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TMI Blog1998 (9) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... will refer to such restrictions and conditions at a later stage. In compliance with the Central Act, the Tamil Nadu General Sales Tax Act defines declared goods under section 2(h) of the TNGST Act. Section 4 is the charging section in respect of such declared goods and the same faithfully incorporates the restrictions imposed by section 15 of the Central Act. The Second Schedule to the Tamil Nadu General Sales Tax Act prescribes the rate of tax and the point of levy. Entry 4 of the Second Schedule talks of iron and steel and the various forms and by-products of iron and steel. There are as many as 16 types of iron and steel and all of them are chargeable at the point of first sale in the State at 4 per cent. There is no dispute about the above statutory provisions. 2.. In Pyarelal Malhotra v. Joint Commercial Tax Officer, Madras [1970] 26 STC 416 (Mad.), the validity of the levy of sales tax on iron plates, iron sheets and iron bars made out of iron scrap came up for consideration. The short question before the division Bench was whether iron scrap having already suffered tax, the authorities could again levy tax on the iron plates, sheets and bars made out of tax-suffered iron s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentations from the traders seeking waiver of tax for the period between April 10, 1970, the date of the Madras High Court judgment and January 19, 1976, the date of the Supreme Court judgment. The Government, after taking note of all the circumstances, directed that the tax from the steel re-rolling mills for the period from April 10, 1970 to January 19, 1976 be waived subject to the condition that the waiver will not apply to dealers who had collected the tax as such or in some other form. Regarding future liability, the Government invited the views of the then Board of Revenue. This waiver was granted in G.O. Ms. No. 4 dated January 3, 1977. In G.O. Ms. No. 484/ CTRE/dated May 29, 1980, the Government further directed that the tax due under the Central Act from the re-rolling mills for the same period in respect of end-products such as M.S. rounds, rods, etc., manufactured out of raw materials which had already suffered tax under the TNGST Act also be waived. There were again representations from the Tamil Nadu Steel Re-rollers Association in respect of the subsequent levy of sales tax on raw materials as well as end-products at 4 per cent respectively. They complained that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of a declaration of purchase from the steel re-rolling mills. There was a second amendment on February 22, 1988 issued in G.O. P. No. 150, dated February 22, 1988. Under the second amendment the sale of raw materials was exempted subject to the production of a declaration of purchase from the steel re-rolling mills and subject to the condition that the re-rolling mills remit to the assessing authority the tax in the raw materials so purchased and used in the manufacture of end-products sent on consignment sales/branch transfers to other States. It is this amendment on February 22, 1988 which cast a sting on the re-rolling mills. 6.. In G.O.P. No. 390 dated September 4, 1991, a notification II(1)/CTRE/ 147 (a-15)/91, was issued, in and by which the notification dated March 17, 1986 was superseded, with all the amendments. The fresh notification says that there will be a reduction of 2 per cent in respect of the tax payable by any dealer under the TNGST Act on the sales of raw materials falling under item 4 of Second Schedule to steel re-rolling mills in Tamil Nadu for manufacture of endproducts. The condition for the grant of the concessional rate is that the endproducts sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dly speaking, there are four categories of petitioners: (1) Scrap dealers: For illustrating the case of such scrap dealers we will take one case, namely, T.P. No. 3111 of 1997. We can also notice the grounds of attack of such scrap dealers in general. It is stated that such dealers purchase iron and steel scrap either from inside Tamil Nadu or from outside Tamil Nadu and the scrap is melted in furnace to produce ingots, billets, etc. They sell the ingots and billets to re-rolling mills inside Tamil Nadu or out of Tamil Nadu who undertake the task of hot rolling or cold rolling for the purpose of drawing rolled steel sections. These petitioners representing the scrap dealers are only apprehensive of the imposition of a further levy under the Additional Sales Tax Act, 1970. They therefore, contend that though the tax is reduced from 4 per cent to 2 per cent, they are likely to be affected because of the imposition of additional sales tax. They also complain of non-application of mind by the Government and contend that the impugned G.O. P. No. 390, dated September 4, 1991 is also vitiated by the principles of promissory estoppel. There is also a plea that the impugned notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tempt to impose the tax on the re-rolling mills on the purchase of raw materials by a mere notification under section 17 of the TNGST Act is absolutely illegal. It is also contended that section 7-A of the TNGST Act will not get attracted in respect of such purchases of scraps. Therefore, the attempt of the respondent to estimate the purchase value of the consignment sales and impose a tax at 2 per cent can only be regarded as a tax on consignment sales which is beyond the jurisdiction of the State Government. Therefore, the steel re-rolling mills attack the impugned G.O. P. No. 390 dated September 4, 1991 on the following grounds: (1) The State Government has no jurisdiction to legislate on the subject because of the constitutional entries. (2) The impugned notification is in violation of sections 14 and 15 of the Central Sales Tax Act. (3) The impugned notification is vague and unworkable. (4) Section 7-A of the TNGST Act is not at all attracted. (3) Tube manufacturers: The case of the tube manufacturers can be illustrated with the facts of T.P. No. 661 of 1997. The petitioner is carrying on business as manufacturers, dealers, importers, etc., in pipes, tubes and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les 301 and 304 of the Constitution of India. (4) Steel Authority of India (SAIL): A number of writ petitions/transferred petitions have been filed by the Steel Authority of India and their case is to some extent conflicting with some of the other petitioners. Their prayer itself is for the issue of a writ of mandamus to restrain the sales tax authorities from denying the benefits of the notification dated March 17, 1986 as amended by G.O.P. No. 150 dated February 22, 1988. The petitioners are a Government of India undertaking. They have steel plants in Bhilai, Rourkela, Durgapur and Bokaro for the production of mild steel products and hot rolled coils, skelps, angles, channels, plates, etc., as well as billets, blooms, ingots, slabs, etc. They have also alloy steel plants and stainless steel plants. After referring to the various notifications of the Government of Tamil Nadu, it is pointed out that the sales of raw materials like the products of SAIL are exempt from sales tax, so long as the purchaser is a steel re-rolling mill, engaged in the manufacture of endproducts. The purchaser has to prove their status by furnishing a declaration to the seller of raw materials (SAIL) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act itself contains a safety valve and the prohibition contained in the Central Sales Tax Act will not be violated and the tax shall never exceed 4 per cent. After pointing out that the re-rolling mills have to file a declaration to the first seller of raw materials it is pointed out that the grant of exemption was subject to the condition that if the re-rolling mills send the end-products on consignment basis to their branches or agents in other States, then the steel re-rolling mills have to remit the tax due on their purchase turnover of raw materials to assessing authority. In the words of the Revenue it is stated as below: Therefore, if the re-rolling mills do not abide by the conditions of selling the end-products either within the State or in the course of inter-State trade or commerce, they have to remit the tax due on their purchase turnover of steel raw materials used in the manufacture of end-products by way of penalty. It does not mean that the point of taxation was shifted from the sellers of steel raw materials to the re-rollers on their purchase turnover. Again the counter-affidavit says as follows: The effect of the amendment issued was therefore, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the petitioners are not entitled to exemption on sales of end-products manufactured outside the State of Tamil Nadu and imported into Tamil Nadu and sold locally. They are first sales in Tamil Nadu of the end-products and therefore, taxable under the TNGST Act. Reliance is placed on [1990] 77 STC 82 (SC); 4 SISTC 95 (SC) (Video Electronics Pvt. Ltd. v. State of Punjab). 10.. Counter-affidavits have been filed in respect of the W.Ps. filed by the tube manufacturers. A perusal of the same suggests that the Government denies exemption both on the ground that some of the manufacturers have factories outside Tamil Nadu and also on the ground that they are not steel re-rolling mills. So far as the second ground of defence it is stated that they purchased coils and skelps from the 3rd and 4th respondents. Even the third and fourth respondents did not accept the claim of the petitioners that they are re-rolling mills and therefore exemption was not available to them. It is pointed out that in the manufacture of end-products they produce steel tubes with continuous section by a process which is not equated to re-rolling. The counter-affidavit says that re-rolling is a process by which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edge and belief and nothing has been concealed therefrom. Signature with date. Name of the person signing the declaration. Status of the person signing the declaration in relation to the steel re-rolling mills. 12.. On the above pleadings and records, Mr. C. Natarajan, has projected the arguments on behalf of most of the petitioners. The first argument is that the intention of the Government had always been to maintain a single stage levy of iron and steel products and that is clear from G.O. P. No. 103/CTRE Department dated January 24, 1982. All the notifications up to G.O. P. No. 253 dated March 17, 1986 were issued having regard to public interest involved in granting exemption. Therefore, the withdrawal of the said notification by the impugned G.O. P. No. 390 dated September 4, 1991 should also be proved and demonstrated to be in public interest. Reference is made to Indian Express Newspapers (Bombay) Private Ltd. v. Union of India [1986] 159 ITR 856 (SC); AIR 1986 SC 515. Secondly, it is pointed out that having regard to the tax structure in neighbouring States there was no reason for withdrawing the earlier notifications. It is complained that there is lack of appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales and branch transfer during the years 1987-88. They have not paid the tax due on the above corresponding purchases and not included in the monthly return. This turnover was also not assessed by the assessing officer for the year 1987-88. For working out the corresponding purchase value of scrap the assessing authority had adopted a particular method. The method is to divide the value of scrap purchased by issuing declaration forms and used in the manufacture of finished products sent on consignment basis by total quantity of scrap purchased by issuing declaration forms and then multiplied by the total quantity of stock transferred on consignment basis. After arriving at the purchase value of scrap the officer proposed to tax the same at 4 per cent. According to Mr. Chopda, the above notice is totally without jurisdiction and there is absolutely no logic in proposing the tax at 4 per cent. 15.. Mr. S. Sivanandam, the learned counsel, has only added that section 7-A of the TNGST Act is not at all attracted, because there was no earlier taxable event. 16.. Mr. K. Mani, the learned counsel appearing for some of the tube manufacturers, insisted that the Notification G.O. P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification of purchases used in the manufacture of goods for sale was held to be an unreasonable classification. 21.. Sun Paper Mills Ltd. v. Union of India [1991] 80 STC 1 (Mad.) was relied upon for the purpose of suggesting that the withdrawal of the notification should be shown to be in public interest. This decision is no longer good law in view of the fact that the said judgment was set aside by the Supreme Court in Civil Appeal Nos. 3243-49 of 1991 dated October 23, 1997 State of Tamil Nadu v. Sun Paper Mills [1999] 113 STC 311. Therefore, we do not propose to apply the ratio in the division Bench judgment. 22.. In [1973] 31 STC 585 (Sales Tax Officer, Navgoan v. Timber Fuel Corporation), the Supreme Court held that when the taxable event took place, the assessee was not liable to be taxed on sales effected by it and its liability had to be determined only on the basis of the law at that time. The fact that the Forest Department was retrospectively exempted from paying tax could not make the assessee to pay tax which it was otherwise not liable to pay. 23.. State of Tamil Nadu v. M.K. Kandasamy is an oft-quoted judgment on the issue of purchase tax. It is reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmune from the attack on the ground of violation of article 14 of the Constitution of India. 25.. In Govind Saran Ganga Saran v. Commissioner of Sales Tax [1985] 60 STC 1 (SC), it was held that even if a State levy is uncertain or vague and was likely to exceed the restrictions under section 14 of the Central Sales Tax Act, the court will not uphold the validity of the State law. In that case it was held that in order that tax should not be levied at more than one stage, it is imperative that the State sales tax law should specify either expressly or by necessary implication the single point at which the tax may be levied. This, in our opinion, is an important decision which considerably supports the attack on the impugned G.O. P. No. 390, dated September 4, 1991 because there is considerable uncertainty and vagueness in ascertaining the point of levy. Firm A.T.B. Mehtab Majid Co. v. State of Madras [1963] 14 STC 355 (SC) is authority for the proposition that any discrimination between goods imported from outside the State and those manufactured or produced inside the State would contravene article 304(a) of the Constitution of India. 26.. We will now refer to some of the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exemption was granted for a certain period. The learned counsel for the Revenue also cites S. Kandaswamy Chettiar v. State of Tamil Nadu AIR 1985 SC 257. In that case under section 29 of the Tamil Nadu Buildings (Lease and Rent Control) Act exemption was granted to buildings owned by Hindu, Christian and Muslim religious public trusts and public charitable trusts. The Supreme Court held that it was not violative of article 14 of the Constitution of India. 28.. On the question of promissory estoppel and withdrawal being in public interest reliance is placed on Kasinka Trading v. Union of India (1995) 1 SCC 274. That case arose out of the withdrawal of exemption in public interest under section 25 of the Customs Act. The Supreme Court, after taking note of the earlier judgments, observed that the grant of exemption and the fact that it was in existence of quite a long time does not hold out any promise to the beneficiaries. Observed the Supreme Court at page 290: It would bear a notice that though Notification No. 66 of 1979 was initially valid only up to March 31, 1979 but that date was extended in public interest , we see no reason why it could not be curtailed in public in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate, that is including the additional tax, that is to be taken into consideration for finding out the applicability of section 8(2-A) of the Central Sales Tax Act and the rate of tax in respect of his inter-State sales turnover. There could be, therefore, no doubt that the assessees-respondents in all these cases are liable to pay sales tax at the rate including the additional sales tax in respect of their inter-State sale under the Central sales tax assessment orders. 31.. The Supreme Court upheld the levy of additional sales tax under the Kerala Additional Sales Tax Act in respect of the inter-State sales of assessee after April 1, 1978. The apex Court made it clear that any levy under the Kerala Additional Sales Tax Act is also a levy under the sales tax law of the appropriate State . 32.. The last of the case to be noticed is Eagle Flask Industries Limited v. Commercial Tax Officer [1997] 105 STC 202 (TNTST). This is a judgment by the Special Tribunal. Though this case seems to be similar to the facts of the present case, there is a vital difference. In that case a manufacturer of vacuum flask bought component parts/raw materials against the issue of form XVII declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a shift in the stand of the Government would attract the principles of promissory estoppel. We do not think that the contention is well taken. A perusal of the history of sales tax produced by the Revenue shows that representations were made when the Government sought to enforce the judgment of the Supreme Court in [1976] 37 STC 319, (Pyare Lal Malhotra). To alleviate the grievances the collection of tax for the period from April 10, 1970 till January 19, 1976 was waived. Again on similar considerations tax for the period from January 19, 1976 to March 31, 1982 was waived. But the reports of State team disclosed that each one of the articles mentioned in item No. 4 of the Second Schedule is a separate commercial product and can be subjected to single point tax as per the decision of the Supreme Court. Therefore, in March, 1986, the Government considered it unnecessary to continue the exemption granted till March, 1982. The result was G.O. P. No. 253, dated March 17, 1986. Therefore, there was absolutely no promise held out to the assessees in the matter of exemption. The judgment of the Supreme Court in (1995) 1 SCC 274 (Kasinka Trading Corporation) dispels any theory of promi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id the sale should be for the manufacture of end-products falling under item No. 4 of the Second Schedule for sale inside the State or in the course of inter-State trade or commerce plus a declaration of purchase by the steel re-rolling mills. The emphasis* supplied by us indicates the addition. There was no change in the declaration. On February 22, 1988 a second notification was brought in, which said that the exemption was subject to a declaration of purchase from steel re-rolling mills and subject to the condition that the steel re-rolling mills remit to its assessing authority the tax in the raw materials so purchased and used in the manufacture of end-products sent on consignment sales/branch transfer to other States. The entire emphasised* portion is a new addition. This additional condition was maintained and insisted upon in the impugned G.O. P. No. 390, dated September 4, 1991, which for the first time reduced rate of tax on the seller of raw materials from 4 per cent to 2 per cent and provided for the collection of the difference of 2 per cent from re-rolling mills in case they sent the end-products on consignment or branch transfer to other States. The idea was to preve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected. In other words, the beneficiary suffers or the seller of raw materials has to be denied the exemption. It is always open to him to contract with the buyer, the re-roller, to pay the difference. Even without a contract, may be, it is open to him to claim the difference from the purchaser. But the impugned notification fastens liability on the purchaser, who violates the condition. The counter-affidavit says so. The impugned notices in some of the cases also reflect the same position. This is illegal for more than one reason. They are as follows: (i) The power under section 17 of the TNGST Act is only to make an exemption or reduction in rate . There is no power to create a liability on any dealer. It is not a charging section. Therefore, while granting exemption on the sale of raw materials, the Government has no power to shift the liability on the purchaser merely because he violated the declaration. As things stand a person who violates a declaration can be proceeded against under sub-section (8) of section 45. (ii) In effect the respondents are taxing the purchaser on the turnover of end-products despatched on consignment/branch transfers, by estimating the corresp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution of India. This point relating to articles 301 and 304(a) arises in certain other cases also where re-rolling mills are concerned. Therefore, our decision on this point will govern all the cases where the question is involved. So far as the contention that the tube manufacturers are also re-rolling mills the counter-affidavit of the State gives the correct picture and provides an answer to the contention. In W.P. No. 12720 of 1986 which is equal to T.P. No. 2932 of 1997, the respondents explained the process of re-rolling as understood in the various notifications. It is correctly pointed out that re-rolling is a process by which various shapes, sheets, rods, strips, plates, etc., are made by forming the raw materials by passing the same between rollers. This process is well-known in the iron and steel industries. It cannot therefore, be contended that any process, other than re-rolling process is entitled to the concession or exemption granted under the notifications. A careful reading of notifications shows that the exemptions or concessions was extended to steel re-rolling mills in Tamil Nadu for end-products falling under item No. 4 of the Second Schedule w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he basis of judgment of Raju, J., they have to ignore the words in Tamil Nadu and even if the steel re-rolling mills are outside Tamil Nadu the benefit of exemption or concession should be extended. 4.. The Steel Authority of India: We now come to the last set of cases filed by the Steel Authority of India. They seek to enforce the Notifications No. 253 dated March 17, 1986 and Here italicised. G.O. P. No. 150 dated February 22, 1988. Since we are upholding these notifications except for a few portions which have nothing to do with the sale of raw materials by SAIL. We are of the opinion that the SAIL and similarly placed companies can have no difficulty or complaint. But, Mr. C. Natarajan, pleads that in many cases the SAIL have been proceeded against notwithstanding injunction orders issued by the Madras High Court while entertaining the writ petitions filed by the tube manufacturers. Now as the position has been made clear by the present judgment, there can be no difficulty in completing the assessments because the tube manufacturers are ineligible for getting the benefit of exemption or concession. The SAIL are effecting sales both to re-rolling mills as well as to tube ..... X X X X Extracts X X X X X X X X Extracts X X X X
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