stroud's Judicial Dictionary, 4th Edition Volume 5, at page 2753 ; Pyare Lal Malhotra [1976] 37 STC 319 (SC)). The expression that is to say is descriptive, enumerative and exhaustive and circumscribes to a great extent the scope of the entry. (Commissioner of Sales Tax v. Popular Trading Co. [2000] 118 STC 379 (SC) ; AIR 2000 SC 1578, Castrol India Ltd. v. Commissioner of Central Excise [2005] 4 RC 370 (SC); [2005] 3 SCC 30). The words that is to say are limitative and not merely illustrative. (Tan Bug Taim v. Collector of Bombay AIR 1946 Bom 216). Ordinarily, the expression that is to say is employed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the species of the genus iron and steel under section 14(iv) of the Central Sales Tax Act and, therefore, could not be subjected to tax in excess of four per cent in view of section 15 of the Central Sales Tax Act. After referring to the judgment of the Supreme Court in Pyare Lal Malhotra [1976] 37 STC 319 (SC), the Division Bench of the Allahabad High Court held (pages 545 and 546 in 32 VST):- From the perusal of the 16 categories under the 'iron and steel' it appears that sub-items (i) to (viii) are in the nature of raw material or primary iron and steel and items Nos. (x) to (xvi) are derivatives of such primary materials and raw materials. .... The next vital question for consideration is whether the 'alloy and steel' mentioned in sub-item (ix) will cover the stainless steel wire. The words 'alloy and special steel' are qualified by the words 'of any of the above categories'. The language is plain and unambiguous. Therefore, we are of the view that only those items which are mentioned in sub-items (i) to (viii) are covered under 'alloy and special steel'. It appears that by using the words 'of any of the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hotra [1976] 37 STC 319 (SC). Sales tax laws are intended to tax sales of different commercial commodities. The object is to tax sale of goods of each variety, and not the sale of the substance out of which they are made. As soon as a separate commercial commodity emerges or comes into existence, they become separately taxable goods or entities for purposes of sales tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type. Stainless steel is a corrosion-resistant type of alloy steel which contains a minimum of 12 per cent chromium. The latter is the element which confers upon the steel its property of resisting attack by the atmosphere or by a number of chemical re-agents. The effect is attributed to the ability of chromium to form a thin, but a very tenacious, film of oxide at the surface of the alloy which resists attack by most oxidising agents. The resistance to corrosive attack is enhanced if nickel be added, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al circles or in popular parlance. It cannot, therefore, be said that the Legislature had used the word articles in the meaning attached to it in popular parlance. (State of Gujarat v. Keshavlal and Sons [1966] 17 STC 170 (Guj)). Seamless stainless steel tubes, stainless steel tubes and stainless steel ball bearing tubes are articles of stainless steel as the word article , in entry 54 of the First Schedule to the Act, has been used in a wider sense to include not only a particular commodity or a thing for sale, but also a component part, a distinct part or a portion. Even if stainless steel tubes, seamless stainless steel tubes and stainless steel ball bearing tubes are held not to be whole commodities, but merely component parts, they would, nonetheless, fall within the meaning of article and, as they would be articles of stainless steel , the Revenue is justified in contending that the said goods fall within the ambit of item 54 of the First Schedule, and not item 2 of the Third Schedule to the Act. In Hindustan Wires Limited [1992] 86 STC 1 (Mad), the Division Bench of the Madras High Court has given a narrow and restricted meaning to the word articles with whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lishments, separate planning and separate management, but these aspects by themselves do not detract from the basic characteristic of communion with the corporate body that had created these units or divisions. They can claim no independent existence apart from the company itself. The property of these units or divisions is legally held by the company. The profits generated by the units form part of the company's income and will go to the benefit of general body of shareholders of the company. So also, the liabilities or losses incurred by the individual units, in ultimate analysis, will have to be borne by the company. It is the company (the K. C. P. Ltd.) that can sue for the recovery of property or dues or be sued for the outstandings due on account of dealings of the units. It is on record that a single balance sheet is prepared by the company in respect of all the units and divisions owned and controlled by the company. . . (emphasis supplied). Transfer of goods by NFC to other units of the Department of Atomic Energy does not constitute sale as they are all units of the Department of Atomic Energy, and the Department of Atomic Energy cannot be said to have sold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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