Press Metal Corporation Limited (Now known as Tube Investments of India Limited) v. The State of Tamil Nadu

In the High Court of Judicature at MadrasDated: 06.09.2012CoramThe Honourable Mrs.JUSTICE CHITRA VENKATARAMANandThe Honourable Mr.JUSTICE K.RAVICHANDRABAABUTax Case (Revision) No.1855 of 2008Press Metal Corporation Limited(Now known as Tube Investments of India Limited)3/A.1 & A.2, SIDCO Industrial EstateChennai 600 098 ... PetitionerVs.The State of Tamil Nadurepresented by the DeputyCommercial Tax OfficerBack Year Assessment Zone XChennai ... Respondent Tax Case (Revision) to revise the order of the Sales TaxAppellate Tribunal (Main Bench), Chennai dated 31.8.1999 in T.A.No.106/98 and against the proceedings of the appellate assistantcommissioner (CT) VI, Chennai-108 dated 8.9.99 in AP.1167/95 andagainst the proceedings of the Deputy Commercial Tax Officer, BackAssessment Zone-X dated 31.3.95 in TNGST/166993/89-90 year.For Petitioner: Mr.N.SriprakashFor Respondent: Mr.Manoharan Sundaram Government Advocate (Taxes)O R D E R(Order of the Court was delivered by CHITRA VENKATARAMAN,J.) The above Tax Case Revision is filed at the instance of theassessee against the order of the Sales Tax Appellate Tribunalrelating to assessment year 1989-90. Following substantial questionsof law were raised in the above Tax Case (Revision):-"(i) Whether the Sales Tax Appellate Tribunal hascommitted an error of law in not classifying thetop hat sections sold by the petitioners under https://hcservices.ecourts.gov.in/hcservices/ Serial No.4(v) of the Second Schedule to the TamilNadu General Sales Tax Act, 1959, in view of thewords "Other Rolling Sections" found in thatEntry?(ii) Whether the Sales Tax Appellate Tribunalought to have completely set aside the impositionof penalty in view of the bona fides of thepetitioners?"2. The assessee is a manufacturer of auto components andfabricated items. It is seen from the facts narrated in the orderthat the place of business of the assessee was inspected by theEnforcement Wing Officials on 19.9.89. The Enforcement Wing Officialsviewed that top hat sections sold for bus body building should beassessed at 8% under I Schedule as auto components. Based on theresults, the Assessing Officer viewed that the top hat section couldbe assessed to tax only under the I schedule and not under the IISchedule as an item falling under Entry 4(v) of the Tamil NaduGeneral Sales Tax Act. The assessee resisted the assessment bycontending that the top hat section fell within the Entry 4(v) of theII Schedule as any other rolled section and the product has wide useapart from the body building industry. Thus, the understanding of thescope of the Entry for the purpose of taxation could not be based onuser theory with reference to the purpose for which the item inquestion was sold. The assessee further pointed out that steelstructurals was sold in length and could not be used in the samecondition and this had to undergo further process before the use inthe bus body building. The Assessing Officer however rejected thesaid contention and came to the conclusion that the top hat sectionsold for non structural purposes would attract 8% as applicable toauto components. Aggrieved by the order of the Assessing Authority,the assessee went on appeal before the Appellate Assistantcommissioner, who confirmed the assessment. This led the assessee togo on further appeal before the Sales Tax Appellate Tribunal. 3. On a consideration of the scope of the Entry as well as howthe assessee had dealt with in its return, the Tribunal pointed outthat as admitted by the assessee, the top hat sections manufacturedby them was sold only to automobile industries, even though the saiditem had various structural purposes. Going by the materials placedbefore the Tribunal, it held that it was evident that the top hatsections were designed and manufactured and sold only to theautomobile industries and not for any other purpose. The Tribunalfurther pointed out that though the top hat section could not be saidto be an accessory of motor vehicle, yet in the absence of any proofto the contrary, manufactured items being used only by automobileindustries, the same could not be brought under II Schedule andhence, the same was rightly assessed as an item falling under the ISchedule. In so coming to this conclusion, the Tribunal referred to https://hcservices.ecourts.gov.in/hcservices/ an earlier judgement rendered by it in T.A.No. 157/93 dated 27.5.1997in the assessee's own case viz., TUBE INVESTMENTS OF INDIA LIMITED v.THE STATE OF TAMILNADU, which was concerned about the sale of steeltubes in straight length and held as declared goods. The Tribunalheld that the steel tubes in length were different from bent tubesand hence held as declared goods and could not be called asautomobiles or motor parts or accessories. On the other hand, benttubes were held as auto parts. Thus, considering the process that ithad undergone to hold the top of the vehicle firmly, the steel tubesmanufactured by the assessee could be called as automobile or motorspare parts or accessories. Thus, the Tribunal distinguished thedecision of the Tribunal and went in favour of the Revenue by holdingthat the contention of the assessee that the item in question couldnot be considered on the basis of user theory could not be sustained.In so arriving at this conclusion, the Tribunal also referred to thedecision reported in 92 STC 67 in the case of DEWAN ENTERPRISES v.COMMISSIONER OF SALES TAX., U.P. The said decision dealt withreference to rim of a cycle to be assessed at 4% under Entry 4(xiv)of the II Schedule. 4. Dealing with the contention that the top hat section camewithin the broad category of rolled section, the Tribunal pointed outthat in the monthly return, the assessee had pointed out to therolled section as motor vehicle parts. In the case on hand there wasno material to substantiate that top hat section were only rolledsection. Pointing out to wind shield wiper arm blades wherein thestainless steel strips sold had to undergo the process to becamemotor vehicles component parts, the Tribunal held that in the absenceof any material that top hat sections sold by the assessee could beused for any other purposes, the only head to which item in questioncould be fitted in was as a motor vehicle parts. Thus, based on theinvoices or uses to which top hat section sold by the assessee wereput into; the Tribunal rejected the assessee's contention and heldthat the item in question attracted levy of tax under the head ofmotor vehicle parts. As far as levy of penalty is concerned, whichrelated to other items in question, it reduced penalty to 75% insteadof 150%. It however pointed out that there was no material to holdthat the assesee had deliberately claimed that top hat section asfalling under declared goods. Consequently, it held that noninclusion of turnover would not lead to levy of penalty. Aggrieved bythe order of the Tribunal, present revision by the assessee. 5. Learned counsel for the assessee while taking us throughEntry 4 of the II Schedule submitted that barring sub Entry (xiv),other sub Entries in Entry 4 are general entries. There are no wordsof restriction to be read into the above entry, particularly in subentry (v) of Entry 4 dealing with "steel structurals, angles, joistschannels, tees, sheet pilling sections, Z section or any other rolledsections, to hold that it applied only to steel structures used infields other than automobile. In other words, he submitted that being https://hcservices.ecourts.gov.in/hcservices/ a general entry, the test as to whether particular goods would fallunder the Entry would not be with reference to usage to which thesteel structurals are put into. Learned counsel for the assesseereferred to the Central Excise Tariff of India 1989-90 under Entry7215.20 & 7216.20 and the Harmonised commodity description and codingsystem referring to the products in the heading which stated asfollows:-"The heavier angles, shapes and sections (eg.Girders, beams, pillars and joists) are used inthe construction of bridges, buildings, ships,etc., lighter products are used in the manufactureof agricultural implements, machinery,automobiles, fences, furniture, sliding door orcurtain tracks, umbrella ribs and numerous otherarticles. "6. Thus going by the treatment under the Central Exciseprovisions and the nature of the Entry in the II Schedule, learnedcounsel for the assessee submitted that the Tribunal committedserious error in considering the item in question with reference touse to decide as to whether the same would fall under 8 of the Ischedule taxable at 8% or not. Referring to the decision reported in129 STC 238 – TUBE INVESTMENTS OF INDIA LIMITED v. D.C.T.O., hesubmitted that reliance placed by the Tribunal on the decision of theTribunal in T.A.No. 157/93 is no longer a correct view as the saiddecision of the Tribunal was revered by this Court in the abovestated decision. Placing reliance on paragraph 13 of the saiddecision, learned counsel for the asssessee submitted that theTribunal committed serious error in fixing the rate of tax withreference to the usage of the product sold by the assessee. He alsoreferred to the decision of this Court reported in 52 STC 94 – T.I. &M. SALES LIMITED v. STATE OF TAMIL NADU and submitted that entriesare not enumerated with reference to the use to which steelstructurals are put into to decide the rate of tax. Thus, in thebackground of this decision, he submitted that the Tribunal committedserious error in misdirecting its attention to consider the issue onthe basis of the user theory, which has no relevant as far as thepresent case is concerned. 7. Learned Government Advocate (Taxes) supports the order of theTribunal, which confirmed the order of assessment. 8. Heard learned counsel for the assessee as well as learnedGovernment Advocate (Taxes) for the respondent and perused thematerials available on record. 9. It is an admitted case that iron and steel are declared goodsfalling under Entry 4 of II Schedule of the Tamil Nadu General SalesTax Act. The relevant entries which is to be taken note of for thepurpose of deciding the question herein is Entry 4(v), which reads as https://hcservices.ecourts.gov.in/hcservices/ under:-"4. Iron and Steel that is to say, (i) ......(ii) .....(iii) ....(iv) ....(v) Steel structurals (angles, joists channels,tees, sheet pilling sections, Z sections or anyother rolled sections). "10. In the decision reported in 129 STC 238 – TUBE INVESTMENTSOF INDIA LIMITED v. D.C.T.O., this Court had an occasion to consideralmost a similar issue. It may be noted that the petitioner in thedecided case is none other the present petitioner, who is now knownas Tube Investments of India Limited. The assessee in the reporteddecision is engaged in the manufacture of tubes, bicycles parts,machinery etc. It dealt with the steel tubes, both welded andseamless, of all diameters and lengths, including tube fittings. Itsupplied exhaust pipes to M/s. Ashok Leyland according to thespecification given by the buyer, which were to be fitted into thetrucks after certain process done by the buyer. The assessee claimedthe sale of exhaust pipes as declared goods falling under Entry 4(xi)of the II Schedule of the Tamil Nadu General Sales Tax Act. TheAssessing Authority treated the item in question as part of accessoryof a motor vehicle falling within the scope of Entry 3 of the FirstSchedule and taxable at 15%. Referring to the decision of the ApexCourt reported in 74 STC 176 – GUJARAT STEEL TUBES LIMITED v. STATEOF KERALA, AIR 1990 SC 616 -BHARAT FORGE AND PRESS INDUSTRIES (P) LTDv. COLLECTOR OF CENTRAL EXCISE, AIR 1985 SC 1201 – INDIAN ALUMINIUMCABLES LTD v. UNION OF INDIA, AIR 1991 SC 1028- INDIAN METALS ANDFERRO ALLOYS LIMITED v. COLLECTOR OF CENTRAL EXCISE, 102 STC 67 –DEWAN ENTERPRISES v. COMMISSIONER OF SALES TAX, U.P. and 121 STC 396– COMMISSIONER OF SALES TAX, U.P. v. AGRA BELTING WORKS, this Courtheld that the fact that the buyer had used the steel tube supplied bythe petitioner as part of a chasis/ engine fitting it into suchengine/ chassis, for use as exhaust pipe, did not in any way alterthe basic fact that what was supplied by the petitioner was in fact,a steel tube of certain shape and length. By treating it as parts andaccessories of motor vehicles, higher rate could not be imposed andthe goods in question were declared goods. The end use of thedeclared goods would not have the effect of taking away the effect ofthe declaration made by Parliament regarding those goods. Thus theCourt observed as follows :- "The fact that the buyer has used the steel tubesupplied by the petitioner as part of a chassis/ engineby fitting it into such engine/ chassis, for use asexhaust pipe, does not in any way alter the basic factthat what is supplied by the petitioner is in fact, asteel tube of certain shape and length. As held by theApex Court, the State Legislature has no authority to https://hcservices.ecourts.gov.in/hcservices/ prescribe a higher rate of tax on declared goods bychanging the description of those goods. Article 286(3)of the Constitution obligates the States to be bound bythe declaration made by Parliament regarding the goodswhich are of special importance in inter-State trade orcommerce, as also the restrictions and conditionsincluding the ceiling on rates, subject to which Statesmay levy tax on such declared goods. The State, bysubjecting parts and accessories of motor vehicles, at ahigher rate, cannot impose such higher rate on goodswhich are declared goods. The end use of the declaredgoods will not have the effect of taking away the effectof the declaration made by Parliament regarding thosegoods". "The fact that the specification for the tube orpipe supplied was given by the buyer would also make nodifference, as what is supplied in fact, is the steeltube conforming to the specification given by the buyerand nothing more. The sales tax levied on steel tubessupplied by the petitioner, though put to use by thebuyer as exhaust pipes, cannot exceed four per cent. "11. It may be noted in the decision rendered by this Court in52 STC 94 – T.I. & M. SALES LIMITED v. STATE OF TAMIL NADU whiledealing with rolled steel sections, under Entry 4(d) (iv) of the IISchedule to the Tamil Nadu General Sales Tax Act, this Court pointedout that there is absolutely no reference at all in the entry asregards the use to which the steel sections are to be put to use. Inthe circumstances, any meaning that has to be given to the words"rolled steel sections" as found either in the Central Sales Tax Actor the Tamil Nadu General Sales Tax Act or the consideration of thequestion as to whether any article falls within the meaning of thewords "rolled steel sections" found in section 14(iv)(d)(iv) of theCentral Sales Tax Act or item 4(d)(iv) of the Second Schedule to theTamil Nadu General Sales Tax Act does not depend upon the user towhich the rolled steel sections are put to. In the absence ofanything in the language of the entry, warranting restrictedconstruction, the entries have to be read in generic manner. Thus, wefind the decisions of this Court referred to above, concludes theissue on hand. 12. The said view was once again considered by this Court in thedecision reported in 5 VST 476 – I.P. RINGS LTD v. TNTST. The item inquestion dealt with in the said decision was with reference to discs,rings, forgings and steel castings falling under Entry 4 of theSecond Schedule. Even herein, the Assessing Officer treated the goodsas automobile components. The goods in question marketed by theassessee were used in the automobile field. The rings sold by theassessee were polished and the buyer used the steel rings as piston https://hcservices.ecourts.gov.in/hcservices/ ring or oil engine ring. This Court held that such process did not inany way alter the basic fact that what was supplied by the petitionerwas in fact a steel ring which qualified to be brought under thedeclared goods. 13. Thus, applying the decisions referred to above, one cansafely come to the conclusion that in the absence of restrictivewords in the entry relating to steel structurals as relatable tosteel structurals used in building works or building structuresalone, we do not find any justifiable ground to treat the top hatsection sold by the assessee could be treated as I Schedule goods asautomobiles parts by reason of sale to the automobile manufactures.As pointed out in the decision of this Court reported in AIR 1991 SC1028- INDIAN METALS AND FERRO ALLOYS LIMITED v. COLLECTOR OF CENTRALEXCISE, the circumstances that certain processes are applied to thestructurals or that to identify the particular type of tube one uses,different names are given is not sufficient to treat the articledealt with by the assessee, as automobiles component. So too the useto which the top hat section has been put into cannot be taken as adecisive factor for the purpose of understanding the width of theentry which is general in character. Going by the entry, we have nohesitation in setting aside the order of the Tribunal. We hold thatthe item in question is taxable as declared item under Entry 4. Thefact that the assessee had admittedly sold the top hat section to theautomobile industries would not in any manner be a decisive test forthe purpose of understanding the entry and rate of tax to be appliedto the case on hand. In the circumstances, we set aside the order ofthe Tribunal. 14. As far as levy of penalty is concerned, even though theTribunal upheld the levy of penalty upto 75%, admittedly, the samewas with reference to other heads of taxation. The Tribunal hadcancelled the levy of penalty with reference to the non inclusion ofthe turn over relating to top hat section. The penalty thus imposedat 75% instead of 150% however stands confirmed as no serious disputeis raised on this aspect. 15. In the result, the above Tax Case (Revision) is allowed. Nocosts. Sd/Asst. Registrar/true copy/Sub Asst.Registrarbg https://hcservices.ecourts.gov.in/hcservices/ To1.The Registrar Registrar, Sales Tax Appellate Tribunal (Main Bench), Chennai2. The Deputy Commercial Tax Officer Back Year Assessment Zone X, Chennai 3. The Appellate assistant Commissioner CT (VI) Chennai-108.+ 1 cc to Mr.N. Inbarajan, Advocate Sr.54045+ 1 cc to the Special Government Pleader SR.54491Tax Case (Revision) No.1855 of 2008SGL(CO)Eu 15.11.12