Allahabad High Court
The Commissioner, Trade Tax vs S/S Iron Rod And Drawing Factory on 11 May, 2007
Author: Prakash Krishna
Bench: Prakash Krishna
JUDGMENT Prakash Krishna, J.
1. The Commissioner of Trade Tax has challenged the legality and validity of the order dated 11-3-1997 passed in Second Appeal No. 418 of 1992 for the assessment year 1986-87 whereby the Trade Tax Tribunal, Aligarh has dismissed the appeal filed by it. The following question of law has been framed in the memo of appeal:
Whether on the facts and circumstances of the case, Tribunal is justified to treat Iron Bar (Sariya) and wires drawn as the same commodity when:
(i) Iron bar comes under IVth category of Iron and Steel as defined in Section 14 of the Central Sales Tax Act 1956 and manufactured commodity comes under XVth category of Iron and Steel.
(ii)According to the judgment of Hon'ble Supreme Court in State of Tamilnadu v. Pyare Lal Malhotra S.T.I.-1976 S.C.-42 each and every item described under the main category of Iron and Steel is separate and independent commercial commodity, hence exigiable to tax.
2. In pith and substance, the question involved in the present revision is whether with reference to activity carried on by a dealer on iron bar it can be termed as 'manufacture' within the meaning of Section 2 (e-1)of U.P. Trade Tax Act.
3. The dispute relates to the year 1986-87. The dealer-opposite party after purchasing the Iron Sariya undertakes the process of cleaning it in acid whereby the carbon and dust particles are removed. After cleaning, the diameter of sariya is reduced to the desired measurement with the help of dyeing machine and thereafter it is put in cutter machine to cut in different sizes as required by its customers. The said process has been held as manufacturing process' by the Assessing Authority vide assessment order dated 18-3-1991 and it levied trade tax on such manufactured Sariya treating it as a hardware at the rate of 8.8% on the turn over of Rs. 1034,000/-. The accounts books were rejected. It was set aside by the Deputy Commissioner (Appeal) in Appeal No. 151 of 1991 on the ground that the reduction in diameter of Sariya after cleaning it in acid for removing carbon and dust does not amount to 'manufacturing process'. The Tribunal by its order in Second Appeal, which is under challenge in this revision, has confirmed the order of the first appellate court.
4. At the very outset, Sri Krishna Agrawal learned Counsel for the dealer-opposite party informed the Court that the controversy involved in the present revision is concluded by a judgment delivered by me in 2004 N.T.N. (25) 752 CST v. Iron Rod Drawing Factory. It was pointed out that the said decision was delivered on the basis of decision of the Apex Court in the case of Telangana Steel Industries v. State of Andhra Pradesh (1994) 93 S.T.C. 187. However, it was pointed out to him that subsequently, it was discovered that the decision in the case of Telangana Steel Industries (supra) was no longer a good law on he clay when it was relied upon in the aforesaid judgment and this fact was not brought to my notice earlier. The hearing of the case, consequently, on the request of the learned Counsel for the dealer-opposite party, was adjourned to enable him to meet the above situation and to enable him to make his submission in this regard. On the last date of hearing, the learned Counsel for the applicant informed the Court that against the earlier judgment of this Court, the Department has filed Special Leave to Appeal (Civil) No. 7431-7434 of 2005 along With an application for condonation of delay before the Apex Court and the matter is engaging; attention of the Apex Court. Also reliance was placed on certain other decisions to support the impugned order which will be considered in the latter part of this judgment.
5. To appreciate, as to whether the activity of the denier amounts to 'manufacture' or not, it is desirable to look into the definition of 'manufacture' as defined in Section 2(e-1) of U.P. Trade Tax Act which is reproduced below:
2(e-1) "manufacture" means producing, making, mining, collecting, extracting, altering, ornamenting, furnishing or otherwise processing, treating or adapting any goods; but does not include such manufactures or manufacturing process as may be prescribed.
6. The Apex Court, while considering a similar definition of "manufacture" as contained in Madhya Pradesh General Sales Tax Act, has held in Ashirwad Ispat Udyog and Ors. v. State Level Committee and Ors. 1999 UPTC 93 (S.C.) that the definition of "manufacture" is very widely worded. The said definition is reproduced below:
2(j) "manufacture" includes any process or manner of producing, collecting, extracting, preparing or making any goods and in respect of trees which have been severed from the land or which have been felled, also the process of lopping the branches, cutting the trunks or converting them into logs, poles or bailies or any other articles of wood, but does not include such manufacture or manufacturing process as may be notified.
7. It took into consideration the word 'collecting' which also appears in the definition of "manufacture" under U.P. Sales Tax Act to reach to a conclusion that 'collecting' does not usually result in the production of new articles, even then it is included in the definition of "manufacture". There, therefore, inherent evidence in the definition itself that the narrow meaning of the word "manufacture" was not intended to be applied in Madhya Pradesh General Sales Tax Act and wider meaning should be given. The controversy involved therein was whether cutting of iron scraps so that it may be utilised by rolling mills with the help of shearing machines and glass cutting of the scrap of widths of 2" to 5" and thickness upto 2" to 4" is a process of "manufacture". It was held that giving the said treatment to scrap making saleable goods would fall within the wide definition of "manufacture" under the said Act.
8. Comparing the definition of "manufacture" as given in Madhya Pradesh General Sales Tax Act which is cognate Act with the definition of "manufacture" as given under U.P. Trade Tax Act, one would find that the word 'collecting' besides other things, is common in both the definitions. It follows that "manufacture" is not confined to new articles but it also includes old articles made saleable. The ratio decidendi in the case of Ashirwad Ispat Udyog (supra) is applicable to the definition of "manufacture" given in U.P. Trade Tax Act.
9. Coining to the ratio of Telangana Steel Industries (supra) it may be noted that there the question was whether iron wires were separate commercial goods or wire rods from which they were produced. It was held therein that as both the rods and wires form part of one item viz. Sub-item (XV) of Item (IV), they could not be taken as separable taxable commodity and a wire rod which has been purchased by a dealer has already been subjected to sales tax, therefore, the wires which were drawn from the said rod could not be taxed again.
10. The Apex Court in TVL K.A.K. Anwar and Co. v. State of Tamil Nadu 1998 UPTC-447 was faced with the aforesaid pronouncement given in Telangana Steel Industries case (supra) and it was held therein that the decision given in Telangana Steel Industries case cannot be pressed further because of the fact that the attention of the learned Judges in the case of Telangana Steel Industries (supra) was not drawn to the observation of Constitution Bench of Apex Court in Hajee Abdul Shakoor and Co. v. State of Madras . In the case of TVL K.A.K. Anwar and Company it was pointed out by the Apex Court that the decision given in the case of Telangana Steel Industries as well as in the case of State of Tamil Nadu v. Pyare Lal Malhotra 1976 U.P.T.C. 282 and Rajasthan Roller Flour Mills Association and Anr. v. state of Rajasthan and Ors. 1993 U.P.T.C. 1247 (S.C.) being not in consonance with the judgment of Constitution Bench of Apex Court in Hajee Abdul Shakoor Company, are not good law.
11. The above view taken was reiterated by the Apex Court in Tata Iron & Steel Co. Ltd. v. State of Jharkhand and Ors. wherein it has been held as follows:
...Then relying on the judgment in Telangana Steel Industries he held that merely because the two products are found in the same entry in the schedule to the Central Sales Tax Act, both the product will have to be treated as the same. Though it was pointed out to the Commissioner that the judgment of this Court in Telangana case was subsequently held to be contrary to an earlier Constitution Bench judgment of this Court and declared to be not good law in TVL K.A.K. Anwar and Co. v. State of T.N. the Commissioner seems to have lost sight of the same and chose to rely upon Telangana Steel to come to the conclusion that the two products must be treated as the same commodity merely because they are found in the same entry in the Act for the purpose of levy of sales tax and if that be so under the policy and the notification unless the products are two different commodities the benefit of exemption was not available.
12. The aforesaid judgment has been referred subsequently in the case of same Assessee, Tata Iron and Steel Co. Ltd. v. State of Jharkhand and Ors. .
It is, thus, axiomatic that the decision rendered by the Apex Court in the case of Telangana Steel Industries (supra) holding that if the two items are found in the same entry and the tax has been paid on one of the items, no tax can be levied on the other one, is not a good law.
13. Very recently same view has been taken by the Apex Court in the case of Kumar Motors v. CST, U.P. Lucknow .
14. Unfortunately, the above legal position was not brought to my notice earlier when the decision was rendered in the case of same Assessee for the earlier assessment year and the judgment given by me obviousl; being not in consonance with the authoritative pronouncements of the Apex Court cannot be treated as precedent nor it can be relied upon by the dealer-opposite party. The said decision given by me in CST v. Iron Rod Drawing Factory (supra) is per incuriam.
15. In response, the learned Counsel for the Assessee placed heavy reliance upon a judgment of learned Single Judge of this Court in Commissioner of Trade Tax, U.P. Lucknow v. S/S Decent Industries, Aligarh 2005 N.T.N. (Vol. 26)-202.
16. A bare perusal of the aforesaid judgment would show that the learned Single Judge in the above case has placed reliance upon the judgment of Telangana Steel Industries (supra) as also on my judgment in the case of CST v. Iron Rod Drawing Factory (supra) besides the other judgments. The other judgment relied upon is Commissioner of Sales Tax, U.P. v. Lal Kaun Stone Crusher Pvt. Ltd. 2000 UPTC 463 : 118 STC 287.
17. This is a decision given by the Apex Court wherein it has been held that crushing of stone boulders into stone chips for the purpose of sale does not amount to manufacturing activity. The judgment of the Apex Court in the case of Lal Kaun Stone Crusher Pvt. Ltd. is based on its decision in State of Tamil Nadu v. Pyare Lal Malhotra (supra).
18. With great respect to the Hon'ble Judges, the judgment rendered in the case of Pyare Lal Malhotra (supra) as held by the Apex Court-subsequently in the case of TVL K.A.K., answer and Company(supra), was no longer open to be relied upon in the case of Lal Kaun Store Crusher Pvt. Ltd. (supra).
19. In view of the above, 1 respectfully dissent with the judgment of the learned Single Judge in the case of CTT v. S/S Decent Industries, Aligarh (supra) and I am bound by the judgment of the Apex Court in Ashirwad Ispat Udyog and Ors. (supra), TVL K.A.K. Anwar and Company (supra) and Constitution Bench decision in Hajee Abdul Shakoor and Company (supra).
20. The attention of the learned Single Judge was not drawn by the counsel for the parties to the aforesaid binding precedents of the Apex Court.
21. Learned Counsel for the dealer-opposite party also referred to a judgment of the Apex Court in the case of Collector of Central Excise v. Technoweld Industries . In this case it was held, with reference to the provisions of Central Excise Act, that process of treating wire from wire rod does not amount to manufacture, both products being wire. However, the said decision cannot be pressed into service with reference to the question involved under U.P. Trade Tax Act, as cautioned by the Apex Court in the case of Ashirwad Ispat Udyog and Ors. (supra) with particular reference to para-8 thereof. The relevant portion is extracted below:
8. We are unable to agree with the submission. It is to be seen that the initial product was a wire rod. The ultimate product is also a wire. All that is done is that the guage of the rod is made thinner and the product is finished a little better. In our view the earlier decisions of the Tribunal are correct. There is no manufacture of a new product. Merely because there arc two separate entries does not mean that the product becomes excisable. The product becomes exigiable only if there is manufacture.
22. Viewed from any angle, the order of the Tribunal holding that the dealer-opposite party is not a 'manufacturer' within the meaning of Section 2(e-1) of U.P. Trade Tax Act is legally not correct.
23. In view of the above discussion, the revision is on terra ferma and there is sufficient force in the revision.
24. In the result, the revision succeeds and is allowed but no order as to costs. The Second Appeal filed by the Commissioner before the Trade Tax Tribunal stands allowed and the Tribunal may pass consequential order thereon in accordance with law.
25. A copy of this order may be sent to the Tribunal for passing consequential order as required under Section 11(8) of the Act.