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Judgment
Ramesh Ranganathan, J.—TRC Nos. 198, 201 and 205 of 1988 are filed by M/s Nuclear Fuel Complex, Hyderabad, (hereinafter called "NFC"), against the order of the Sales Tax Appellate Tribunal (STAT) in T.A. Nos. 1054, 1064 and 1060 of 1987. They arise under the APGST Act, and relate to the assessment years 1981-82; 1982-83 and 1980-81 respectively.
The questions which arose for consideration, before the STAT, included "whether stainless steel tubes, seamless stainless steel tubes, stainless steel ball bearing tubes and stainless steel scrap fell under item 54 of the First Schedule or item 2 of the III 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 6% u/s 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 III Schedule, and levy of tax at 6% was illegal.
In its order, impugned before us, the STAT noted that the goods, specified in the III Schedule to the Act, were goods of special importance in inter-state trade or commerce as declared u/s 14 of the CST Act; the rate of tax, prescribed under item 2 of the III Schedule of the Act, was 4% in view of the restrictions imposed u/s 15 of the CST Act; the Government had clarified, in its communication dated 12.05.1958, that stainless steel came under the category of ''tool alloy''; Sri K. Chaturvedi in his book "Central Sales Tax Laws", had stated that, ordinarily, tool alloys were steel mixed with other metals from which tools were, generally, made; in the "Dictionary of Technical terms, by Fredric Swing, stainless steel was described as "an alloy steel containing a high percentage of chromium with the addition some times of nickel and copper"; the Government of India had again clarified, in its circular dated 17.11.1976, that stainless steel sheet was a type of alloy steel and was covered by sub-item (ix) of Section 14(4) of the CST Act; thereafter Entry 54 of the First Schedule to the Act was amended deleting the words "stainless steel" and, subsequent to the amendment, the said Entry read "Articles of stainless steel"; Entry 2(ix), therefore, took within its fold "Stainless Steel"; stainless steel, in its raw form, fell within item 2(ix) of the III Schedule; stainless steel tubes, seamless stainless steel tubes and stainless steel ball bearing tubes were products made out of stainless steel; the description of Entry 2(ix) of the III Schedule did not take within its fold products made out of stainless steel; the goods in question were products made out of stainless steel, and did not fall within Entry 2(ix) of the III Schedule; Entry 2 of the III Schedule, mainly, dealt with "iron and steel", and what was included in sub-item (xi) were "steel tubes"; seamless stainless steel tubes did not fall within the ambit of that Entry; the Madras High Court, in R.R. Manufacturers v. Board of Revenue (1983) 54 STC 88, had held that wires made out of stainless steel should be treated as "articles of stainless steel"; and, therefore, seamless stainless steel tubes and stainless steel ball bearing tubes were also articles of stainless steel within the meaning of Entry 54 of the First Schedule to the Act.
T.R.C. Nos. 133 AND 15 OF 1998:
T.R.C. Nos. 133 and 15 of 1998 are preferred by the Revenue against the order of the STAT in T.A. Nos. 279 and 280 of 1994 respectively. A similar question, as in T.A. No. 1054 of 1987 and batch, arose for consideration in T.A. No. 279 and 280 of 1994. The other question was whether supply of goods, to various units of the Department of Atomic Energy in other States, amounted to inter-state sales or stock transfers.
On the question 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 proforma for issuing invoices and delivery challans etc; these invoices, in the prescribed proforma, 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 adjustment under the relevant head; and such a procedure was followed only for the purpose of evaluating production in each unit.
The STAT held that, on account of issuing such invoices in such proformas, the transactions could not be treated as sales; and there was no relationship of seller and buyer as there was no element of "sale" between different units of the same department. The STAT relied on a Division bench judgment of this Court in K.C.P. Limited (Ramakrishna Cements) v. State of Andhra Pradesh 1993 (88) STC 374, and the judgments of other High Courts, to hold that transfer of goods effected by NFC to other units of the Department of Atomic Energy could not be treated as "sale"; the disputed transactions were only stock transfers to other units; and such transactions could not be treated as inter-state sales for being assessed to tax under the CST Act.
On the question, whether sale of seamless stainless steel tubes and stainless steel ball bearing tubes within the State fell within the ambit of Entry 2(xi) of the III Schedule or Entry 54 of the I Schedule to the Act, the STAT held that the Deputy Commissioner had treated the goods as falling under Entry 54 of the first Schedule mainly in view of the earlier decision of the STAT in T.A. No. 1054 of 1987 and batch dated 21.01.1988, and in view of the decision of the Madras High Court in R.R. Manufacturers (1983) 54 STC 88; the said decision of the Madras High Court in R.R. Manufacturers (1983) 54 STC 88 was held to be no longer good law by the Madras High Court in Hindustan Wires Limited v. State of Tamilnadu 1992 (86) STC 1 in the light of the judgment of the Supreme Court in Commissioner of income tax v. Krishna Copper and Commissioner of Income Tax, Haryana Vs. M/s. Krishna Copper Steel Rolling Mills, Jagadhri etc. etc., ; the Madras High Court, in Hindustan Wires Ltd. 1992 (86) STC 1, had held that the words "iron and steel" mentioned in the main item included all kinds of steel, like alloy steel etc., and, if "iron and steel" occurring in the main item included non-alloy steel and alloy steel including stainless steel, the same construction should be placed on sub-items (xi) and (xv) also. The STAT, while noting the contention of the Revenue, that in view of sub-item (ix) the expression "alloy and special steel" applied only to sub- item (i) to (viii) and not to sub-item (x) to (xvi), observed that the Madras High Court, in Hindustan Wires Ltd. 1992 (86) STC 1, 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 II Schedule to the Tamilnadu General Sales Tax Act, which was similar to Entry 2 of the III Schedule to the Act. In view of the decision of the Madras High Court, in Hindustan Wires Ltd. 1992 (86) STC 1, the STAT held that the view expressed by it, in its earlier decision in T.A. No. 1054 of 1987 and batch dated 21.01.1988, and the view expressed in the earlier decision of the Madras High Court in R.R. Manufacturers (1983) 54 STC 88 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 of the First Schedule, but not the tubes which were sold by NFC; and such view also found favour with the Madras High Court in Hindustan Wires Ltd. 1992 (86) STC 1. The STAT concluded that seamless stainless steel tubes, and stainless steel ball bearing tubes, were to be considered only as falling under Entry 2(xi) of the III Schedule, and not as "articles of stainless steel" falling under Entry 54 of the First Schedule to the Act.
Sri R.S. Murthy, Learned Counsel for NFC, would submit that "stainless steel" is an alloy of iron and steel and would fall within the main item"iron and steel"; steel tubes, referred to in sub-item (xi) of Entry 2 of the III Schedule included stainless steel tubes and seamless stainless steel tubes also; and, as such, the goods sold by NFC ie., "stainless steel tubes, seamless stainless steel tubes, stainless steel ball bearing tubes and stainless steel scrap" fell under Entry 2(xi) of the Third Schedule to the Act. On the other hand, Sri A.V. Krishna Koundinya, Learned Special Standing Counsel for Commercial Taxes, would submit that Entry 2(xi) of the Third Schedule is not the relevant Entry, and it is under Entry 54 of the First Schedule that the goods, sold by NFC, should be classified. It is necessary, therefore, to first examine whether or not the goods in question fall within Entry 2(xi) of the Third Schedule to the Act.
Interpretation of an Entry, under the Tax Laws, is a quasi-judicial function. State of Kerala and Others Vs. Kurian Abraham Pvt. Ltd. and Another, While interpreting an Entry, the Court''s role is to consider its effect after examining it from different angles. Ponds India Ltd. (Merged with H.L. Ltd.) Vs. Commissioner of Trade Tax, Lucknow, . Neither can one single universal test be applied nor can there be a static parameter for proper classification. Functional utility, design, shape and predominant usage have also to be taken into account while determining the classification of an item. O.K. Play (India) Ltd. Vs. Commissioner of Central Excise, Delhi-III, Gurgaon, ; A. Nagaraju Bros., Visakhapatnam Vs. State of A.P., . Different tests are laid down for interpretation of an entry in a taxing statute namely, dictionary meaning, technical meaning, user''s point of view, popular meaning, etc. Ponds India Ltd. (Merged with H.L. Ltd.) Vs. Commissioner of Trade Tax, Lucknow, . 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 Vs. Commissioner of Sales Tax, Uttar Pradesh, ; Shri Bharuch Coconut Trading Co. and others Vs. The Municipal Corporation of the City of Ahmedabad and others, ; Ponds India Ltd. (Merged with H.L. Ltd.) Vs. Commissioner of Trade Tax, Lucknow, 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, Andhra Pradesh Vs. Taj Mahal Hotel, Secunderabad, ; Asian Paints India Ltd. Vs. Collector of Central Excise, ; Ponds India Ltd. (Merged with H.L. Ltd.) Vs. Commissioner of Trade Tax, Lucknow, The test commonly applied to such cases is: How is the product identified by the class or section of people dealing with or using the product? That is a test which is attracted whenever the Statute does not contain any definition. It is, generally, by its functional character that a product is so identified. Commissioner of Sales Tax, U.P. Vs. Macneill and Barry Ltd., Kanpur, ; Porritts and Spencer (Asia) Ltd. Vs. State of Haryana, ; Atul Glass Industries (Pvt.) Ltd. Vs. Collector of Central Excise, In determining the meaning or connotation of words and expressions describing an article or commodity, the turnover of which is taxed in a sales tax enactment, if there is one principle fairly well settled it is that the words or expressions must be construed in the sense in which they are understood in the trade, by the dealer and the consumer. It is they who are concerned with it, and it is the sense in which they understand it that constitutes the definitive index of the legislative intention when the statute was enacted. (Geep Flashlight Industries Ltd. v. Union of India (1985) 22 ELT 3 ; Atul Glass Industries (Pvt.) Ltd. Vs. Collector of Central Excise, ; Delhi Cloth and General Mills Co. Ltd. and Another Vs. State of Rajasthan and Others, .
Entry 54 of the First Schedule to the Act, as it stood at the relevant time, read as "Articles of Stainless Steel". Likewise Entry -2 of the third Schedule to the Act, (i.e., declared goods in respect of which a single point tax only is leviable u/s 6 of the Act), read as under:
S.No. Description of goods Point of levy Rate of tax
2 Iron and steel, that is to say: (i) Pig iron (Sponge Iron) and cast iron including ingot moulds, and bottom plates; (ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes); (iii) skeip bars, tin bars, sheet bars, hoe-bars and sleeper bars; (iv) steel bars (rounds, rods, squares, flats, octagons and hexagons; plain and ribbed ortwisted, in coil form as well as straight length); (v) steel structurals (angles, joists, channels, tees, sheet pilling sections, Z sections or any ther rolled sections) (vi) sheets, hoops, strips and skelp, both black and galvanised, hot 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 plats; (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... At every point of sale in the State 4 paise in the rupee
Entry 2 of the Third Schedule to the Act is similar to Section 14(iv) of the Central Sales Tax Act, (CST Act for short), after its amendment by Act 61/1972 with effect from 1.4.1973. Before its amendment by Act 61/1972, Section 14(iv) of the CST Act read as under:
(iv) iron and steel, that is to say-
(a) Pig iron and iron scrap;
(b) Iron plates sold in the same from in which they are directly produced by the rolling mill;
(c) Steel scrap, steel ingots, steel billets, steel bars and rods;
(d)
(i) steel plates
(ii) steel sheets
(iii) sheet bars and tin bars,
(iv) rolled steel sections
(v) tool alloy steel
Sold in the same form which they are directly produced by the rolling mill
The scope of the pre-amended Section 14(iv) of the CST Act fell for consideration before the Punjab and Haryana High Court in Devgun Iron and Steel Rolling Mills, Gobindgarh v. The State of Punjab (1961) 12 STC 590. The Petitioners therein purchased steel and rolled it into rolled steel sections. They claimed that the process of rolling steel into rolled steel sections was not a process of manufacture; this process amounted to no more than making the steel to be a more marketable commodity as such; and the nature and character of the commodity did not undergo any alteration. It is in this context that the Division Bench held:
...In Section 14 of the Central Sales Tax Act, (No. 74 of 1956) Clause (iv) deals with "iron and steel" as one of the goods declared of special importance in inter-State trade or commerce, and under this clause there are four heads, of which head (a) relates to pig iron and iron scrap, head (c) to steel scrap, steel ingots, steel billets, steel bars and rods, and head (d) (iv) to rolled steel sections sold in the same form in which they are directly produced by the rolling mills. It is clear that rolled steel sections are treated as a separate commodity as against the raw material dealt with in heads (a) and (c) of this clause. At the hearing what was stated was that the Petitioners purchased iron scrap or steel scrap and then rolled the same into rolled steel sections. In the petitions it is not made so clear. It is obvious that when the raw material of iron or steel that the Petitioners purchase and rolling the same turn into rolled steel sections, the outcome, that is to say, the rolled steel sections, is a new 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 Haiyana High Court was approved by the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra (1976) 37 STC 19(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 State of Tamil Nadu Vs. Pyare Lal Malhotra and Others, 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:
...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 purposes of single point taxation in a series of sales unless the contrary is shown. Some confusion has arisen because the separate items are all listed under one heading: "iron and steel"....
....If the object was to make iron and steel taxable as a substance, the entry could have been: "Goods of iron and steel". Perhaps even this would not have been clear enough. The entry, to clearly have that meaning, would have to be: "Iron and steel irrespective of change of form or shape or character of goods made out of them". This is the very unusual meaning which the Respondents would like us to adopt. If that was the meaning, sales tax law itself would undergo a change from being a law which normally taxes sales of "goods" to a law which taxes sales of substances out of which goods are made. We, however, prefer the more natural and normal interpretation which follows plainly from the fact of separate specification and numbering of each item. This means that each item so specified forms a separate species for each series of sales although they may all belong to the genus: "iron and steel". Hence, if iron and steel "plates" are melted and converted into "wire" and then sold in the market, such wire would only be taxable once so long as it retains its identity as commercial goods belonging to the category "wire" made of either iron or steel. The mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity, would make no difference for purposes of the law of sales tax. The object appears to us to be to tax sales of goods of each variety and not the sale of the substance out of which they are made....
As we all know, sales tax law is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entities for purposes of sales tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, 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 necessary to determine when they ceased to be goods of one taxable description and become those of a commercially different category and description....
(emphasis supplied).
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 separate taxable item for the purpose of single point taxation in a series of sales, unless the contrary is shown. The interpretation of separate specification and numbering of each item is that each item so specified forms a separate species for each series of sales although they may all belong to the genus: "iron and steel".
As noted hereinabove, Section 14(iv) of the CST Act was amended by Amendment Act 61 of 1972 with effect from 1.4.1973. The reason given, in the Statement of Objects and Reasons of the 1972 Amendment Act, for an elucidation of the "definition" of iron and steel, was that the "definition" had led to varying interpretations by assessing authorities and the courts so that a comprehensive list of specified declared iron and steel goods would remove ambiguity. The Select Committee, which recommended the amendment, called each specified category "a sub-item" falling under "iron and steel". Apparently, the intention was to consider each "sub-item" as a separate taxable commodity for the purpose of sales tax. The statement of reasons for amendment speaks of Section 14(iv) as a "definition" of "iron and steel". A definition is expected to be exhaustive. The object of Section 14 is not to lay down that all the categories or sub-items of goods, as specified separately, are to be viewed as a single salable commodity called "iron and steel" for the purposes of determining a starting point for a series of sales. Each subcategory of a sub-item retains its identity as a commercially separate item for purposes of sales tax so long as it retains the sub-division. The more natural and normal meaning of such a mode of listing special or declared goods is that the object of specification is to enumerate only those categories of items, each of which is to serve as a new starting point for a series of sales, which are to be classed as "declared" goods. If one were to state the meaning in different words, it would to be: "iron and steel goods of various types enumerated below..." State of Tamil Nadu Vs. Pyare Lal Malhotra and Others,
While considering the scope of the amended Section 14(iv) of the CST Act, the Supreme Court, in State of Tamil Nadu Vs. Pyare Lal Malhotra and Others, observed:
...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 an"Steel" i.e., each sub-item of Item 2 of the Third Schedule to the Act constitute 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, and 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 falling under the item "Iron and Steel". constitute a new species of commercial commodities; and what is brought within the ambit of sub-item (xi) of item 2 of the III schedule are only welded steel tubes and seamless steel tubes, and not stainless steel tubes and seamless stainless steel tubes, as the latter is a commercial commodity distinct from the former. The Division bench judgment of the Madras High Court in Hindustan Wires Ltd 1992 (86) STC 1 , holding that "Iron and Steel" was the main item and the different categories mentioned thereunder were sub-items of the main Item "Iron and Steel", falls foul of the judgment of the Supreme Court in State of Tamil Nadu Vs. Pyare Lal Malhotra and Others, . We are, therefore, not persuaded to accept the opinion expressed by the Madras High Court in Hindustan Wires Ltd. 1992 (86) STC 1
This question can also be examined from another angle. Entry 2 of the III Schedule to the Act uses the words ''that is to say''. The expression ''that is to say'' is the commencement of an ancillary clause which explains the meaning of the principal clause. It has the following properties: (1) it must not be contrary to the principal clause; (2) it must neither increase nor diminish it; (3) but where the principal clause is general in terms it may restrict it. (Stroud''s Judicial Dictionary, 4th Edn. Vol. 5, at p. 2753; State of Tamil Nadu Vs. Pyare Lal Malhotra and Others, The expression "that is to say" is descriptive, enumerative and exhaustive and circumscribes to a great extent the scope of the Entry. (CST v. Popular Trading Co. AIR 2000 SC 1578 ; Castrol India Limited Vs. Commissioner of Central Excise, Calcutta-I, The words "that is to say" are limitative and not merely illustrative. Tan Bug Taim Vs. Collector of Bombay, . Ordinarily, the expression "that is to say" is employed to make clear and fix the meaning of what is to be explained or defined. Such words are not used, as a rule, to amplify a meaning while removing a possible doubt for which purpose the word "includes" is generally employed. In unusual cases, depending upon the context of the words "that is to say", this expression may be followed by illustrative instances. In the context of single point sales tax, subject to special 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. State of Tamil Nadu Vs. Pyare Lal Malhotra and Others, Tan Bug Taim Vs. Collector of Bombay, ; Mahindra Engineering and Chemical Products Ltd. Vs. Union of India and others, and R. Dalmia Vs. The Commissioner of Income Tax, New Delhi, 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 III 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 III Schedule, would it fall within the ambit of Entry 2 and not otherwise. As item 2(xi) relates only to seamless steel tubes, and not to seamless stainless steel tubes, the goods manufactured and sold by NFC do not fall within its ambit. These goods cannot, therefore, be classified under Entry 2 of the Third Schedule to the Act.
Entry 2 (ix) specifically relates to tool, alloy and special steels of any of the above categories i.e., categories in sub-items (i) to (viii) of Entry-2 of the III Schedule. In Bansal Wire Industries Ltd. and Another Vs. State of U.P. and Others, , the question which fell for consideration before the Division bench of the Allahabad High Court was whether wires made wholly or principally of stainless steel could be taxed in excess of four per cent. The contention urged on behalf of the Petitioner-dealer therein was that "stainless steel wire" was one of the species of the genus "iron and steel" u/s 14(iv) of the Central Sales Tax Act and, therefore, could not be subjected to tax in excess of four per cent in view of Section 15 of the Central Sales Tax Act. After referring to the judgment of the Supreme Court in State of Tamil Nadu Vs. Pyare Lal Malhotra and Others, the Division bench of the Allahabad High Court held:
...From the perusal of the 16 categories under the "iron and steel" it appears that sub-items (i) to (viii) are in the nature of raw material or primary iron and steel and items Nos. (x) to (xvi) are derivatives of such primary materials and raw materials....
...The next vital question for consideration is whether the "alloy and steel" mentioned in sub-item (ix) will cover the stainless steel wire. The words "alloy and special steel" are qualified by the words "of any of the above categories". The language is plain and unambiguous. Therefore, we are of the view that only those items which are mentioned in sub-items (i) to (viii) are covered under "alloy and special steel". It appears that by using the words "of any of the above categories" the intent of the Legislature is to cover only those alloys and special steel which are in the nature of raw material and in primary form and not which are derivatives of the stainless steel manufactured out of the primary form of the stainless steel....
...We are of the view that stainless steel wire is not covered under the entry of "alloys and special steel" on sub-item (ix) and, therefore, does not fall under "iron and steel" as defined u/s 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 III Schedule to the Act.
In Hindustan Wires Limited 1992 (86) STC 1, a Division Bench of the Madras High Court held:
...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 (viii) are in the nature of raw materials or primary steel and items (x) to (xvi) are derivatives from primary materials mentioned in sub-items (i) to (viii)....
We are unable to agree with the afore extracted view of the Madras High Court as, in the context of single point sales tax, subject to special conditions when imposed on separate categories of specified goods, the expression "that is to say" is apparently meant to exhaustively enumerate the kinds of goods in a given list. The purpose of an enumeration in a statute dealing with sales tax at a single point in a series of sales would, very naturally, be to indicate the types of goods each of which would constitute a separate class for a series of sales. Otherwise, the listing itself loses all meaning and would be without any purpose behind it. State of Tamil Nadu Vs. Pyare Lal Malhotra and Others,
Sale tax laws are intended to tax sales of different commercial commodities. The object is to tax sale of goods of each variety, and not the sale of the substance out of which they are made. As soon as a separate commercial commodity emerges or comes into existence, they become separately taxable goods or entities for purposes of sales tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type. "Stainless steel" is a corrosion-resistant type of alloy steel which contains a minimum of 12 per cent chromium. The latter is the element which confers upon the steel its property of resisting attack by the atmosphere or by a number of chemical re-agents. The effect is attributed to the ability of chromium to form a thin, but a very tenacious, film of oxide at the surface of the alloy which resists attack by most oxidising agents. The resistance to corrosive attack is enhanced if nickel be added, and is further improved by small additions of molybdenum and copper. (Hindustan Wires Limited 1992 (86) STC 1).
As stainless steel is a separate commercial commodity, which emerges on "steel" being subjected to a process of manufacture, it does not answer the commercial description of "steel" as a commodity. What item 2(xi) of the Third Schedule 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, on which reliance is placed by Sri R.S. Murthy, 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 cutting or turning; and the rod or the wire rods were likewise not products of iron and steel but only certain finished or refined forms of the metal itself.
According to Webster''s and the Shorter Oxford Dictionaries, the word "article" means a particular commodity, a thing for sale. It also means a component part, a distinct part or a portion. There is no indication in the Entry to show that an "article" does not mean what its ordinary and dictionary meaning is, namely, a particular commodity or a thing for sale. It may be that the word "article" may include not only a particular commodity, but also a component part. But that would not mean that "article" can only be a component part and not a whole commodity or a whole thing. The word "article" has not acquired any popular meaning which gives it a narrower connotation either in commercial circles or in popular parlance. It cannot, therefore, be said that the Legislature had used the word "article" in the meaning attached to it in popular parlance. (State of Gujarat v. Keshavlal and Sons (1966) 17 STC 170 (SC).
"Seamless stainless steel tubes, stainless steel tubes and stainless steel ball bearing tubes" are "Articles of stainless steel" as the word "Article", in Entry 54 of the First Schedule to the Act, has been used in a wider sense to include not only a particular commodity or a thing for sale, but also a component part, a distinct part or a portion. Even if stainless steel tubes, seamless stainless steel tubes and stainless steel ball bearing tubes are held not to be whole commodities, but merely component parts, they would, nonetheless, fall within the meaning of "article" and, as they would be "articles of stainless steel", the Revenue is justified in contending that the said goods fall within the ambit of item 54 of the I Schedule, and not item 2 of the III Schedule to the Act. In Hindustan Wires Ltd. 1992 (86) STC 1, the Division Bench of the Madras High Court has given a narrow and restricted meaning to the word "articles" with which we respectfully disagree as the said word has a wider meaning and includes not only commodities but also component parts or distinct parts thereof.
The other question which falls for consideration, in TRC Nos. 133 and 15 of 1998, is whether supply of goods to other units of the Department of Atomic Energy would constitute 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 transferred to the buyer. In Halsbury''s Laws of England, "sale" is defined as the transfer of ownership of a thing from one person to another for a price. In Chalmer''s Sale of Goods Act, it is stated that "the essence of sale is the transfer of the property in a thing from one person to another for a price". (State of Madras v. Gannon Dunkerley and Co. [1958] STC 353; The K.C.P. Limited 1993 (88) STC 374).
In The K.C.P. Limited 1993 (88) STC 374, a Division Bench of this Court held:
...the company may have several units or divisions located at different places engaged either in the same line of manufacture or trading or in different manufacturing or trading activities. Normally, the units or divisions will have no separate identity of their own, much less a distinct legal entity. There may be separate establishments, separate planning and separate management, but these aspects by themselves do not detract from the basic characteristic of communion with the corporate body that had created these units or divisions. They can claim no independent existence apart from the company itself. The property of these units or divisions is legally held by the company. The profits generated by the units form part of the company''s income and will go to the benefit of general body of shareholders of the company. So also, the liabilities or losses incurred by the individual units, in ultimate analysis, will have to be borne by the company. It is the company (the K.C.P. Ltd.) that can sue for the recovery of property or dues or be sued for the outstandings due on account of dealings of the units. It is on record that a single balance sheet is prepared by the company in respect of all the units and divisions owned and controlled by the company....
(emphasis supplied)
Transfer of goods by NFC to other units of the Department of Atomic Energy does not constitute "sale" as they are all units of the Department of Atomic Energy, and the Department of Atomic Energy cannot be said to have sold goods to itself. The STAT was, therefore, justified in holding that the transaction was in the nature of a stock transfer, and did not amount to inter-state sale liable to tax under the CST Act.
As a result, TRC Nos. 198, 201 and 205 of 1988 filed by NFC are dismissed. TRC Nos. 133 and 15 of 1998 preferred by the Revenue are allowed in part to the extent the STAT held that "stainless steel tubes, seamless stainless steel tubes, stainless steel ball bearing tubes and stainless steel scrap" fell under item 2 of the III schedule, and not item 54 of the I Schedule to the Act. However, on the question of stock transfer, the order of the STAT is affirmed and TRC Nos. 133 and 15 of 1998 are dismissed in part.