State of Tamil Nadu Vs. Pyare Lal
Malhotra  INSC 6 (19 January 1976)
BEG, M. HAMEEDULLAH BEG, M. HAMEEDULLAH RAY,
A.N. (CJ) SARKARIA, RANJIT SINGH SHINGAL, P.N.
CITATION: 1976 AIR 800 1976 SCR (2) 168 1976
SCC (1) 834
CITATOR INFO :
R 1976 SC1437 (12) R 1981 SC1649 (13,14) R
1982 SC 149 (245) R 1991 SC 354 (4) RF 1992 SC 422 (3)
Central Sales Tax Act-Secs. 14-15-Tamil Nadu
Sales Tax Act Sec. 2(j)- Prohibition against imposing tax at more than one
stage-Whether all categories and sub items of iron and steel to be treated as
one commodity -Words and Phrases- Meaning of "that is to say."
The respondents are dealers under the Tamil
Nadu Sales Tax Act. Section 14 of the Central Sales Tax Act declares certain
goods enumerated therein of `' special importance in inter-state trade or
commerce. The list of goods given at serial No. IV reads as under:
(IV) Iron and Steel, that is to say- (a) pig
iron and iron scrap .
(b) iron plates sold in the same form 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, I mill.
(v) tool alloy steel, J sole in the same from
in which they are directly produced by the rolling mill.
The said clause IV was amended by the Central
Sales Tax Amendment Act, Act 61 of 1972 by which certain more entries were
Section 15 of the Central Sales Tax Act
provides that the tax payable under a State Law on sale or purchase of declared
goods shall not be levied at more than one stage.
Respondents used to purchase iron scrap and
thereafter used to convert them into steel rounds, flats, plates etc.
The scrap was already subject to tax once.
The respondents contended that the entry Iron & Steel was wide enough to -
include scrap as well as the steel rounds, flats, plates, etc. made out of the
scrap which was subject to tax once and that, therefore, the sale of the steel
rounds, flats, plates, etc., cannot be subjected to tax again under the Tamil
Nadu Sales Tax Act. The High Court accepted the contention of the respondents.
Allowing an appeal by certificate, ^
HELD: 1. The intention was to consider each
sub-item in clause IV as a separate taxable commodity for purposes of sales
tax. The object was not to lay down that all the categories or sub-items of
goods specified separately were to be viewed as a single saleable commodity
called iron and steel for purposes j of determining a starting point for a series
of sales. The note against sub division of Clause IV makes it clear that even
each sub-category 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. [171Gm,
2. The expression 'that is to say' is
employed to make it clear and fix the meaning of words 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. The precise meaning of the words 169 that is to say' must vary with
the context. The purpose of the expression in a sales A lax law would be to
indicate the types of goods each of which would constitute separate class for a
series of sales. [172F-H, 173B]
3. The chemical composition of iron and steel
cannot afford a clue to the meaning of iron and steel. Sales Tax Law taxes
sales of goods and is not a taxation on sales of substance out of which goods
are made. We prefer to follow the more natural and normal interpretation which
follows plainly from the fact of separate specification numbering of each item.
State of Madhya Pradesh v. Hira Lal; (1966) 17 STC 313-315 distinguished. The
case of Devidas applied.
4. It has not been shown to, us that any
provision of the Tamilnadu Sales Tax Act violates section 15 of the Central
Sales Tax Act enacted in accordance with Article 286(3) of the Constitution.
Section 2(j) of the Tamil Nadu Act defines goods and section 4 imposes charge
in respect of tax on declared goods. The Tamil Nadu Act borrows clause (IV) of
section 14 of the Central Sales Tax Act. [176 C-H] C
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 58-59 and 880-883 of 1971.
From the Judgment and order dated 10-4-1970
of the Madras High Court in Writ Petition Nos. 437/67 and 520/68 and Tax Cases
Nos. 135-138 of 1970 respectively.
P. Ram Reddy, A. V. Rangam and Miss A.
Subhashini, for the Appellant in C.As. 58-59/71.
Sachin Chandra Chaudhury and Mrs. S.
Gopalakrishnan for Respondent.
Gobind Das. P. H. Parekh and Miss Manju
Jetley for the Intervener (M/s Durga Steel) The Judgment of the Court was
delivered by BEG, J.-The two Civil Appeals Nos. 58-59 of 1971 arise out of a
judgment of a Division Bench of the Madras High Court dismissing two Writ
Petitions filed against notices issued by a Commercial Tax officer showing
institution of Sales tax assessment proceedings in respect of certain iron and
steel goods for the assessment year 1965-66 in Writ Petition No. 437 of 1967
and for the assessment year 1966-67 in Writ Petition No. 520 of 1968. The High
Court of Madras had certified the cases as fit for appeal to this Court under
Article 132 and 133(1)(a) and (c) of the Constitution.
Although, the Writ Petitions had been
dismissed on the ground that they involve an investigation into the-question of
fact whether the iron and steel scrap, out of which the manufactured goods,
sought to be subjected to Sales tax, had been made, were already taxed or not,
yet, the State of Tamil Nadu was aggrieved by the decision of the Madras High
Court holding that the manufactured goods, said to consist of "steel
rounds, flats, angles, plates, bars" or similar goods in other forms and
shapes, could not be taxed again if the material out of which they were made
had already been subjected to sales' tax once an iron and steel scrap as both
were "Iron and steel". It was possible to leave the assessing
authorities free to decide all the questions which they had jurisdiction to
consider. But, it appears that the Madras High Court thought it proper to
decide the question as the Sales' tax 170 authorities had already adopted the
view, in other cases, that such goods, though covered by the broad genus
"Iron and Steel", were separately taxable commodities because each
kind of "Iron and Steel" goods was a commercially different and
separately taxable species or category. Moreover, this very question was also
before the High Court in regular revision petitions under the Tamil Nadu Sales
Tax Act (hereinafter referred to as 'the Tamil Nadu Act').
Civil Appeals Nos. 880-883 of 1971 arise out
of four petitions for revision under the provisions of the Tamil Nadu Act for
the years 1964-65 and 1965-66, which were allowed by the Madras High Court 4
setting aside assessment orders by following its judgment and decision
mentioned above given on 24-6-1970 on Writ Petitions Nos. 437 of 1967 and 520
of 1968. The Madras High Court had also granted Certificates of fitness for
appeal to this Court under Article 132 read " with Article 133(1)(a)(c) in
the four cases before it on revision petitions. Hence, six cases were connected
and heard together by us. The same question of law, decided by the Madras High
Court on grounds contained in one judgment, under appeal in Civil Appeals Nos.
58-59 of 1971 before this Court, arise in all of them.
All the six cases before us relate to what
are known as "declared goods" under Section 14 of the Central Sales
Tax Act (hereinafter referred to as 'the Central Act'). It was claimed, on
behalf of the r dealers, sought to be assessed in each case, that, by reason of
the restrictions imposed by Section 15 of the Central Act, the levy of tax
under the Tamil Nadu Act was not permissible.
Section 14 of the Central Act declares
certain goods enumerated there to be "of special importance in inter-State
trade or commerce". The list of goods given there at No.
(iv), as it stood in 1968, was:
"(IV) Iron and Steel, that it to say-
(a) 'pig iron and iron scrap (b) iron plates sold in the same form 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, sold in the same form in which they are (iv) rolled
steel sections, directly produced by the rolling mill;" (v) tool alloy
steel, , sole in the same from in which they are directly produced by the
rolling mil;" By the Central Sales Tax (Amendment) Act 61 of 1972, clause
(iv) r was redrafted. It now reads as follows:
"(iv) iron and steel, that is to say-
(i) pig iron and cast iron including ingot, moulds, bottom plates, iron scrap,
cast iron scrap, runner scrap andiron skull scrap;
(ii) steel semis (ingots, slabs, blooms and
billets of all qualities, shapes and sizes);
(iii)skelp bars, tin bars, sheet bars,
heebars and sleeper bars;
171 (iv) steel bars (rounds, rods, squares,
flats, octagone and A hexagone, plain and ribbed or twister, in coil from as
well as straight lengths):
(v) steel structurals (angles, joints,
channels, tees, sheet piling sections, sections or any other 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 rivetted
(vii)plates both plain and chequered in all
(viii)discs, rings, forgings and steel
(ix) tool, alloy and special steels of any of
the above categories;
(x) steel melting scrap in all forms
including steel kull, turnings and borings;
(xi) steel cubes, 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 crane rails;
(xiv)wheels, tyres, axles and wheel sets;
(xv) wire rods and wires-rolled, drawn,
galvanised, alumanised, tinned or coated such as by copper;
(xvi)defectives, rejects, cuttings or end
pieces of any of the above categories";
It will be seen that "Iron and
Steel" is now divided into 16 categories which clearly embrace widely
different commercial commodities, from mere scrap iron and left overs of
processes of manufacturing to "wires" and "wheels, tyres, axles,
and wheel sets". Some of the enumerated items like "melting
scrap" or "tool alloys" and "special steels" could
serve as raw material out of which other goods are made and others are
definitely varieties of manufactured goods. If the subsequent amendment only
clarifies the original intentions of Parliament, it would appear that heading 4
in Section 14, as originally worded, was also meant to enumerate separately
taxable goods and not just to illustrate what is just one taxable substance,
"Iron and Steel". The G reason given, in the statement of objects and
reasons of the 1972 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 Steer'.
Apparently, the intention was to consider each "sub- item" as a
separate taxable commodity for purposes of Sales' tax. Perhaps some items could
overlap, but no difficultly arises in cases before us due to this feature. As
we have 172 pointed out, the statement of reasons for amendment spoke of
Section 14(iv) as a "definition" of "Iron and Steel". A
definition is expected to be exhaustive. Its very terms may, however, show that
it is not meant to be exhaustive. For example, a purported definition may say
that the term sought to be defined "includes" what it specifies, but,
in `that case, the definition itself is not complete.
Although, we have looked at the subsequent
amendment of 1972 in order to find an indication of the original intention,
because subsequent history of legislation is not irrelevant, yet, we think
that, even if we confine our attention to Section 14 as it originally stood at
the relevant time, with which we are concerned in the cases before us, the
object was not to lay down that all the categories or sub-items of goods, as
specified separately even before the amendment of 1972, were to b viewed as a
single saleable commodity called "Iron and Steel" for purposes of
determining a starting point for a series of sales. On the other hand, the note
against the brackets in front of the five smaller sub divisions of (d) makes it
clear that even each sub-category of a sub-item retains its identity as a
commercially separate item for purpose of sales tax so long as it retains the
subdivision. The more natural and normal meaning of such a mode of listing
special or declared kinds of goods seems to us to be that the object of
specification was to enumerate only those categories of items, each of which
was to serve as a new starting point for a series of sales, which were to be
classed as "declared" goods. If one were to state the meaning in
different words, it would seem to us to be: "Iron and Steel goods of
various types enumerated below".
What we have inferred above also appears to
us to be the significance and effect of the use of words "that is to
say" in accordance with their normal connotation and effect.
Thus, in Stroud's Judicial Dictionary, 4th
Edn. Vol. 5, at page 2753, we find:
"THAT IS TO SAY. (1) '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: see this
explained with many examples, Stukeloy v. Butler Hob. 171";
The quotation, given above, from Stroud's
Judicial Dictionary shows that, 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 in
stances. In Megh Raj & Anr. v. Allah Rakhia & Ors.(1) the words
"that is to say.", with reference to a general category
"land" were held to introduce "the most general concept"
when followed, inter alia, by the words: "Rights in or over land." We
think that the precise meaning of the words "that is to say" must
vary with the context, where, (1) A.I.R. 1947 P.C. 72.
173 as in Megh Raj's case (supra), the
amplitude of legislative power to enact provisions with regard to "land
and rights over it was meant to be indicated, the expression was given a wide
scope because it came after the word "land" and then followed
"rights over land" as an explanation on "land".
Both were wide classes. The object of using
them or subject-matter of legislation was, obviously, to lay down a wide power
to legislate. But, in the context of single point sales' tax, subject to
special conditions when imposed on separate categories of specified goods, the
expression was apparently employed to specifically enumerate separate
categories of goods on a given list. The purpose of such specification and
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 at separate class for a series of sales. Otherwise, the
listing itself loses all meaning and would be without any purpose behind it.
Learned Counsel appearing for an intervener
argued that the chemical position of iron and steel affords a clue to the
meaning of "Iron and Steel" as used in Section 14 of the Central Act.
We are unable to agree that this could be what Parliament or any legislature
would be thinking of when enumerating items to be taxed as commercial goods.
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 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 t 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 a
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 up 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
174 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
jointed together, they may remain commercially the same goods which cannot be
taxed again, in a series sales, so long as they retain their identity as goods
of a particular type.
In State of Madhya Bharat v. Hiralal(1) this
Court held that a dealer, who bought some scrap iron locally and imported some
iron plates from outside and then converted the material into bars, flats and
plates, by rolling them in his mills, and then sold them, was still entitled to
exemption given to iron and steel from sales tax. But, in that case, the
language of the provision giving the exemption justified this interpretation.
The exemption was given to a sale by either an importer or a purchaser of
"goods prepared from any metal other than gold or silver." In other
words, the question was whether exemption was given to the substance out of
which goods were made. In that .
context, it had become necessary to examine
whether the exemption from sales' tax was meant for all goods made out of a
particular sub stance, or for goods as separate commercial commodities. This
Court held that the raw material from which the goods were made was decisive
for the purposes of the exemption given. This Court said (at p 315):
"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 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 law to be
interpreted in Hiralal's case (supra) was entirely different. In interpreting
it, this Court did observe that a mere change of the form of a substance
excepted from sales' tax did not matter. The language of the notifications
involved there made it clear that the exemption was for the metal used. In the
cases before us now the object of single point taxation is the commercial
commodity and not the sub stance out of which it is made.
each commercial commodity here becomes a
separate object of taxation in series of sales of that commercial commodity so
long as it retains its identity as that commodity.
We think that the correct rule to apply in
the cases before us is the one laid down by this Court in Devi Dass Gopal
Krishan & Ors. v. (1)  17 S.T.C. 313, 315.
175 The State of Punjab & ors.(1) where
Subba Rao, C.J.
speaking for a Constitution Bench of this
Court, said at (p. 447).
"Now coming to Civil Appeals Nos. 39 to
43 of 1965, the first additional point raised is that when iron scrap is
converted into rolled steel it`does not involve the process of manufacture. It
is contended that the said conversion does not involve any process of
manufacture, but the scarp is made into a better marketable commodity. Before
the High Court this contention was not pressed. That apart, it is clear that scrap
iron ingots undergo a vital change in the process of manufacture and are
converted into a different commodity, viz, rolled steer sections. During the
process the scarp iron loses its identity and becomes a new marketable
commodity." The process is certainly one of manufacture.
It is true that the question whether goods to
be taxed have been subjected to a manufacturing process so as to produce a new
market able 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 sale tax is also concerned with "goods" of various
descriptions. It, therefore, becomes necessary to determine when they cease to
be goods of one taxable description and become those of a commercially
different category and description.
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 new. It follows that when one commercial
commodity is transformed into another, it becomes a separate commodity for
purposes of sales tax.
We think that the Madras High Court had
committed an error in applying Hiralal's case (supra) to the decision of cases
now before us which turns really on a correct interpretation of Section 14 of
the Central Act. On the question now before us, we approve of the reasoning
adopted by a Division Bench of the Punjab High Court in Devgun Iron & Steel
Rolling Mills v. State of PunJab(2).
Section 15 of the Central Act places certain
restrictions and conditions upon State enactments imposing Sales tax. It says:
Every sales tax law of a State shall, in so
for as it imposes or authorises the imposition of a tax on the sale or (1)
(1967) 20 S.T.C. 430 at 447. (2) (1961) 12 S.T.C.
p. 590 176 purchase of declared goods, be
subject to the following restrictions and conditions, namely:
(a) the tax payable under that law in respect
of any sale or purchase of such goods inside the State shall not exceed three
per cent of the sale or purchase price thereof,. and such tax shall not be levied
at more than one stage;
(b) where a tax has been levied under that
law in respect of the sale or purchase inside the State of any declared goods
and such goods are sold in the course of inter-State trade or commerce, and tax
has been paid under this Act in respect of the sale of such goods in the course
of inter State trade or commerce, the tax levied under such law shall be
reimbursed to the person making such sale ill the course of inter- State trade
or commerce in-such manner and subject to such condition as may be provided in
any law in force in that State".
It has not been shown to us that any
provision of the Tamil Nadu Sales Tax Act violates Section 15 of the Central
Act enacted in accordance with Article 266(3) of the Constitution. Section 3 of
the Tamil Nadu Act levies. taxes on sales and purchases of "goods" as
defined in Section 2(j) of the Act:
"(j) 'goods, means all kinds of movable
property (other than newspapers, actionable claims, stocks and shares and
securities) and includes all materials, commodities, and articles (including
these to be used in the fitting out, improvement or repair of movable
property), and all growing crops grass or things attached to, or forming part
of, the land which are agree to be severed before sale or under the contract of
sale," Section 4 of the Tamil Nadu Act lays down:
"4. Tax in respect of declared goods.
Notwithstanding anything contained in Section
3, the tax under this Act shall be payable by a dealer or the sale or purchase
inside the State of declared goods at the rate and only at the point specified
against each in the Second Schedule on the turnover in such goods in each year,
whatever be the quantum of turnover in that year".
Item 4 of the second schedule specifies the
rates of tax in accordance with the Central Act. It reproduces Section 14(iv)
of the Central Act. On an amendment of Section 14(iv) of the Central Act,
serial No. 4 of the second schedule of the Tamil Nadu Act was also
correspondingly amended so as to reproduce the sixteen items found in Section
14(iv) of the Central Act. Hence, the decision of these cases really depends on
an interpretation of Section 14 of the Central Act which we have already given
above. Other provisions only fortify our conclusion.
177 The result is that we allow these
appeals. We set aside the orders of the High Court and restore the orders of
the assessing authorities in cases giving rise to Civil Appeals Nos. 880-883 of
1971. In cases but of which Civil Appeals Nos. 58-59 of 1971 arise, we set
aside the judgment of the High Court but maintain its order dismissing the Writ
Petitions and order that the assessing authorities will now proceed to
determine such question of fact and law as still survive for determination
after the decision given above of the question considered by us. The parties
will bear their own costs.
P.H.P. Appeals allowed.