Iron Corporation Vs. C. T. O  INSC 242 (27 April 1993)
Reddy, B.P. (J) Jeevan Reddy, B.P. (J) Venkatachala N. (J)
1993 AIR 2414 1993 SCR (3) 433 1994 SCC Supl. (1) 310 JT 1993 (3) 134 1993
judgment of the court was delivered by B.P.JEEVAN REDDY J.- Civil Appeal No.
4474 of 1992 1.The appellant is engaged in the manufacture and sale of products
like cast-iron pipes, manhole covers, bends etc.
the assessment year 1989-90, the Commercial Tax Officer, Narayanguda Circle, Hyderabad levied sales tax upon the turnover relating to said
products treating them as general goods. He overruled the petitioner's
contention that the said products are declared goods liable to tax at the rate
of 4% only. The assessees' appeal preferred before the Appellate Deputy
Commissioner is still pending. Evidently because no stay was granted pending
the said appeal, a notice was issued to the appellant calling upon him to pay
the tax assessed, against which notice he preferred a writ petition, being W.P.
No. 9315 of 1992, in the High Court of Andhra Pradesh. His main contention in
the writ petition was that by virtue of G.O.Ms. No. 383 Revenue(s) Department
dated April 17, 1985, his products are 'declared goods'
and are, therefore, liable to tax only @ 4%.
Division Bench of the High Court dismissed the writ petition following its
earlier decision in Deccan Engineers v. State of A.P.1 In Deccan Engineers' it
was held by the A.P. High Court that the expression 'cast iron' in Item (2)(i)
of the Third Schedule to the Andhra Pradesh General Sales Tax Act does not
include cast-iron pipes, manhole covers and bends etc. In this appeal, the
correctness of the said view is questioned.
Third Schedule to the Andhra Pradesh General Sales Tax Act pertains to
"declared goods in respect of which a single point tax only is leviable
under Section 6". Section 6 was enacted by the A.P. Legislature to accord
with Sections 14 and 15 of the Central Sales Tax Act. Item (2) of the Third
Schedule in the A.P. Act reads as follows:
(1992) 84 STC 92(AP) 313 THIRD SCHEDULE (As amended up to 15th August 1987)
Declared goods in respect of which a single point tax only is leviable under
Section 6 S. Descri- Point of Rate of No. ption of levy tax goods (1) (2) (3)
(4) (2) Iron and At the 4 paise steel, that point of in the is to say, first
sale rupee (3002) in the State
iron and cast iron including ingot moulds, bottom plates, iron scrap, cast iron
scrap, runner scrap and iron skull scrap;
semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes);
bars, tin bars, sheet bars, hoe-bars and sleeper bars;
bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or
twisted, in coil form as well as straight lengths);
structurals (angles, joists, channels, tees, sheet piling sections, 2 sections
or any other rolled sections);
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 riveted condition;
both plain and checkered in all qualities;
rings, forgings and steel castings;
alloy and special steels of any of the above categories;
melting scrap in all forms including steel skull, turnings and borings;
(xi)steel tubes, both welded and seamless, of all diameters and lengths
including tube fittings;
both hot dipped and electrolytic and tin free plates;
plate bars, bearing plate bars, crossing sleeper bars, fish plates, bearing
plates, crossing sleepers and pressed steel sleepers, rails heavy and light
tyres, axles and wheel sets;
rods and wires rolled, drawn, galvanised, aluminised, tinned or coated such as
rejects, cuttings or end pieces of any of the above categories.
Item (2) of the Third Schedule to the A.P. Act is an exact replica of Item (iv)
of Section 14 of the Central Sales Tax Act. According to Section 15 of the
Central Act, 'declared goods' cannot be taxed at a rate exceeding 4 or at more
than one stage.
precise question that was considered in Deccan Engineers' (followed in the
judgment under appeal) was whether the 'cast iron castings' manufactured by the
petitioner in that case are 'cast iron' within the meaning of Item (2)(i) of
the Third Schedule to the A.P. Act/Item (iv)(i) of Section 14 of the CST Act.
At this stage, it is necessary to ascertain precisely what does 'cast iron'
mean and how are the products of the appellant manufactured.
iron' is defined in the Concise Oxford Dictionary as "a hard alloy of
iron, carbon and silicon cast in a mould".
to New Lexicon Webster's Dictionary of English Language, the word 'cast iron'
means "an iron-carbon alloy produced in a blast furnace. It contains tip
to 4% carbon, and is more brittle, but more easily fused, than steel".
to Van Nostrand's Scientific Encyclopedia, I cast iron' is "primarily the
product of remelting and casting pig iron". (Interestingly, the expression
'cast-iron' with a hyphen between 'cast' and 'iron' has been defined separately
as meaning "made of cast iron". So far as item (iv) of Section 14 is
concerned, the official publication spells the expression 'cast iron' without a
hyphen. Though an authorised publication of the A.P. Act is not placed before
us, we presume that the printing of the said expression in the private
publication placed before us represents the correct rendering it is without a
hyphen.) That 'cast iron' is different from 'cast iron castings' is brought out
in the following extract from the judgment in Deccan Engineers' which is
equally true in the case of the appellant as well:
assessee manufactures and sells various goods mentioned earlier made from cast
iron which has suffered sales tax. The controversy is whether these several
goods sold by the petitioner continue to be the same declared goods covered by
the aforesaid entry or are different commercial commodity liable to levy of
State sales tax. The case of the Revenue is that, items sold by the petitioner
are commodities different from cast iron, though 315 made out of it and are,
therefore, exigible to tax as a distinct commercial commodity. It is contended
by the learned counsel for the assessee that the relevant entry in Section 14
of the Central Act also Third Schedule of the State Act speak of cast iron
including ingots, moulds and bottom plates, iron scrap etc.
indicates that any casting made out of cast iron also should be treated as
included in the entry because of the word used 'including' in the entry. It is
further contended that the Government of India in their letters have clarified
that cast iron castings are covered by cast iron and the State Government has
also issued the aforesaid G.O. subsequently under Section 42(2) of the State
Act clarifying that the cast iron castings are covered within the term cast
is thus clear that 'cast iron' is different from 'cast iron castings'
manufactured by the appellant. 'Cast iron' is purchased by the appellant and
from that 'cast iron', he manufactures several goods like manhole covers,
bends, cast iron pipes, etc. In other words, 'cast iron' used in Item (iv) of
Section 14 of the Central Act is the material out of which the petitioners
products are manufactured. Position remains the same, even if the appellant
purchases iron and mixes it with carbon and silicon thereby deriving 'cast iron'
and then pours it into different moulds. In sum, 'cast iron' is different from
the cast iron pipes, manhole covers, bends etc. manufactured and sold by the
cannot be denied, in such a situation that the products manufactured by the
appellant are, in commercial parlance, different and distinct goods from the
cast iron. Indeed this aspect is not seriously disputed by Shri Ganguli, the
learned counsel for the appellant. His case is entirely based upon certain
clarifications and circulars issued both by the Central and State Governments
and in particular upon an order issued by the Andhra Pradesh Government under
Section 42(2) of the A.P. Act namely G.O.Ms. No. 383 dated April 17, 1985. It is, therefore, necessary to
refer to them.
earliest clarification is the one contained in the letter dated February 28, 1977 from the Department of Revenue and
Banking (Revenue Wing) Government of India addressed to the Finance/Revenue
Secretaries of all State Governments and Union Territories. It reads thus:
as to whether the term 'Cast Iron' mentioned in Section 14(iv)(i) of the
Central Sales Tax Act, 1956 would cover cast iron casting.
continuation of the marginally noted communications and with reference to this
Department's letter No. 24/3/73/ST dt. 20-11- 1973, I am directed to say that
the question whether the expression 'cast iron' used in Section (iv)(i) of the
Central Sales Tax Act, 1956 will include 'Cast iron casting' has been
reexamined in consultation with the Directorate General of Technical
Development, Chief Chemist and the Ministry of Law, Justice & Company
Affairs. This department has been advised that the existing expression 'cast
iron' in the aforesaid section will cover 'cast iron casting' also.
faithfully, Sd/- Deputy Secretary to the Govt. of India."
Pursuant to the above clarification by the Central Government, the Commissioner
of Commercial Taxes, Government of Andhra Pradesh intimated 316 all the Deputy
Commissioners of Commercial Taxes of the State that "Cast Iron Pipes and
specials should be subjected to tax as falling under 'Cast Iron' liable to tax
@ 4% at the point of first sale in the State under Entry 2 of the Third
Schedule of A.P.G.S.T. Act". To the same effect is another clarification
issued by the Commissioner of Commercial Taxes, Government of Andhra Pradesh to
his subordinate officials on March 12, 1982.
next clarification from the Government of India was on January 31, 1984. It
appears that the Government of Haryana had written to the Central Government
stating that 'cast iron castings' cannot be treated as declared goods and
requested the Ministry of Finance, Government of India to examine the same. It
was in reply to the said query that the letter dated January 31, 1984 was
written by the Government of India, Ministry of Finance, Department of Revenue
to the Financial Commissioner and Secretary, Government of Haryana, Excise and
Taxation Department. The letter says that the matter has been considered
carefully by the Department in consultation with the Ministry of Law and the
Director General of Technical Development. It set out the opinion of the
Ministry of Law as also the opinion of the Director General of Technical
Development. The latter's opinion reads:
iron is an alloy iron of Carbon silicon and other alloying elements if required
Iron Castings' are covered under the term 'Cast Iron'. It may also be clarified
that 'Cast Iron' includes Gray Iron, Chilled Malleable and Nodular Iron. Ingot
Moulds and Bottom Plates are nothing but Cast Iron Castings." 10.After
setting out the said two opinions, the Government of India expressed its
opinion in the following words:
accordance with the above advice, cast iron castings are covered under the term
'Cast Iron' State Government may kindly bring this position to the notice of
sales tax authorities of the State. If considered necessary this may be placed
before the Committee of Commissioners of Sales Tax/Commercial Tax set up under
this Ministry's letter No.... Receipt of this letter may please be
acknowledged." 11.Copies of this letter were communicated to all the State
Governments and administrations of Union Territories.
July 20, 1984 the Government of Andhra Pradesh, Revenue(s) Department issued a
memorandum, referring to the aforesaid letter of the Central Government dated
January 31, 1984 and reaffirming that " 'cast iron castings' are covered
within the item 'cast iron including ingot' in sub-item (i) of Item No. 2 of
the Third Schedule to the Andhra Pradesh General Sales Tax Act". On the
same day the Principal Secretary to the Government, Revenue Department
addressed a letter to the Secretary, Andhra Pradesh Small Scale Industries
Association, Vijayawada informing the Association that "a clarification
has been issued to the Commissioner of Commercial Taxes to the effect that
'cast iron castings' are covered within the term 'cast iron including ingot' in
sub- item (i) of Item No. 2 of the Third Schedule to the Andhra Pradesh General
Sales Tax Act, 1957." 13.On March 27, 1984, however, the Commissioner of
Commercial Taxes, Government of Andhra Pradesh addressed a letter to all his
subordinate officers stating that the question whether 'cast iron castings'
fall within the expression I cast iron' is pending before the High Court of
Andhra Pradesh and, therefore, 317 the collection of arrears of tax due on 'raw
castings' is stayed for a period of one year. At the end of one year, he said,
the matter will be reexamined.
April 17, 1985 the Government of Andhra Pradesh issued a clarification
contained in G.O.Ms. No. 383 under sub-section (2) of Section 42 of the A.P.
Act. It will be appropriate to set out the G.O. in full:
OF ANDHRA PRADESH
Pradesh General Sales Tax Act, 1957 Levy of Sales Tax on 'Cast Iron Casting'
DEPARTMENT G. O. Ms. No. 383 Dated 17-4-1985 Read the following:
Govt. Memo. 2216/SI/83-4, dt. 20-7-1984
No. 2216/83-4, dt. 20-7-1984 addressed to Secretary, A.P. Small
Scale Industries Association, Vijayawada
the CCT's Ref. D.O.FE. Lr. 111(3)/1490/84, dt.
Government Memo 3166/SI/84-4, dt. 13-11-1984
the CCT. D.O. on CCT's Ref. LI/(1)/1063/82
Govt. Memo No. 3166/SI/84-5, dt. 22-2-1985
the Commissioner of Commercial Taxes, Ref. A3/LI/1093/82, dt. 19-3-1983.
The Andhra Pradesh Small Scale Industries Association Vijayawada requested the
Government to clarify whether 'cast iron' and 'cast iron castings' are one and
the same commercial commodity.
This matter was examined at length by the Government of India in consultation
with the Ministry of Law, (Department of Legal Affairs) and Director General of
Technical Development. The Ministry of Finance, Department of Revenue, Government
of India clarified, in their letter F. No. 24/10/80-ST, dt. 31-1-1984, to the effect that 'cast iron castings' are covered
within the term 'cast iron'.
Government have examined in detail the legal aspects of the issue and observe
that the term 'cast iron including ingot, moulds, bottom plates' as in sub-item
(i) of Item 2 in the Third Schedule to the Andhra Pradesh Central Sales Tax
covers 'cast iron casting' and as such 'cast iron castings' is not a different
commercial commodity from the commodity 'cast iron including ingot, moulds,
Under sub-section (2) of Section 42 of the Andhra Pradesh General Sales Tax
Act, 1957 the Government hereby clarify that the 'cast iron castings' are
covered within the term 'cast iron including ingot, moulds, bottom plates'
occurring in sub-item (i) of Item 2 of this Third Schedule to the Andhra
Pradesh General Sales Tax Act, 1957. (emphasis added) (By order in the name of
the Governor of Andhra Pradesh) C.R. Nair, Principal Secretary to Government."
Section 42 of the A.P. Act confers upon the State Government the power to
remove difficulties. Sub-section (1) confers the said power to meet the 318
problems arising from transition from the previous Sales Tax Act to the present
Sales Tax Act. An order under sub- section (1) is required to be published in
the A.P. Gazette.
(2) is general in nature. An order under sub- section (2) is not required to be
published in the A.P. Gazette. Section 42 reads:
Power to remove difficulties.- (1) If any difficulty arises in giving effect to
the provisions of this Act in consequence of the transition to the said
provisions from the corresponding provisions of the Acts in force immediately
before the commencement of this Act, the State Government may, by order in the
Andhra Pradesh Gazette, make such provisions as appear to them to be necessary
or expedient for removing the difficulty.
any difficulty arises in giving effect to the provisions of this Act (otherwise
than in relation to the transition from the provisions of the corresponding Act
in force before the commencement of this Act), the State Government may, by
order make such provisions, not inconsistent with the purposes of this Act, as
appear to them to be necessary or expedient for removing the difficulty."
order issued under Section 42 is undoubtedly statutory in character.
word about the validity of Section 42 of the A.P.
Section 37 of the Payment of Bonus Act conferred a similar power upon the
Central Government; it further declared that any such order would be final. It
was struck down by a Constitution Bench of this Court in Jalan Trading Co. (P)
Ltd. v. Mill Mazdoor Sabha2 as amounting to excessive delegation of legislative
power. However, in a subsequent decision in Gammon India Ltd. v. Union of
India3 it has been explained by another Constitution Bench that the decision in
Jalan Trading2 was influenced by the words occurring at the end of Section 37
of the Payment of Bonus Act to the effect that the direction of the Government
issued thereunder was final. Inasmuch as the said words are not there in
Section 34 of the Contract Labour (Regulation and Abolition) Act, 1970, it was
held, Section 34 cannot be said to suffer from the vice of excessive delegation
of legislative power. It is meant "for giving effect to the provisions of
the Act", it was held. Sub-section (2) of Section 42 of the A.P. Act does
no doubt not contain the aforesaid offending words, and cannot therefore be characterised
as invalid. Yet, it must be remembered that the said power can be exercised
"for giving effect to the provisions of the Act", and not in
derogation thereof. As we shall presently indicate it is necessary to bear this
limitation in mind while examining the effect of G.O.Ms. No. 383.
far as clarifications/circulars issued by the Central Government and/or State
Government are concerned, they represent merely their understanding of the
statutory provisions. They are not binding upon the courts. It is true that
those clarifications and circulars were communicated to the concerned dealers
but even so nothing prevents the State from recovering the tax, if in truth
such tax was leviable according to law. There can be no estoppel against the
statute. The understanding of the Government, whether in favour or against the assessee,
is nothing more than its understanding and opinion. It is doubtful whether such
clarifications and circulars bind the quasi-judicial functioning of the
authorities under the Act. While acting in quasi-judicial 2 (1967) 1 SCR 15 :
AIR 1967 SC 691 :(1966) 2 LLJ 546 3 (1974) 1 SCC 596: 1974 SCC (L&S) 252:
(1974) 3 SCR 665 319 capacity, they are bound by law and not by any
administrative instructions, opinions, clarifications or circulars. Law is what
is declared by this Court and the High Court to wit, it is for this Court and
the High Court to declare what does a particular provision of statute say, and
not for the executive. Of course, the Parliament/Legislature never speaks or
explains what does a provision enacted by it mean. (See Sanjeev Coke Mfg. Co.
v. Bharat Coking Coal Ltd.4)
Now coming to G.O.Ms. No. 383, it is undoubtedly of a statutory character but,
as explained hereinbefore the power under Section 42 cannot be utilised for
altering the provisions of the Act but only for giving effect to the provisions
of the Act. Since the goods manufactured by the appellant are different and
distinct goods from cast iron, their sale attracts the levy created by the Act.
In such a case, the Government cannot say, in exercise of its power under
Section 42(2) that the levy created by the Act shall not be effective or
operative. In other words, the said power cannot be utilised for dispensing
with the levy created by the Act, over a class of goods or a class of persons,
as the case may be. For doing that, the power of exemption conferred by Section
9 of the A.P. Act has to be exercised. Though it is not argued before us, we
tried to see the possibility but we find it difficult to relate the order in G.O.Ms.
No. 383 to the power of the Government under Section 9, apart from the fact
that the nature and character of the power under Section 42 is different from
the one conferred by Section 9. As exemption under Section 9 has to be granted,
not only by a notification, it is also required to be published in the Andhra
Pradesh Gazette. it is not suggested, nor is it brought to our notice, that G.O.Ms.
No. 383 was published in the Andhra Pradesh Gazette.
does not, however, preclude the Government of Andhra Pradesh from exercising
the said power of exemption, in accordance with law, if it is so advised. We
need express no opinion on that score.
The learned counsel for the appellant brought to our notice that the very same
Division Bench which rendered the decision in Deccan Engineers' had rendered
another decision in Tax Revision Case No. 93 of 1990 (State of A. P. v. Pratap
Steel) applying G.O.Ms. No. 383 and giving relief to the dealer. It is argued
that the Division Bench ought to have taken the same view in Deccan Engineers1
as well. We have perused the decision in Pratap Steel'. It is a short judgment
dismissing the revision applying G.O.Ms. No. 383.
does not appear that the matter was argued in the manner it was in Deccan
Engineers'. The said argument, therefore, cannot advance the case of the
this view of the matter it is not necessary for us to go into the question
whether the word 'including' in Section 14(iv)(i) of Central Sales Tax Act and
item (2)(i) of the Third Schedule to the A.P. Act has the effect of making the
said sub-clause exhaustive or otherwise.
Accordingly, we hold that the cast iron castings manufactured by the appellants
do not fall within the expression 'cast iron' in Entry 2(i) of the Third
Schedule to the Andhra Pradesh General Sales Tax Act or within Section 14(iv)(i)
of the Central Sales Tax Act.
The appeal accordingly fails and is dismissed. No order as to costs.
(1983) 1 SCC 147 : AIR 1983 SC 239 320 W P. No. 763 of 1992
This writ petition preferred under Article 32 of the Constitution is directed
against the notices issued by the Assessing Authority proposing to reopen the
assessments of the petitioner/appellant with respect to earlier assessment
years and also seeking to apply the principle of Deccan Engineers1 to the
pending assessments. For the reasons stated hereinabove this writ petition
fails and is accordingly dismissed. No costs.