Bihar Sponge Iron Limited vs Commissioner of Trade Tax

Rajes Kumar, J.—Present revision u/s 11 of U. P. Trade Tax Act (Hereinafter referred to as the ''Act'') is directed against the order of the Tribunal dated 18.02.1999 relating to the assessment year 1991-92.

The short question involved in the present revision is whether the Sponge Iron is a Pig Iron and is liable to tax as a declared commodity u/s 14 of the Central Sales Tax @ 4%. The Assessing authority levied the tax on the turnover of Sponge Iron @ 4% treating it as a declared commodity u/s 14 of the Central Sales Tax Apt vide order dated 21.6.1995. The Deputy Commissioner (Executive) passed an order u/s 10-B of the Act on 31.1.1998, wherein, Sponge Iron was held as an unclassified item and not the Iron and Steel, Aggrieved by the order of the Deputy Commissioner (Executive), applicant filed appeal before the Tribunal. The Tribunal by the impugned order, rejected the appeal.

Heard learned Counsel for the parties.

Learned Counsel for the applicant submitted that the Sponge Ion is a Pig Iron mentioned under the heading "Iron and Steel" defined u/s 14 of the Central Sales Tax Act. He submitted that the Sponge Iron is nothing but Pig Iron and is liable to tax u/s 14(iv) of the Central Sales Tax Act. He submitted that on the basis of letter dated 20.8.1985 issued by the Government of India, Ministry of Finance, Department of Revenue, New Delhi, the Commissioner of Trade Tax sought opinion from the Government about the taxability of the Sponge Iron. In reply to the said letter, the Principal Secretary, U. P. relying upon the letter of Government of India, Ministry of Finance, Department of Revenue, New Delhi dated 20.8.1985, wrote a letter dated 02.05.2001, in which, it has been opined that there is no difference in the Pig Iron and Sponge Iron and both are the form of metallic Iron and are being used in the manufacturing of Steel as raw-material. He submitted that on the basis of opinion expressed by the Principal Secretary, U. P. Government, a Circular No. Pa. Sa.Vidhi-1(1) I-1(2001-2002)-213/Vyapar Kar Karyalaya Commissioner, Vyapar Kar, Uttar Pradesh (Vidhi Anubhag) dated Lucknow 04.5.2001 from the Office of Commissioner of Trade Tax, U. P. was issued, in which, direction was issued by the Assistant Commissioner, Trade Tax, U. P. to all the Trade Tax Officer to take necessary action in accordance to the instructions issued by the Government vide letter dated 02.5.2001. He submitted that the opinion of the Government and the Circulars are binding upon the Revenue Authorities and it is not open to the Revenue Authorities to take any contrary view. He submitted that in the subsequent assessment years namely 1997-98, 1998-99, 1999-2000 and 2000-2001, the Assessing Authority had treated the Sponge Iron as ''Iron and Steel''. The said assessment orders have become final.

Learned Standing Counsel submitted that the Sponge Iron is not a metal, therefore, it cannot be held ''Pig Iron''. He submitted that Sponge Iron has been subsequently added in Section 14 of the Central Sales Tax Act alongwith the Pig Iron by Finance Act No. 14 of 2001 dated 11.5.2001. which shows that the Pig Iron and Sponge Iron are two different commodities. He submitted that since the Sponge Iron was not mentioned in the heading ''Iron and Steel'' and the entry of Iron land Steel are being exhaustive, the Sponge Iron cannot be treated as Iron and Steel.

Having heard learned Counsel for the parties and perused the order of the Tribunal and the authorities below.

It is settled principle of law that the opinion expressed by the Government and the Circular issued in this regard are binding upon the Revenue Authorities. The letter of the Principal Secretary, State

Government dated 02.05.2001 are referred hereinbelow:

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I am directed to state that Ministry of Steel, Mines & Coal Department of Steel have brougt to our notice that local sales tax authorities in Andhra Pradesh had originally classified sponge iron as declared goods u/s 14 of the Central Sales Tax Act and were levying single point sale tax at four percent in respect of sales within the State and outside the State of Andhra Pradesh. However, the sales tax authorities have sought to reclassified sponge iron as general goods on the ground that the same is different from iron and steel. Ministry of steel and Mines have pointed out that there is no difference in pig iron and sponge iron which are the forms of metallic iron only and constituted basic raw- materials for steel making. They have therefore, requested the State Government may be approached in the matter for levying single point tax on sponge iron.

In this connection, a copy of Ministry of Steel, Mines & Coal, Department of Steel, O. M. No. ASP-3(21)/85 dated 25 June, 1985 on the above subject is enclosed. It is requested that the matter may kindly be looked into for taking appropriate action and issuing suitable instructions to the local sales tax authorities. Action taken in the matter may kindly be intimated to this department and also to Ministry, of Steel, Mines & Coal, Department of Steel (Shri L.J.S. Khurana, Director). This may kindly be treated as urgent.

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The Commissioner of Trade Tax vide Circular No. 213 dated 04.5.2001 issued on the basis of opinion expressed by the State Government directed to all the Asstt. Commissioners (Assessment). Trade Tax, U. P. and Assessing Authorities to take necessary action. In the letter dated 02.5.2001, the Principal Secretary has expressed his opinion that there is no difference in the Pig Iron and Sponge Iron. Both are in the form of metal and are raw-materials for manufacturing of Steel. The Circular No. 213 dated 04.5.2001 is reproduced hereinbelow:

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I am directed to state that Ministry of Steel, Mines & Coal Department of Steel have brought to our notice that local sales tax authorities in Andhra Pradesh had originally classified sponge iron as declared goods u/s 14 of the Central Sales Tax Act and were levying single point sale tax at four percent in respect of sales within the State and outside the State of Andhra Pradesh. However, the sales tax authorities have sought to reclassified sponge iron as general goods on the ground that the same is different from iron and steel. Ministry of steel and Mines have pointed out that there is no difference in pig iron and sponge iron which are the forms of metallic iron only and constituted basic raw- materials for steel making. They have therefore, requested the State Government may be approached in the matter for levying single point tax on sponge iron.

In this connection, a copy of Ministry of Steel, Mines & Coal, Department of Steel, 0. M. No. ASP-3(21)/85 dated 25 June, 1985 on the above subject is enclosed. It is requested that the matter may kindly be looked into for taking appropriate action and issuing suitable instructions to the local sales tax authorities. Action taken in the matter may kindly be intimated to this department and also to Ministry of Steel, Mines & Coal, Department of Steel (Shri L.J.S. Khurana, Director). This may kindly be treated as urgent.

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In the case of Commissioner of Sales Tax, U.P. v. Indra Industries reported in 2000 UPTC 472, Apex Court held as follows:

A circular by tax authorities is not binding on the courts. It is not binding on the assessee. However, the interpretation that is thereby placed by the taxing authority on the law is binding on (hat taxing authority. In other words the taxing authority cannot be heard to advance an argument that is contrary to that interpretation.

In the case of Paper Products Ltd. v. Collector of Central Excise reported in (1997) 7 SCC 84, Apex Court held as follows:

This question is no more res integra in view of the various judgments of this Court. This Court in a catena of decision has held that the Circulars issued u/s 37B of the said Act are binding on the Department and the Department cannot be permitted to take a stand contrary to the instructions issued by the Hoard. These judgments have also held that the position may be different with regard to an assessee who can contest the validity or legality of such instructions but so far as the department is concerned, such right is not available. See Collector of Central Excise v. Usha Martin Industries.

In the case of Ranadey Micronautrients v. Collector of Central Excise, this Court held that the whole objective of such circulars is to adopt a uniform practice and to inform the trade as to how a particular product will be treated for the purposes of excise duty. The Court also held that it does not lie in the mouth of the revenue to repudiate a Circular issued by the Board on the basis that it is inconsistent with a statutory provision. Consistency and discipline are, according to this Court, of for greater importance than the winning or losing of Court proceedings. In the case of Collector of Central Excise v. Jayant Dalai (P) Ltd. This Court has held that it is not open to the revenue to advance an argument or even file an appeal against the correctness of the binding nature of the Circulars by the Board. Similarly is the view taken by this Court in the case of Collector of Central Excise v. Kores (India) Ltd.

Similar view has been taken by the Apex Court in a recent decision in the case of SACI Allied Products Ltd., U.P. Vs. Commissioner of Central Excise, Meerut, Union of India and Another Vs. Azadi Bachao Andolan and Another,

In the case of Simplex Castings Ltd. Vs. Commr. of Cus., Vishakhapatnam, Apex Court held that it is not open to the Customs Department to prefer appeal before CEGAT contrary to what was laid down in the Circular.

Thus, in the circumstances, without further adjudicating the issue whether the Sponge Iron and Pig Iron is metal or not. Sponge Iron is held to be Pig Iron in view of the opinion expressed by the State Government and the Circular dated 04.5.2001 which are binding upon the Revenue Authorities

In the result, revision is allowed and order of the Tribunal and the Deputy Commissioner (Executive) u/s 10-B are set aside.