Full Judgment Text
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PETITIONER:
THE STATE OF MADHYA BHARAT (Now the STATE OF MADHYA PRADESH)
Vs.
RESPONDENT:
HIRALALJI
DATE OF JUDGMENT:
29/11/1965
BENCH:
SUBBARAO, K.
BENCH:
SUBBARAO, K.
SHAH, J.C.
SIKRI, S.M.
CITATION:
1966 AIR 1546 1966 SCR (2) 752
CITATOR INFO :
RF 1974 SC1362 (4)
D 1976 SC 800 (10,11,15)
D 1981 SC1649 (13)
RF 1992 SC 422 (3,4)
ACT:
Sales Tax-Madhya Bharat Sales Tax Act, Samvat 2007 (30
of 1950)-Essential Goods (Declaration and Regulation of Tax
on Sales or Purchase) Act, 1952 (Central Act 52 of 1952), s.
5-Notifications issued under-Iron and steel exempted from
sales tax-Iron bars, flats and Plates whether ’Iron and
steel’ for the purpose of exemption.
HEADNOTE:
The respondent as head of a joint Hindu family owned a
re-rolling mill at which scrap iron locally purchased, and
iron plate-, imported from outside, were converted into
bars, flats and plates in the Mills and thereafter sold in
the market. The sales tax authorities held that iron bars,
flats and plates sold by the respondent were not ’iron and
steel’ exempted by notification No. 58 dated October 1953
issued under the Essential Goods (Declaration and Regulation
of Sales and Purchasees) Act, 1952. In a petition under
Arts. 226 and 227 filed by the respondent challenging the
said assessment the High Court decided that iron bars, flats
and plates were exempted under the notification. The State
appealed to this Court.
HELD : Goods prepared from metals other than gold and
silver are made taxable by notification No. 59 whereas
notification No. 58 exempts iron and steel from tax. A
comparison of the said two notifications brings out the
distinction between raw-materials of iron and steel and the
goods prepared from iron and steel. While the former is
exempted from tax the latter is taxed. Therefore iron and
steel used as rawmaterial for manufacturing other goods are
exempted from taxation. So long as iron and steel continue
to be raw materials, they enjoy the exemption. Scrap iron
purchased by the respondent was merely rerolled into bars,
flats and plates for convenience of sale. The rawmaterials
were only re-rolled to give them attractive and acceptable
forms. They did not in the process lose their character as
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iron and steel. The bars, flats and plates sold by the
respondent were therefore iron and steel exempt under the
notification. [754 D-G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 814 of
1964.
Appeal by special leave from the judgment and order
dated October 24, 1961 of the Madhya Pradesh High Court in
Misc. Petition No. 125 of 1958.
I.N. Shroff, for the appellants.
C.B. Agarwala and C. P. Lal, for the respondent.
The Judgment of the Court was delivered by
Subba Rao, J. This appeal by special leave raises the
question of the intepretation of Item No. 39 of the
Notification
753
No. 58, dated October 24, 1953, hereinafter called the
’Notification’, issued by the Government of Madhya Bharat
under the Madhya Bharat Sales Tax Act, Samvat 2007 (Act No.
30 of 1950), hereinafter called the Act.
The facts are as follows : Hiralal, the respondent, is
the: manager of a joint Hindu family carrying on business in
the name and style of "Messrs. Tilokchand Kalyanmal". The
joint family owns a re-rolling mill situated in Indore City
called the Central India Iron and Steel Company. The said
family purchases scrapiron locally and imports iron plates
from outside and after converting them into bars, flats and
plates in the Mills sells them in the market. The
respondent made a default in furnishing the returns
prescribed by s. 7(i) of the Act for the period April 1,
1954, to March 31, 1955. On February 27, 1956, the Sales-
tax. Officer, Indore, determined the taxable turnover at
Rs. 2,26,000and the sales-tax payable thereon at Rs. 8,000;
and he also imposed a penalty of Rs. 1,000 under s. 14 (1)
(c) of the Act. On the same day he issued demand notices to
the respondent for the payment of the said sales-tax and the
penalty. On September 10, 1956, the respondent filed a
petition in the High Court of Madhya Bharat (afterwards
Madhya Pradesh) under Arts. 226 and 227 of the Constitution
for the issue of appropriate writs quashing, the assessment
of tax and penalty and to restrain the State from giving
effect to the said orders of the Sales-tax Officer. A Divi-
sion Bench of the High Court held that the iron bars, flats
and’ plates sold by the respondent were exempted from sales-
tax under the Notification. In that view, the orders of the
Sales-tax Officer were quashed. The state has filed the
present appeal, by special’ leave.
The only question in this appeal is whether the said
iron bars, flats and plates are not iron and steel within
the meaning of’ Item No. 39 of the Notification.
Parliament enacted Essential Goods (Declaration and
Regulation of Tax on Sales or Purchases) Act, 1952 (Act No.
52 of’ 1952), which came into force on August 9, 1952. In
Schedule I of the said Act, iron and steel were declared
essential for the life of the community. Thereafter, the
Government of Madhya. Bharat, in exercise of the powers
conferred by S. 5 of the Act, issued the Notification as
also Notification No. 59, dated October 24, 1953. The
material part of Schedule I of Notification 58 reads
754
"No tax shall be payable on the sale of the following goods
S.No.
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Description of goods.
----------------------------------------------------------
39 Iron and steel.
----------------------------------------------------------
Notification No. 59 described the goods sales of which were
taxable at particular rates. Schedule IV thereof reads :
"List of articles under section 5 of the
Madhya Bharat Sales Tax Act, 1950, on the
assessable sale proceeds of which sales tax at
the rate of Rs. 3/2/- per cent. shall be
payable, showing the nature of articles on
which the tax is payable.
-----------------------------------------------------------
S.No. Name of article Stage of sale in Madhya Bharat at
which the tax is payable.
------------------------------------------------------------
9 .... goods prepared from any Sale by imported or pro-
metal sale by importer or producer. ducer.
other than gold and silver........
------------------------------------------------------------
Learned counsel for the State contends that the
expression "iron and steel" means iron and steel in the
original condition :-and not iron and steel in the shape of
bars, flats and plates. In our view, this contention is not
sound. A comparison of the said two Notifications brings
out the distinction between rawmaterials of iron and steel
and the goods prepared from iron and steel : while the
former is exempted from tax, the latter is taxed.
’Therefore, iron and steel used as raw-material for
manufacturing other goods are exempted from taxation. So
long as iron and steel continue to be raw-materials, they
enjoy the exemption. Scrap iron purchased by the respondent
was merely re-rolled into bars,flats and plates. They were
processed for convenience of sale.The raw-materials were
only re-rolled to give them attractive and acceptable forms.
They did not in the process lose their character as iron and
steel. The dealer sold "iron and steel" in the shape of
bars, flats and plates and the customer purchased "iron and
steel" in that shape. We, therefore, hold that the bars,
flats and plates sold by the assessee are iron and steel
exempted under the Notification. The conclusion arrived at
by the High Court is ,correct.
In the result, the appeal fails and is dismissed with
costs.
Appeal dismissed.
755