9911796707
TMI Blog1991 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Act. They claim that the articles manufactured by them fall under item No. 1 of the list of articles and things set out in the relevant Schedule which reads : " Iron and steel (metal), ferro-alloys and special steels. " This contention was rejected by the Income-tax Officer but has been accepted by the Appellate Assistant Commissioner, the Tribunal and the High Court. Hence, these appeals by the Revenue. It has been brought to our notice that there is a difference of judicial opinion on this issue among the High Courts. The Calcutta High Court, in Indian Steel and Wire Products Ltd. v. CIT [1977] 108 ITR 802, and the Allahabad High Court, in CIT v. Kay Charan P. Ltd. [1991] 190 ITR 190, have answered the question in the negative and against the assessee. On the other hand, the Kerala High Court, in CIT v. Mittal Steel Re-rolling and Allied Industries P. Ltd. [1977] 108 ITR 207 and CIT v. West India Steel Co. Ltd. [1977] 108 ITR 601 [FB], the Madras High Court, in the judgment under appeal, reported as CIT (Addl.) v. Trichy Steel Rolling Mills Ltd. [1979] 118 ITR 39, the Punjab and Haryana High Court, in CIT v. Krishna Copper and Steel Rolling Mills [1979] 119 ITR 256, (her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold by the assessee are iron and steel exempted under the Notification. The conclusion arrived at by the High Court is correct." (2) The second decision referred to is Devi Das Gopal Krishnan v. State of Punjab [1967] 20 STC 430 (SC). Here, one batch of appellants before the court carried on business in rolling steel. They purchased steel scrap and steel ingots and converted them into rolled steel sections. They contended that the levy of purchase tax on the steel scrap and ingots side by side with sales tax on the rolled steel sections constituted double taxation of the same commodity contrary to the provisions of section 15 of the Central Sales Tax Act, 1956. This contention was rejected. It was held that the process by which the steel scrap (or ingot) lost its identity and became rolled steel sections was a process of manufacture and that, since the goods purchased and those sold were different, no question of double taxation arose. (3) The third decision, Hindustan Aluminium Corporation Ltd. v. State of U. P. [1981] 48 STC 411 (SC), involved the interpretation of certain notifications issued under section 3A(2) of the U. P. Sales Tax Act, 1948. The two notifications with wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " After referring to its earlier decisions in State of M. B. v. Hiralal [1966] 17 STC 313 (SC), Devi Dass Gopal Krishnan v. State of Punjab [1967] 20 STC 430 (SC) and State of Tamil Nadu v. Pyarelal Malhotra [1976] 37 STC 319 (SC), the court concluded (p. 417) : "We are of the definite opinion that the only interpretation possible is that aluminium rolled products and extrusions are regarded as distinct commercial items from aluminium ingots and billets in the notifications issued under the U. P. Sales Tax Act." The above decisions were rendered in the context of the Sales Tax Acts and notifications thereunder. They, however, bring out two points. First, they make it clear that there is a real and clear dichotomy between "iron and steel" and "products or goods made of iron and steel" and, indeed, between any metal as such and the products or goods fabricated therefrom. This is also clear from the various entries in the relevant schedules under the Income-tax Act itself. For instance, item No. 2 in the list is : "Aluminium, copper, lead and zinc (metal)", while ingots and sheets manufactured from scrap have been held to fall under item No. 2 ; finished commercial products like al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are concerned with further restricts the nature of the qualifying industry but we are not inclined to agree. Obviously, it is not used to denote the metal in its pristine form as an ore or as an extraction from the ore. In the context of a manufacturing industry, it is used, we think, for emphasising the distinction between the metal used as a raw material in the manufacture of various articles and the commercial articles made therefrom. We would, therefore, attach the same meaning to the expression as Hiralal's case [1966] 17 STC 313 (SC) did. In that case, the court held that the bars, flats and pieces turned out by the assessee from the scrap metal were not products manufactured from the raw material but only represented the raw material rolled out in attractive and acceptable forms. Per contra, in Devi Dass Gopal Krishnan [1967] 20 STC 430 (SC), rolled steel sections were held to be products manufactured from steel scrap and ingots. But that will not be conclusive here because the relevant provision here contemplates something manufactured out of iron ore or iron scrap. The question really, therefore, is : having regard to the nature of the iron and steel industry and its p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modity Description and Coding Nomenclature (NCCN) are also on the same lines. The chapter covers ferrous metals (pig iron, spiegeleisen, ferro-alloys and other materials) as well as certain products of the iron and steel industry (ingots and other primary products and the principal products derived therefrom) of iron or non-alloy steel, of stainless steel and of other alloy steel. It is pointed out that iron ore, waste, scrap metal, pre-reduced iron ore and other ferrous waste are converted by reduction in blast furnaces or electric furnaces into pig iron or sponge iron or lump iron. Electrolysis or other chemical processes are used only when iron of exceptional purity is required for special use. Most of the pig iron is converted into steel in steel works but some are used in foundries (iron works) for manufacture of ingot moulds, cast iron tubes and pipes and castings and the remainder are cast into the forms of pigs or blocks, in casting machines or sand-beds or produced in the form of irregularly shaped lump (plate iron) or granulated. Pig iron, cast iron, sponge iron, waste and scrap constitute the primary steel-making materials. Steelmaking processes are either pneumatic or h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sents only an intermediate stage at which the iron and steel metal becomes semi-finished steel. The semi-finished steel is converted into plates, bars or rods which are described as "finished steel". According to him, the bars, rods and rounds continue to be iron and steel in a finished form. It is only finished steel that is subsequently used to manufacture, by various processes such as rolling, cutting, shearing, forging, hammering and so on into various kinds of products, which can be described as products of iron and steel in contrast with "iron and steel (metal)", the item covered under the relevant entry of the Schedules. He also draws our attention to a decision of the Calcutta High Court in Indian Aluminium Co. Ltd. v. CIT [1980] 122 ITR 660, where, while following the earlier decision in Indian Steel and Wire Products Ltd. v. CIT [1977] 108 ITR 802, the court observed that there is really no divergence in view between the Calcutta and the Kerala views and that the real question for consideration in each case is whether the articles in question constitute finished products and represent articles of iron and steel or merely represent the raw material, viz., iron and steel (m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of iron and steel. B. Non-ferrous (1) Precious metals including gold and silver, and their alloys (1A) Other non-ferrous metals and their alloys. (2) Semi-manufactures and manufactures." Again, in 1964, when the Finance Act of 1964 decided to grant a rebate in the corporation tax payable by companies in order to encourage development of certain industries which occupy an important place in our economy, the list of industries named in the Finance Act was similar to and included many of the items including items Nos. 1 to 3 of the list we are concerned with now. The reliefs were given to strengthen the reserves and augment the capacity of the corporate sector to develop. This process was continued under the Finance Act of 1965 : which introduced a higher development rebate for machinery or plant installed for the purposes of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule. The Finance Act of 1966 substituted a new concession to these priority industries basic to the commercial development of the community. This historical background reflects the intention of the Legislature to grant progressively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same machinery and plant when used in rolling mills and when used in other mills in the industry. If machinery and plant installed in steel mills where the process includes not merely the production of ingots, billets and the like but also the production of bars and rods are eligible for the higher development rebate, it is difficult to see why the same plant and machinery, when installed in rolling mills which proceed from the stage of ingots or billets to manufacture of bars and rods should not be eligible for the higher rate of development rebate. In considering the issue before us, we should not be carried away by classifications of stages of manufacture that may be relevant for other purposes. We would like to emphasise, at the cost of repetition, that what we should examine is not the nature of the mill which yields the article but the nature of the article or thing that is manufactured and ask ourselves the question whether such article or thing can be considered as raw material for manufacture of other articles made of the metal or is it itself an article made of the metal. On this issue, our view is, as we have already stated, that the goods in the present case fall in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
