PYARELAL MALHOTRA Vs. JOINT COMMERCIAL TAX OFFICER T NAGAR DIVISION MADRAS
LAWS(MAD)-1970-4-1
HIGH COURT OF MADRAS
Decided on April 10,1970

PYARELAL MALHOTRA Appellant
VERSUS
JOINT COMMERCIAL TAX OFFICER, T. NAGAR DIVISION, MADRAS Respondents

JUDGEMENT

RAMAPRASADA RAO AND RAMANUJAM, JJ. - (1.) THE point involved in these cases has arisen in a batch of cases which was posted for hearing along with these and the question that is raised for our decision is as to the validity of the levy of sales tax on iron flats, iron sheets and iron bars made out of iron scrap which has already been subjected to tax. We have heard the various counsel appearing for the petitioners in the entire batch of cases but we render our decision in the above two cases leaving the other cases to be disposed of later on the particular facts. Before dealing with the contentions of the assessee in these cases, it is necessary to set out the facts at least in one case and we propose to deal with the facts in Writ Petition No. 520 of 1968. The petitioners herein are carrying on business of re-rolling steel. They buy iron and steel scraps from other registered dealers and convert them into mild steel rounds, flats, angles etc., by rolling them. The concerned assessing authority by its order dated 25th January, 1968, proposed to assess the said petitioners under the Tamil Nadu General Sales Tax Act, 1959 Section 3 :
(2.) "Levy of taxes on sales or purchases of goods. (1) Every dealer (other than a casual trader or agent of a non-resident dealer) whose total turnover for a year is not less than fifteen thousand rupees and every casual trader or agent of a non-resident dealer, whatever be his turnover for the year, shall pay a tax for each year at the rate of three per cent. of his taxable turnover ....... (2) Notwithstanding anything contained in sub-section (1) in the case of goods mentioned in the First Schedule, the tax under this Act shall be payable by a dealer, at the rate and only at the point specified therein on the turnover in each year relating to such goods whatever be the quantum of turnover in that year." Section 4 :" Notwithstanding anything contained in section 3, the tax under this Act shall be payable by a dealer on the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the Second Schedule on the turnover in such goods in each year, whatever be the quantum of turnover in that year." * Schedule I to the Act sets out the goods in respect of which single point tax is leviable under sub-section (2) of section 3 and Schedule II sets out a list of declared goods in respect of which single point tax only is leviable under section 4 of the local Act. Item 4 in Schedule II is as follows : "Description of the goods Point of levy Rate of tax per cent. (1) (2) (3) Iron and steel that is to say - At the point of first sale in the State. 3(a) pig iron and iron scrap (b) iron plates sold in the same form in which they are directly produced by the rolling mill (c) steel scrap, steel ingots, steel billets, steel bars and rods and (d) (i) steel plates (ii) steel sheets (iii) sheet bars and tin bars (iv) rolled steel sections and (v) tool alloy steel. Items (i) to (v) sold in the same form in which they are directly produced by the rolling mill." * Section 14 of the Central Act declares certain goods as being of special importance in inter-State trade or commerce and item (iv) therein is practically the same as has been set out under item 4 of Schedule II to the Act. As a matter of fact the entire Second Schedule is based on the list of goods mentioned in section 14. Section 15 imposes certain restrictions and conditions in regard to the levy of tax by the States on the sales of declared goods as enjoined by article 286(3) of the Constitution of India. It is useful to set out the said section 15 as it stood originally : "15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State. - Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely :- (a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed two per cent. of the sale or purchase price thereof, and such tax shall not be levied at more than one stage (b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, the tax so levied shall be refunded to such person in such manner and subject to such conditions as may be provided in any law in force in that State." *
(3.) THIS section came into force on 1st October, 1958, and the restrictions imposed by the section became applicable as and from that date. The rate of 2 per cent. mentioned in sub-section (a) was, however, raised to 3 per cent. by the Finance Act of 1966 with effect from 1st July, 1966. Section 15 ensures that in the case of declared goods they should in all circumstances be liable to tax only at a specified stage in the series of sales and at the prescribed rate. In the light of the above statutory provisions the substantial contention of the petitioners is that "iron and steel" cannot be subjected to tax at more than one stage, and at more than the prescribed rate of 3 per cent. under any circumstances and that if the sales tax law of any State imposes or authorises the imposition of a tax on the sale or purchase of "iron and steel" at more than one stage or at more than 3 per cent., such law would be invalid. Admittedly the rate of tax has not exceeded the prescribed rate of 3 per cent. as the rate of tax levied under section 4 read with Schedule II of the Act is only 3 per cent. and it has not exceeded the rate fixed in section 15(a). We are concerned herein only with the question whether by levying tax on rolled "iron and steel" bars and plates etc., made out of iron and steel scrap and the ingots (already subjected to tax), the revenue has contravened the provisions of section 15 of the Central Sales Tax Act prohibiting the levy of tax on "iron and steel" at more than one stage. Mr. V. K. Thiruvenkatachari, learned counsel for the petitioner in W.P. No. 520 of 1968 submitted that the words "that is to say" following "iron and steel" in item (iv) in section 14 of the Central Act as also in item 4 of Schedule II to the local Act are of considerable importance. According to him these words are explanatory of what "iron and steel" is and all articles enumerated under that head either in their crude form or in their manufactured stage or in any of the forms listed under the sub-headings (a), (b), (c) and (d) are treated as various forms of "iron and steel". It is said that the statute contemplates a single point tax in the series of sales of all forms mentioned under the heading "iron and steel", and that it does not contemplate a single point among the series of sales of articles in various forms mentioned in (a), (b), (c) and (d) of item (iv). In this connection, the learned counsel referred to the decision in Megh Raj v. Allah Rakhia 1947 AIR(PC) 72] for ascertaining the scope of the words "that is to say" occurring in item (iv). In that case the Judicial Committee had to deal with the scope of item 21 of List II of the Seventh Schedule of the Government of India Act, 1935, when they expressed as follows :;


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