Madras High Court
Tube Investments Of India Limited vs The Deputy Commercial Tax Officer, The ... on 14 August, 2002
Equivalent citations: [2003]129STC238(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
ORDER R. Jayasimha Babu, J.
1. The petitioner, Tube Investments of India Ltd. as the name signifies, is engaged in the manufacture of tubes, though that is not the only product made by it. It also manufactures bicycles, parts, machinery, etc. It had, during the assessment years 1982-83, 1983-84, 1984-1985 and 1985-86 supplied exhaust pipes to Ashok Leyland Limited which is a manufacturer of trucks. The exhaust pipes which are made by the petitioner to the specification given by the buyer were to be fitted into the trucks after the buyer had carried out certain further processing operation which included block setting, welding/brazing of flanges and matching components at both ends, surface treatment and red oxide painting and assembly to the engine/chassis manufactured by the buyer. The petitioner paid taxes on exhaust pipe so supplied by it to Ashok Leyland as an item of declared goods falling under Second Schedule to the Tamil Nadu General Sales Tax Act, more particularly, item 4, sub-item (xi) therein, which reads thus:
"4. Iron and steel, that is to say,-.........
(xi) steel tubes, both welded and seamless, of all diameters and lengths including tube fittings."
2. That entry in the Second Schedule to the State Act is similar to that found in Section 14(iv)(xi) of the Central Sales Tax Act.
3. After the assessment had been made for Assessment years 1982-83 and 1984-85, those assessments were revised by Deputy Commercial Tax Officer, Enforcement, on the ground that exhaust pipes which had been treated as steel tubes were in fact required to be taxed as part or accessory of a motor vehicle falling within the scope of Entry 3 of the First Schedule taxable at the relevant time at the rate of 15 per cent. The assessees' appeals against that order were rejected by the statutory authority, as also by the Taxation Special Tribunal.
4. Learned Senior Counsel for the petitioner Mr.C.Natarajan submitted that the exhaust pipe supplied by the petitioner to its buyer was only a tube made out of steel and it was bent at certain point as required by the buyer, but that fact by itself would not make it any the less "a tube made out of steel". The fact that it was described as an exhaust pipe, it was submitted, would also make no difference to the substance of the matter, as "pipe" is only a tube. "Pipe" is defined in Oxford Dictionary, as, "a tube of metal, plastic or other material used to convey water, gas, oil or other fluid substance."
"Tube" is defined in the same Dictionary inter alia, as "a long, hollow cylinder of metal, plastic, glass etc. for holding or transporting etc. chiefly liquids or gases ..."
5.The further submission was that if the exhaust pipe which was merely a tube of steel was capable of being regarded as "steel tube", then it would fall within the scope of Entry 16 of the Second Schedule to the Tamil Nadu General Sales Tax Act. Further consequence would be, according to learned counsel, to remove that item "exhaust pipe" which is made out of steel tube from within the scope of the entries in the First Schedule, more particularly, entries therein, inter alia, dealing with "parts and accessories of motor vehicle and trailers". That submission was based on the language of Section 4 of the Tamil Nadu General Sales Tax Act, which deals with tax in respect of declared goods and starts with non-obstante clause. Section 4 of the Act, reads thus:
"Notwithstanding anything contained in (Section 3 or 4-A) the tax under this Act shall be payable by a dealer on 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."
6. Section 4, it was pointed out, has the effect of overriding the provisions in Section 3 or 4-A) and also has the effect of overriding the First Schedule which is relatable to Section 3 which in sub-section 2 provides that in the case of goods mentioned in the First Schedule, the tax under this Act shall be payable by a dealer, at the rate and only at the point specified therein on the turnover in each year relating to such goods whatever be the quantum of turnover in that year.
7. Counsel placed reliance on certain decisions of the Apex Court as also this Court. In GUJARAT STEEL TUBES LTD v. STATE OF KERALA (74 S.T.C., 176), the apex Court considered the question as to whether the galvanised iron pipes and tubes are steel tubes within the meaning of item (xi) specified in Section 14(iv) of the Central Sales Tax Act. The Court held that galvanising the pipe is merely to make it weather-proof and the pipe would remain a steel tube before and after galvanising. The Court observed: "Neither its structure nor function is altered. As a commercial item it is not different from a steel tube." In the case of M/s.B.F. & P.INDUSTRIES(P)LTD. v. COLLECTOR OF CENTRAL EXCISE , the Court considered the question as to whether pipe fittings made by a manufacturer which had purchased steel pipes and tubes in the open market, thereafter cut them into different sizes, and made them into pipe fittings in their factories by heating in a furnace, hammering and pressing, could be regarded as pipes and tubes. The Central Excise Tariff, Item 26-AA (iv) refers to "pipes and tubes" (including blanks therefore) all sorts, whether rolled, forged, spun, cast, drawn, annealed, welded or extruded. The Court observed:
"It is true that initially pipes and tubes may be obtained from sheets, billets or bars by various processes, but the process of manufacture of pipes and tubes does not end there. In order to achieve fully the purpose for which the pipes and tubes are manufactured, it is necessary to manufacture smaller pieces of pipes and tubes and also to manufacture them in such a shape that they may be able to conduct liquid and gases, passing them through and across angles, turnings, corners and curves or regulating their flow in the manner required. Smaller pieces of pipes and tubes differently shaped are manufactured for this purpose. They are merely intended as accessories or supplements to the larger pipes and tubes. They are pipes and tubes made out of pipes and tubes. There is no change in their basic physical properties and there is no change in their end use. There is no reason why these smaller articles cannot be described as pipes and tubes."
8. The Court also reaffirmed the law that had been laid down by the Apex Court in the case of INDIAN ALUMINIUM CABLE LTD. v. UNION OF INDIA wherein it was held by the Court thus:
"To sum up the true position, the process of manufacture of a product and the end use to which it is put cannot necessarily be determinative of the classification of that product under a fiscal schedule like the Central Excise Tariff. What is more important is whether the broad description of the article fits in with the expression used in the Tariff."
The Court concluded that ".... it is difficult to say that pipe fittings, though they may have a distinctive name, are not pipes and tubes. It is true that all pipes and tubes cannot be described as pipe fittings. But it would not be correct to say that pipe fittings are not pipes and tubes. They are only a species of pipes and tubes."
9. In the case of INDIAN METALS AND FERRO ALLOYS LTD. v. COLLECTOR OF CENTRAL EXCISE , the Court considered the case of an assessee who manufactured pipes, tubes and poles made of iron and steel supplied by it to the Telephone and Telegraph Departments of Government of India. The Court rejected the submission that on account of those items being called as poles, instead of pipes or tubes, they should be regarded as a different commercial commodity. The Court observed:
"The statement that they are commercially distinct commodities is merely based on their being called 'poles'. They are also available in the same market in which normally pipes and tubes are otherwise available. Neither the circumstance that certain processes are applied to the "mother" pipes or tubes nor the fact that, in order to identify the particular type of tube one needs, one may use different names, is sufficient to treat the article as a commercially different commodity."
10.In the case of DEWAN ENTERPRISES v. COMMR. OF SALES TAX (102 S.T.C., 67), the Court was concerned with Section 14(iv) of the Central Sales Tax Act and the entry referring to "wheels, tyres, axles and wheel sets". The question before the Court was as to whether a cycle rim fell within the scope of the entry. The Court held that the rim of a cycle is admittedly a part of the wheel and without a rim other parts cannot be regarded as a wheel. The Court applied the test of common parlance and held that rim which is an essential part of the cycle, would come within entry (xiv) of Section 14(iv) of the Central Sales Tax Act and being declared goods cannot be taxed at a rate in excess of 4 per cent.
11. Our attention was also invited to the case of COMMR. OF SALES TAX v. AGRA BELTING WORKS (S.C.) (121 STC, 396) in which it was held that State has no authority to change the character of the declared goods. The Court observed:
"The contention of the department is that the notification issued under Section 3-A of the Act has prescribed a specific rate of tax in respect of beltings of all kinds and, therefore the cotton belting manufactured by the revisionist ceases to be a declared goods. This contention is not tenable because the State has no authority to change the character of the declared goods. If a commodity falls in the category of declared goods, as defined in Section 14 of the Central Sales Tax Act then the State by virtue of Section 14 of the Central Sales Tax Act has no authority to prescribe a higher rate of tax by changing the description of the goods."
12. In the Harmonized Commodity Description and Coding System, which is adopted in the Central Excise Tariff, tubes and pipes, are referred to together. Tubes and pipes therein would include tubes and pipes which are polished, coated, bent, threaded and coupled or not, drilled, waisted, expanded, cone shaped or fitted with flanges collars or rings.
13. The fact that the buyer has used the steel tube supplied by the petitioner as part of a chassis/engine by fitting it into such engine/chassis, for use as exhaust pipe, does not in any way alter the basic fact that what is is supplied by the petitioner is in fact, a steel tube of certain shape and length. As held by the apex Court, the State legislature has no authority to prescribe a higher rate of tax on declared goods by changing the description of those goods. Article 286(3) of the Constitution obligates the States to be bound by the declaration made by Parliament regarding the goods which are of special importance in inter-state trade or commerce, as also the restrictions and conditions including the ceiling on rates, subject to which States may levy tax on such declared goods. The State, by subjecting parts and accessories of motor vehicles, at a higher rate, cannot impose such higher rate on goods which are declared goods. The end use of the declared goods will not have the effect of taking away the effect of the declaration made by Parliament regarding those goods.
14. The fact that the specification for the tube or pipe supplied was given by the buyer would also make no difference, as what is supplied in fact, is the steel tube conforming to the specification given by the buyer and nothing more. The sales tax levied on steel tubes supplied by petitioner, though put to use by the buyer as exhaust pipes, cannot exceed four percent.
15. The view taken by the Tribunal therefore, cannot be sustained. The writ petition is allowed.