TaxTMI 
TaxTMI 
2011 (2) TMI 1253
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....the Third Schedule to the APGST Act". The petitioner, a unit of the Department of Atomic Energy, Government of India, manufactures and sells special material plant products of stainless steel, ball bearings steel tubes, etc. For the aforesaid assessment years, they were assessed to tax at six per cent under section 5(2) of the APGST Act, (hereinafter called "the Act"), read with entry 54 of the First Schedule thereto. The petitioner contended that the stainless steel tubes, seamless stainless steel tubes, stainless steel ball bearing tubes and stainless steel scrap sold by them fell under item 2 of the Third Schedule, and levy of tax at six per cent was illegal. In its order impugned before us, the STAT noted that the goods, specified in the Third Schedule to the Act, were goods of special importance in inter-State trade or commerce as declared under section 14 of the Central Sales Tax Act; the rate of tax, prescribed under item 2 of the Third Schedule of the Act, was four per cent in view of the restrictions imposed under section 15 of the CST Act; the Government had clarified, in its communication dated May 12, 1958, that stainless steel came under the categor....
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....tion of supply of goods to other units of the Department of Atomic Energy, the STAT noted that NFC was one of the units of the Department of Atomic Energy, Government of India under the control of the Prime Minister ; those units, to which NFC supplied goods, were units of the Department of Atomic Energy engaged in different kinds of activities in research and other works ; NFC effected supply of goods to other units as per the requirements specified in the letter addressed to them from time to time ; NFC was a registered dealer engaged in effecting sale of similar goods to others also, and was paying tax under the CST Act as well as under the Act ; such sales were effected accepting quotations and issuing invoices ; while effecting stock transfers to other units of the Department of Atomic Energy also, NFC had inadvertently utilized the same pro forma for issuing invoices and delivery challans, etc. ; these invoices, in the prescribed pro forma, were prepared only for the purpose of recording entries in the books, and there was no payment made by other units for the stock transfer of such goods ; the proceeds were credited to the Consolidated Fund of India by way of book adjustmen....
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....i), observed that the Madras High Court, in Hindustan Wires Limited [1992] 86 STC 1 (Mad), had rejected a similar contention, and had held that one sub-item could not be construed with the aid of another sub-item to restrict the scope of a sub-item; the main item should be looked into for understanding the sub-items ; and, when it was so done, there was no difficulty in holding that the "goods" fell under entry 4 of the Second Schedule to the Tamil Nadu General Sales Tax Act, which was similar to entry 2 of the Third Schedule to the Act. In view of the decision of the Madras High Court, in Hindustan Wires Limited [1992] 86 STC 1 (Mad), the STAT held that the view expressed by it, in its earlier decision in T. A. No. 1054 of 1987 and batch dated January 21, 1988, and the view expressed in the earlier decision of the Madras High Court in R. K. Manufacturers [1983] 54 STC 88 (Mad) could not be followed as the view did not represent the correct position of law. The STAT further held that stainless steel tubes and stainless steel ball bearing tubes were sold in lengths, and such tubes were used for other stainless steel articles which alone should be considered as falling under entry 54....
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....user's point of view, popular meaning, etc. (Ponds India Ltd. [2008] 15 VST 256 (SC); [2008] 8 SCC 369). In interpreting entries in a Sales Tax Act, resort should be had not to the scientific and technical meaning of the terms or expressions used, but to their popular meaning, i.e., the meaning attached to them by those dealing in them. (Indo International Industries v. Commissioner of Sales Tax [1981] 47 STC 359 (SC) ; [1981] 2 SCC 528, Shri Bharuch Coconut Trading Co. v. Municipal Corporation of the City of Ahmedabad [1992] Supp (1) SCC 298 and Ponds India Ltd. [2008] 15 VST 256 (SC); [2008] 8 SCC 369). Where the definition of a word has not been given, it must be construed in its popular sense, that sense which people conversant with the subject-matter, with which the statute is dealing, would attribute to it. (Commissioner of Income-tax v. Taj Mahal Hotel [1971] 82 ITR 44 (SQ ; [1971] 3 SCC 550, Asian Paints India Ltd. v. Collector of Central Excise [1988] 70 STC 38 (SC); [1988] 2 SCC 470 and Ponds India Ltd. [2008] 15 VST 256 (SC) ; [2008] 8 SCC 369). The test commonly applied to such cases is : How is the product identified by the class or section of people dealing with o....
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....t and cold rolled, plain and corrugated in all qualities, in straight lengths and in coil form as rolled and in revitted condition; (vii) plates, both plain and, chequered in all qualities; (viii) discs, rings, forgings and steel castings; (ix) tool, alloy and special steels of any of the above categories; (x) Omitted (xi) steel tubes, both welded and seamless, of all diameters and lengths including tube fittings; (xii) tin-plates, both hot dipped and electrolytic and tin-free plates; (xiii) fish plate bars, bearing plate bars, crossing sleeper bars, fish plates, bearing plates, crossing sleepers and pressed steel sleepers, rails-heavy and light crane rails; (xiv) wheels, tyres, axles and wheel sets; (xv) wire rods and wires rolled, drawn, galvanised, aluminized, tinned or coated such as by copper; (xvi) omitted" Entry 2 of the Third Schedule to the Act is similar to section 14(iv) of the Central Sales Tax Act, 1956 ("the CST Act", f....
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....ew commodity, the result of the process of manufacture by steel having been rolled into that commodity..." (emphasis supplied). The aforesaid judgment of the Punjab and Haryana High Court was approved by the Supreme Court in State of Tamil Nadu v. Pyare Lai Malhotra [1976] 37 STC 319 (SC). Though the scope of the pre-amended section 14(iv) of the CST Act arose for consideration before it, the amended section 14(iv) of the CST Act, (which is similar to entry 2 of the Third Schedule to the Act), was also noted by the Supreme Court in Pyare Lal Malhotra [1976] 37 STC 319 (SC). The question which fell for determination therein was whether manufactured goods, said to consist of "steel rounds, flats, angles, plates, bars" or similar goods in other forms and shapes, could be taxed again if the material out of which they were made had already been subjected to sales tax once as iron and steel scrap, as both goods were "iron and steel". The Supreme Court observed (pages 324-326 in 37 STC):- " ...The ordinary meaning to be assigned to a taxable item in a list of specified items is that each item so specified is considered as a separately taxable item for purp....
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...., so long as they retain their identity as goods of a particular type. ...In the cases before us now, the object of single point taxation is the commercial commodities and not the substance out of which it is made. Each commercial commodity here becomes a separate object of taxation in a series of sales of that commercial commodity so long as it retains its identity as that commodity. ... 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 ....
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....SC). While considering the scope of the amended section 14(iv) of the CST Act, the Supreme Court, in Pyare Lal Malhotra [1976] 37 STC 319 (SC) observed (page 326 in 37 STC):- "It appears to us that the position has been simplified by the amendment of the law, as indicated above, so that each of the categories falling under 'iron and steel' constitutes a new species of commercial commodity more clearly now. It follows that when one commercial commodity is transformed into another, it becomes a separate commodity for purposes of sales tax." (emphasis supplied) Thus each of the categories falling under the item "iron and steel", i.e., each sub-item of item 2 of the Third Schedule to the Act constitutes a new species of commercial commodities. Merely because these separate items are listed under one head does not reduce them to sub-items of the main item "iron and steel". If we were to read each sub-item of item 2 of the Third Schedule as a separate taxable commodity for the purpose of sales tax, arid the list of special items under item 2 of the Third Schedule as being exhaustive, it would necessarily follow therefrom that each of the categories f....
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....al conditions when imposed on separate categories of specified goods, the expression is, apparently, meant to exhaustively enumerate the kinds of goods in a given list. (Pyare Lal Malhotra [1976] 37 STC 319 (SC), Mahindra Engineering and Chemical Products Ltd. v. Union of India [1993] 89 STC 408 (SC); AIR 1993 SC 406, R. Dalmia v. Commissioner of Income-tax [1977] 106 ITR 895 (SC); AIR 1977 SC 988 and Castrol India Ltd. [2005] 4 RC 370 (SC); [2005] 3 SCC 30). It would, necessarily, follow therefrom that the list of sub-items in entry 2 of the Third Schedule are merely descriptive, enumerative and exhaustive of the expression "iron and steel", and circumscribe the scope of entry 2, i.e., "iron and steel". What is not specifically included therein must, therefore, be held to fall outside the ambit of entry 2 of the Third Schedule to the Act. Even if "stainless steel" is held to fall within the expression "iron and steel" on the ground that it is an alloy of steel, it is only if seamless stainless steel tubes are specifically enumerated in any one of the sub-items of item 2 of the Third Schedule, would it fall within the ambit of entry 2 and not otherwise. As item 2(xi) relates only t....
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....cial steel' on sub-item (ix) and, therefore, does not fall under 'iron and steel' as defined under section 14(iv) of the Central Act. . ." (emphasis supplied). It is evident that entry 2(ix) of the Third Schedule to the Act intends to bring within the ambit of "iron and steel" only alloys of iron and steel which are in the nature of raw material, and in the primary form. Derivatives, manufactured out of the primary form of iron and steel, which are specified in entries 2(xi) to 2(xv) fall outside the ambit of entry 2 of the Third Schedule to the Act. It is clear, therefore, that stainless steel tubes and seamless stainless steel tubes do not fall within the scope of entry 2 of the Third Schedule to the Act. In Hindustan Wires Limited [1992] 86 STC 1 (Mad), a Division Bench of the Madras High Court held (page 11 in 86 STC):- "The other contention that in view of sub-item (ix), the alloy and special steel will apply only to sub-items (i) to (viii) is not correct as that will diminish the meaning given to the main item. Even otherwise, sub-item (ix) can be explained by saying that it was included by way of abundant caution or sub-items (i) to ....
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....le specifies is "steel tubes both welded and seamless". The products manufactured by NFC, i.e., "Stainless steel tubes, seamless stainless steel tubes and stainless steel ball bearing tubes" are separate commercial commodities distinct from seamless steel tubes and, therefore, do not fall under Item 2(xi) of the Third Schedule to the Act. The question which next necessitates examination is whether the goods manufactured and sold by NFC fall within the ambit of entry 54 of the First Schedule, i.e, "articles of stainless steel". In Hindustan Wires Limited [1992] 86 STC 1 (Mad) on which reliance is placed by Sri R. S. Murthy, the learned counsel for NFC, the Division Bench of the Madras High Court held that, in the case before it, the stainless steel wires and tubes were sold in lengths; those wires and tubes were used for manufacturing other stainless steel articles ; the mild steel rods, bars or rounds which were manufactured by the assessees were only finished forms of the metal, and not articles made of iron and steel; they only constituted raw material for putting up articles of iron and steel such as grills or windows by applying to them processes such as cut....
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....nstitute stock transfer or are inter-State sales liable to tax under the CST Act. From the order of the STAT it is evident that NFC is one of the units of the Department of Atomic Energy, Government of India ; units to which NFC supplies goods are also units of the Department of Atomic Energy engaged in different kinds of activities including research and other works ; and NFC had effected supply of goods, to the other units of the Department of Atomic Energy, as stock transfers and not as inter-State sales. It is axiomatic that "sale" can only take place between two persons. There cannot be any sale to one's self. The definition of "sale", both under the Act as well as the CST Act, makes it clear that, in order to constitute a sale, there must be a transfer of property in goods for consideration by one person to another . The concept of "sale" in the Sale of Goods Act is no different. "Sale" contemplates a seller and a buyer to be parties to a contract of sale. When a sale takes place, the seller is divested of the property in goods and the buyer acquires the property in the goods transferred. In this process, the title to the goods vested in the seller gets transfer....