(1.) IRON and steel falling under entry 4 of the Second Schedule of the Tamil Nadu General Sales Tax Act, 1959 (hereinafter called "the TNGST Act") is the subject -matter of this batch of cases. To begin from the beginning, Section 14 of the Central Sales Tax Act, 1956 (hereinafter called "the Central Act") declares certain goods are of special importance in inter -State trade or commerce. Sub -section (iv) of Section 14 specifies that iron and steel is one of the goods declared, as having special importance. The said entry proceeds to describe the various forms of iron and steel and it is not necessary for us to notice all the types of iron and steel which are eligible for the special status given to declared goods. Section 15 of the Central Act enumerates the restrictions and conditions in regard to tax on sale or purchase of declared goods within the State. We 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. In Pyarelal Malhotra v. Joint Commercial Tax Officer, Madras  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 scrap.
(2.) THE conclusion of the division Bench of the Madras High Court was as follows :
"Even assuming that the process adopted is a manufacturing process and the product sold by the petitioner is a manufactured product, we are of the view that even in their manufactured state the goods did not cease to be 'iron and steel' as defined in entry (iv) in Section 14 of the Central Act. A reading of the said entry as a whole shows that the statute wanted to treat all forms of iron and steel either as raw material or as a finished product from the rolling mill as 'iron and steel' and the product as emerging from the various stages of manufacture cannot be treated different from 'iron and steel'."
This judgment was rendered on April 10, 1970, and the manufacturers and traders had the benefit of the above decision. But, on January 19, 1976, the Supreme Court of India, reversed the said judgment in State of Tamil Nadu v. Pyare Lal Malhotra reported in  37 STC 319 and held that the sales tax law is intended to tax sales of different commercial commodities and as soon as a separate commercial commodity emerges or comes into existence, they become separately chargeable to tax. Observed the Supreme Court :
"It is true that the question whether goods to be taxed have been subjected to a manufacturing process so as to produce a new marketable commodity, is the decisive test in determining whether an excise duty is leviable or not on certain goods. No doubt, in the law dealing with the sales tax, the taxable event is the sale and not the manufacture of goods. Nevertheless, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event, in the sales tax law, it may also become necessary to consider whether a manufacturing process, which has altered the identity of the commercial commodity, has taken place. The law of sales tax is also concerned with 'goods' of various descriptions. It, therefore, becomes necessary to determine when they ceased to be goods of one taxable description and become those of a commercially different category and description".
(3.) CONSEQUENT on the judgment of the Supreme Court, the authorities started issuing notices for re -opening the assessment and bring to tax the sale of such other commodities which attracted the judgment of the Supreme Court. There was a spate of representations 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 they were not able to compete with the manufacturers from other States. In June, 1979, a Task Force was appointed by the Government to examine the difficulties expressed by the re -rollers. Ultimately, in G.O. Ms. D. No. 103 dated January 24, 1982, the Government accepted the recommendations of the task force and directed that the end -products in item No. 4 of the Second Schedule, such as M.S. rounds, rods, etc., manufactured by the steel rolling mills in Tamil Nadu out of raw materials which also find a place in item No. 4 of the Second Schedule, be exempted from tax payable under the TNGST Act and CST Act. This exemption was available from January 19, 1976, the date of the Supreme Court judgment. In G.O. P. No. 311/CTRE/dated March 13, 1982 Government issued two notifications under Section 17 of the TNGST Act. The first notification under Sub -section (1) of Section 17 exempted the payment of tax in respect of end - products mentioned in item 4 of the Second Schedule of the TNGST Act manufactured by steel rolling mills in Tamil Nadu subject to the condition that the raw materials had suffered tax under the said Act and subject to the conditions that the dealers did not collect tax directly or indirectly, or got income -tax relief. The second notification under Sub -section (5) of Section 8 of the Central Act gave exemption in respect of the very same goods from payment of tax under the said Central Act, subject to the very same conditions. These notifications came into effect from April 1, 1982. While matters stood thus, the Government effected a drastic change in the policy by issuing G.O. P. No. 253 dated March 17, 1986. Under the said Government order a Notification II (l)/CTRE/47(n)/86 was issued under Sub -section (1) of Section 17 of the TNGST Act exempting the tax payable by any dealer on the sales of raw materials falling under item 4 of the Second Schedule to the Act to steel re -rolling mills in Tamil Nadu, subject to the production of a declaration of purchase from the steel re -rolling mills. An amendment was introduced to the above notification on April 3, 1987 in G.O. P. No. 334, which stated that the exemption on raw materials will apply when the sale is to re -rolling mills for the manufacture of end -products falling under item 4 of the Second Schedule for sale inside the State or in the course of inter -State trade or commerce subject to the production 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.;