1972 (6) TMI 63 - HC - VAT and Sales Tax

Classification of Galvanised and B.P. Sheets as Iron and Steel under Sales Tax

The State of Andhra Pradesh Versus Sri Durga Hardware Stores, Vijayawada and Another

The State of Andhra Pradesh Versus Sri Durga Hardware Stores, Vijayawada and Another - [1973] 32 STC 322 (AP) Issues Involved:1. Classification of galvanised plain or corrugated sheets and B.P. sheets under 'iron and steel' in Entry No. 2 of the Third Schedule to the Andhra Pradesh General Sales Tax Act.2. Liability of sales tax on wire-nails.3. Interpretation of statutory entries in tax legislation.4. Application of common parlance test in tax classification.Detailed Analysis:1. Classification of Galvanised Plain or Corrugated Sheets and B.P. Sheets under 'Iron and Steel':The primary issue was whether galvanised plain or corrugated sheets and B.P. sheets fall under the 'iron and steel' category in Entry No. 2 of the Third Schedule to the Andhra Pradesh General Sales Tax Act. The Sales Tax Appellate Tribunal held that these commodities fall within 'iron and steel' and are exempt from sales tax as they are not first sales. The State contended that these items are commercially distinct from iron and steel and should not be classified under Entry No. 2. The court, however, determined that galvanisation and corrugation are processes that enhance the utility of iron and steel without altering their essential character. Citing various precedents, the court concluded that these items do not lose their identity as iron and steel and thus fall within Entry No. 2.2. Liability of Sales Tax on Wire-Nails:The Sales Tax Appellate Tribunal upheld the Deputy Commissioner's view that wire-nails do not fall under the 'iron and steel' category and are subject to sales tax. The court did not delve deeply into this issue, as it was not the primary focus of the revision cases.3. Interpretation of Statutory Entries in Tax Legislation:The court emphasized that entries in tax legislation should be interpreted in their popular sense, as understood in common parlance by those dealing with the commodities. This approach was supported by several precedents, including the Supreme Court's decisions in Ramavatar Budhaiprasad v. The Assistant Sales Tax Officer and State of Gujarat v. Sakarwala Brothers. The court rejected the State's argument that the commercial names and different uses of the processed items should dictate their classification.4. Application of Common Parlance Test in Tax Classification:The court reiterated that the common parlance test is crucial in determining the classification of goods under tax statutes. The test considers how the goods are understood by those dealing with them and their consumers, rather than their scientific or technical definitions. This principle was applied to conclude that galvanised plain or corrugated sheets and B.P. sheets are forms of 'iron and steel,' despite their altered shapes and enhanced properties due to processing.Conclusion:The court held that galvanised plain or corrugated sheets and B.P. sheets fall within the ambit of 'iron and steel' as defined in Entry No. 2 of the Third Schedule to the Andhra Pradesh General Sales Tax Act. Consequently, these items are exempt from sales tax as they are not first sales. The tax revision cases filed by the State were dismissed, and the State was ordered to pay the costs of the references to the dealers. The judgment underscores the importance of the common parlance test in interpreting tax statutes and the classification of goods.