2013 (3) TMI 575 - HC - VAT and Sales Tax

Court rules stranded rods not wire rods under Central Sales Tax Act, subject to 12.5% tax rate

Utracon Structural Systems Pvt. Ltd. Versus State of Karnataka

Utracon Structural Systems Pvt. Ltd. Versus State of Karnataka - [2013] 66 VST 459 (Kar) Issues Involved:1. Classification of stranded rods under Section 14 of the Central Sales Tax Act, 1956.2. Tax rate applicability on stranded rods.3. Interpretation of 'wire rods' and 'stranded rods' in market parlance.4. Applicability of judgments and statutory amendments to the case.Issue-Wise Detailed Analysis:1. Classification of Stranded Rods under Section 14 of the Central Sales Tax Act, 1956:The primary issue revolves around whether stranded rods can be classified under Section 14(iv)(xv) of the Central Sales Tax Act, 1956, which lists 'wire rods and wire-rolled, drawn, galvanized, aluminized, tinned or coated such as by copper' as goods of special importance. The assessee argued that stranded rods, being composed of multiple wires, should be classified as wire rods and thus benefit from the reduced tax rate of 4%. However, the authorities and the court found that stranded rods are not specifically listed under Section 14 and should not be considered the same as wire rods.2. Tax Rate Applicability on Stranded Rods:The assessee was initially taxed at a general rate of 12.5% by the assessing authority, which was later upheld by the Joint Commissioner of Commercial Taxes (Appeals) and the Karnataka Appellate Tribunal. The assessee contended that stranded rods should be taxed at the reduced rate of 4% applicable to wire rods under Section 14 of the Central Sales Tax Act. The court, however, upheld the authorities' decision, stating that stranded rods do not fall under the specified items of iron and steel in Section 14 and should be taxed at the general rate.3. Interpretation of 'Wire Rods' and 'Stranded Rods' in Market Parlance:The court examined whether wire rods and stranded rods are considered the same commodity in market parlance. The court referred to the Supreme Court judgment in State of Tamil Nadu v. Pyare Lal Malhotra, which emphasized that each specified item in Section 14 constitutes a separate commercial commodity. The court concluded that wire rods and stranded rods are distinct commodities in the market, with stranded rods being a specialized product used for specific purposes, unlike wire rods which have broader usage.4. Applicability of Judgments and Statutory Amendments to the Case:The court reviewed several judgments, including the Supreme Court's ruling in State of Tamil Nadu v. Pyare Lal Malhotra and the Karnataka High Court's decision in Bahri Steel Wires v. Additional Commercial Tax Officer. The court noted that the amendments to Section 14 aimed to clarify the classification of various iron and steel products. The court also referred to an unreported Supreme Court judgment in Collector of Central Excise, Indore, M.P. v. Anand Behari Steel Wires & Other Products Limited, which held that stranded wires remain classified as wires unless proven otherwise in market parlance. However, the court found that the specific listing of items under Section 14 does not include stranded rods, and thus the benefit of reduced tax rates does not apply to them.Conclusion:The court dismissed the revision petitions, affirming that stranded rods do not qualify as wire rods under Section 14 of the Central Sales Tax Act, 1956, and are subject to the general tax rate of 12.5%. The court emphasized the importance of market parlance and statutory interpretation in determining the classification and tax rate applicability of commodities.