Karnataka High Court
Bahri Steel Wires vs Additional Commercial Tax Officer And ... on 23 August, 1991
Equivalent citations: [1992]84STC418(KAR)
JUDGMENT K. Shivashankar Bhat, J.
1. The main contention raised by the petitioners involves the effect and interpretation of sub-item (xv) of item (iv) in section 14 of the Central Sales Tax Act, 1956 (for short "the Central Act") as well as item 2(xv) of the Fourth Schedule to the Karnataka Sales Tax Act, 1957 (for short "the State Act"). Section 14 of the Central Act declares the goods stated therein as goods of special importance in inter-State trade and as per section 15 of the said Act, the sales tax law of a State shall not impose or authorise the imposition of a tax on the sale or purchase of declared goods, at a rate exceeding the rate stated in section 15; further, where a tax has been levied under the State law in respect of the declared goods and such goods are sold in the course of inter-State trade or commerce, and tax has been paid thereon under the Central Act in respect of the sale of such goods, the tax levied under the State law shall be reimbursed to the person making such sale in the course of inter-State trade or commerce. This restriction imposed on the powers of the State to impose sales tax on declared goods, is carried out in section 5(4) of the State Act read with the Fourth Schedule thereto.
2. The petitioners, herein, are dealers in M.S. wires; according to them, they purchase M.S. wire rods from the registered dealers within the State of Karnataka and out of such M.S. wire rods of thicker gauge, wires of thinner gauge are drawn and these wires are then sold by them.
3. In the case of the petitioner in W.P. No. 1077 of 1988 (M/s. Bahri Steel Wires) assessments for the periods earlier to 1983-84 were concluded on the basis that the sales of these M.S. wires drawn out of M.S. wire rods (which had already suffered tax under the State Act), were not taxable further, because, as per section 5(4) of the State Act read with its Fourth Schedule, only a single point of tax was leviable. Regarding the goods enumerated under item 2 of the said Schedule, the point of levy is the sale by the first or earliest of successive dealers in the State liable to tax under the said Act. Therefore, if the sale of the relevant goods is taxed in the hands of the first dealer in the State, the subsequent sales were not liable to be taxed.
4. There is no dispute, here, that M.S. wire rods purchased by the petitioners were subjected to tax already in the State; therefore the question for consideration is, whether M.S. wires drawn out of those M.S. wire rods are liable to be taxed under the Act further, as proposed in the notices issued to the petitioners.
5. The notice dated November 19, 1987 (annexure B), issued to the petitioner (M/s. Bahri Steel Wires) states that, "........ the M.S. wire to the tune of Rs. 2,47,017 was manufactured by you out of M.S. wire rods and although you have proved that M.S. wire rods consumed in the manufacture of M.S. wire was purchased by you from the registered dealers inside the State, you have failed to prove the quantum of tax paid on M.S. wire rods so consumed as per the explanation II of the Fourth Schedule to the Act. Further, the Honourable Karnataka Appellate Tribunal in the case of M. Keshava Pai v. State of Karnataka, S.T.A. Nos. 264/85, 265/85, 266/85 and 267/85 dated December 21, 1985 has clearly held that M.S. wire rods and M.S. wires are two different items of iron and steel, commercially two different and consequently when M.S. wire is manufactured out of tax suffered M.S. wire rod, the M.S. wire is exigible to tax in the light of explanation II of the Fourth Schedule to the Act. The Commissioner of Commercial Taxes, Karnataka, Bangalore, in the letter No. CLR/Cr/455/87-88 dated July 6, 1987 addressed to Sri Maran Engineering Works, Bangalore, has clarified that the M.S. wire manufactured out of M.S. wire rods is exigible to tax."
Consequently, the Additional Commercial Tax Officer proposed to assess the petitioner under section 12(3) of the State Act, to the best of his judgment. It may be noted here that, as per explanation II to the Fourth Schedule (of the State Act), if any item of goods of iron and steel is manufactured in the State and is sold, the tax on such manufactured goods shall be reduced by the amount of tax paid already on the relative item of goods of iron and steel used in the manufacture; therefore, according to the respondents, the petitioners were entitled to prove that M.S. wire rods out of which wires were drawn, have already suffered tax and claim deduction of the said tax, from the tax leviable on the sale of M.S. wires.
6. The learned counsel for the petitioners contended that, the meaning attributable to the Fourth Schedule to the State Act has to be the meaning attributable to the items of goods mentioned in section 14 of the Central Act and if the alleged manufacture of a new article does not result in its transformation into a new species and thus continues to be the same taxable commodity under section 14 of the Central Act, position under the State Act would not be in any manner different, because, section 15 of the Central Act restricts the State's power of taxation in that regard. There is no dispute regarding this proposition.
7. Mr. Indrakumar, learned counsel for the petitioners, relied on sub-item (xv) of item (iv) of section 14 of the Central Act and contended that, "Wire rods and wires - rolled, drawn, galvanised, aluminised, tinned or coated such as by copper;"
form one taxable commodity and therefore the M.S. wires drawn out of tax-paid M.S. wire rods, continues to be the article stated in sub-item (xv), just as the M.S. wire rods and if so, by virtue of section 15, the sales of said M.S. wires shall not be taxed again. A few relevant sub-items in items (iii) and (iv) of section 14 of the Central Act are as follows :
"(iii) hides and skins, whether in a raw or dressed state;
(iv) iron and steel, that is to say, -
(iv) steel bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or twisted, in coil form as well as straight length);
(v) to (xiv) ...............
(xv) wire rods and wires - rolled, drawn, galvanised, aluminised, tinned or coated such as by copper;"
Relevant items in the Fourth Schedule to the State Act read :
"2(a) Iron and steel, that is to say, -
.................
(iv) steel bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or twisted, in coil forms as well as straight lengths);
.................
(xv) wire rods and wires - rolled, drawn, galvanised, aluminised, tinned or coated such as by copper;
.................
3. Hides and skins, whether in a raw or dressed state."
We may also note that, item (ii) of section 14 of the Central Act refers to cotton, whether ginned or unginned, eic. Similarly item (vi) refers to oil-seeds and enumerates them and the sub-item (iii) thereof refers to cotton-seed. Referring to section 14 of the Central Act, it was contended that each main item gives the broad genus of each taxable commodity, and each taxable commodity is categorised under its sub-items; all goods failing within a particular sub-item formed a single taxable commodity for the purposes of section 14. For example, it was pointed out that, ginned cotton manufactured out of unmanufactured cotton, still continues to be treated as the parent cotton for the purpose of section 14, because, both of them are covered by the same sub-item. Similarly, "dressed hides and skins" continues to be the same taxable commodity as the "raw hides and skins" from which the former emerges by various processes. In other words, irrespective of the status as an independent, identifiable, distinct commercial commodity, the commodity continues to be the same as falling within the same sub-item and the transformation of the original or parent commodity into another commercial commodity is of no consequence at all so long as both the commercial commodities fall within the same sub-item of section 14 of the Central Act.
8. The learned Government Advocate on the other hand laid emphasis on the principle that for the purpose of the levy of sales tax, the taxable event is the sale of the goods and whenever a new article emerges out of another article and the new article is commercially treated as a different commodity, the said new article could be the subject of taxation when it is sold or purchased and for the said purpose the new article is never treated as having the benefit obtained by the earlier article. Mr. Dattu, for this proposition referred to a passage in the decision of the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra [1976] 37 STC 319. In the said case, "steel rounds, flats, angles, plates, bars" were manufactured out of iron and steel scraps. At the relevant point of time under section 14 of the Central Act steel scrap was found in item (iv), sub-item (c) and the manufactured articles referred here as steel rounds, etc., were not part of the said sub-item. However, all these sub-items were enumerated under the main item "iron and steel". It was contended by the dealer therein that the manufactured articles such as steel rounds, flats, etc., came out of iron and steel scraps and the latter had been subjected to the levy of sales tax already and therefore the said manufactured articles cannot be taxed under the provisions of the Tamil Nadu General Sales Tax Act, once again, in view of the provisions of section 15 of the Central Act. The contention of the dealer was negatived by the Supreme Court and the levy was upheld. At page 326 of the decision it was observed :
"It is true that the question whether goods to be taxed have been subjected to a manufacturing process so as to produce a new marketable 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 sales tax is also concerned with 'goods' of various descriptions. It, therefore, becomes necessary to determine when they ceased to be goods of one taxable description and become those of a commercially different category and description."
On a closer reading of the decision of the Supreme Court in Pyare Lal Malhotra's case [1976] 37 STC 319, we are of the opinion that it does not support the contention advanced by Mr. Dattu, as the law now stands and as declared by the Supreme Court. In the above passage the opening sentence actually refers to the levy of excise duty, wherein the decisive test is to find out whether the goods have come into existence as a result of a manufacturing process. The subsequent sentences indicate that, as to whether a new commercial commodity has come into existence or not for attracting the levy of sales tax depends upon the nature of the levy with reference to the new taxable event. The last sentence in the excerpt given above further points out the need to find out as to whether the original goods of one taxable description cease to be so and become goods of a commercially different category and description. In other words the normal concept of one commercial commodity getting transformed into another commercial commodity, by itself is not an exclusive test. The said test will have to be read along with the nature of the description of the goods attracting the sales tax. The test is to see whether the goods having a particular taxable description loses that description and category, under the particular sales tax legislation.
9. The above understanding of the proposition laid down by the Supreme Court flows out of the entire decision of the Supreme Court in Pyare Lal Malhotra's case [1976] 37 STC 319. At page 321 of the report, section 14 of the Central Act as it then stood prior to its amendment in the year 1972 is quoted. Thereafter the Supreme Court also has given the present entry (iv) found in section 14 of the Central Act. The effect of the change made by the amendment is commented upon by the Supreme Court thus :
"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 leftovers 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 (iv) 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 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' failing under 'iron and steel'. Apparently, the intention was to consider each 'sub-item' as a separate taxable commodity for purpose of sales tax."
Thereafter at page 324 the Supreme Court points out that each item specified as goods of iron and steel forms a separate species for each series of sales although they may all belong to the genus of iron and steel. At page 325, the object is stated as the one, to tax sales of goods of each variety and not the sale of the substance out of which they are made. It is in this context further observation is made that :
"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 joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type."
At page 326 again it was observed that :
"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 now. It follows that when one commercial commodity is transformed into another, it becomes a separate commodity for purposes of sales tax."
It is thus clear that each of the categories enumerated under item (iv) of section 14 of the Central Act constituted a new species of commercial commodity. Each sub-item comprised a particular goods of one taxable description. In A. Hajee Abdul Shukoor and Co. v. State of Madras [1964] 15 STC 719, the Supreme Court was concerned with the provisions in the Madras General Sales Tax Act and the Rules framed thereunder governing the levy of sales tax on sale or purchase of hides and skins. The Supreme Court was not concerned with the provisions of the Central Act and the impact of sections 14 and 15. The question was whether the State had competence to treat the raw hides and skins and dressed hides and skins differently and the Supreme Court held that the State Legislature had competence to treat them differently because both of them constituted different commercial commodities. In the instant cases before us the question is entirely different and the question has arisen under a different context.
10. Mr. Indrakumar referred to an earlier decision of the Supreme Court in State of Punjab v. Chandu Lal Kishori Lal [1970] 25 STC 52; here the court was considering the effect of sections 14 and 15 of the Central Act on the levy of sales tax on ginned cotton. The contention was whether the sale of ginned cotton could be taxed when it came out of the cotton which has already suffered tax. The Supreme Court accepted the contention of the State to the extent of holding the ginning process is a manufacturing process. However, that by itself would not permit the levy of sales tax on the sale of ginned cotton produced out of the cotton which had already suffered tax. At page 56 the Supreme Court held :
"In our opinion, the appellants are right in their contention that the ginning process is a manufacturing process. But the question presented for determination in the present case is somewhat different, viz., whether the respondent is entitled to the exemption under section 5(2)(a)(vi) of the Act in the context and setting of the language of sections 14 and 15 of the Central Sales Tax Act, 1956. 'Declared goods' in section 14 of the Central Sales Tax Act, 1956, are individually specified under separate items. 'Cotton ginned or unginned' is treated as a single commodity under one item of declared goods. It is evident that cotton ginned or unginned being treated as a single commodity and as a single species of declared goods cannot be subject under section 15(a) of the Central Sales Tax Act to a tax exceeding two per cent of the sale or purchase price thereof or at more than one stage."
Since cotton-seed is found under a different item altogether from the cotton, it was held that the cotton-seed could be taxed even though, the cotton out of which the seeds were separated subsequently, had been taxed earlier. The test to be applied is whether both sets of goods are specified under separate items or under a single item; this is clear from the above observation.
11. The relevant question has been answered beyond any doubt by the Supreme Court again in State of Tamil Nadu v. Mahi Traders [1989] 73 STC 228. "Hides and skins" whether in raw or dressed state, by itself is an item under section 14 of the Central Act. Raw hides and skins when purchased were subjected to taxation under the Tamil Nadu General Sales Tax Act. These articles were subjected to various processes and at different stages different kinds of articles with particular uses emerged. Again the ultimate processing also results in a commercially different article called dressed hides and skins. Therefore the State contended that as and when the new article is sold, it is a sale of different commercial commodity and could be taxed and the restrictions imposed by section 15 of the Central Act were not attracted. The Supreme Court affirmed the view of the Madras High Court. The Supreme Court also approved the observations of the Tribunal which had stated that the leather from the stage of raw skins to the stage of dressed hides and skins may undergo various stages of changes. Under the classification for the purpose of section 14 of the Central Act, the various stages are irrelevant because all the hides and skins are brought together in one entry. While concluding, the Supreme Court further pointed out that "it was hardly material that coloured leather may be a form of leather or may even be said to represent a different commercial commodity.
The statutory entry is comprehensive enough to include the products emerging from hides and skins until the process of dressing or finishing is done." The Madras High Court in the very case (Mahi Traders v. State of Tamil Nadu [1980] 45 STC 327) had observed at page 331 :
"For the purpose of the application of section 14(iii), it is not necessary to find out whether the resultant product is commercially different or not, and the only thing necessary to find out is whether it comes within the expression 'hides and skins, whether in a raw or dressed state' or not. The expression used in section 14(iii), namely, 'hides and skins, whether in a raw or dressed state', is of wide connotation and the latter part of the expression is not restrictive in anyway of the goods mentioned earlier, namely, hides and skins, but, on the other hand, is intended to cover all hides and skins in all states, whether dressed or raw. Simply because a dressed skin is split or the split skin is coloured, it does not cease to be 'hides and skins', though in a dressed state and does not become a totally different commodity. Consequently, we are clearly of the opinion that leather splits and coloured skins will come within the scope of the expression 'hides and skins, whether in a raw or dressed state' under section 14(iii) of the Central Sales Tax Act and would, therefore, be liable only to single point levy as provided for in section 15 of that Act and not to multi-point levy."
Mr. Indrakumar referred to another decision of the Supreme Court reported in Bharat Forge & Press Industries v. Collector of Central Excise, Baroda [1992] 84 STC 414; (1990) 1 JT 35 (SC). The matter arose under the tariff description for the purpose of levy of Central excise duty regarding pipes and tubes cut into different shapes and sizes after the original pipes and tubes were subjected to certain processes. The Revenue contended that the product emerged out of these processes were commercially different from the original pipes and tubes and hence could be taxed separately. The Supreme Court negatived the contention of the Revenue by pointing out that in the context of the particular tariff item the dichotomy between the original pipes and tubes and the subsequent pieces cannot be imported where there is only one comprehensive and generic entry. The petitioner has also referred to a clarification issued by the Commissioner of Sales Tax, Karnataka, on August 14, 1975 (annexure A) wherein he opined that R.B. and M.S. wires drawn out of Karnataka sales tax suffered ingots/rods are not taxable when sold within the State. The Department of Revenue and Insurance of the Government of India, Ministry of Finance, had also issued a clarification regarding the definition of the term "iron and steel" as given in section 14 of the Central Act, as per its letter dated March 21, 1974. The above communication was issued for the guidance of all the State Governments. It reads :
"Sub-item (xv), viz., 'wire rods and wires - rolled, drawn, galvanised, aluminised, tinned or coated such as by copper' would include only (1) black annealed wire, (2) G.I. wire, (3) W.I. wire, (4) black M.S. wire and (5) H.B. wire. Barbed wire, stranded wire, coiled cables and wire nails are engineering items and cannot come under the classification of 'wire rods and wire'."
The "Indian Standard" Second Revision issued by the Indian Standard Institution, 1983 edition, describes a wire as :
"The product of a wire rod whose sectional area has been reduced at normal temperatures either by drawing through a specially prepared orifice or passing under pressure between suitably driven rolls."
After referring to these, it was contended by the learned counsel for the petitioners that (1) the context of the legislation will have to be seen to gather the scope of the particular provision; and (2) the meaning attributed to the particular provision by the competent authorities at a time which is proximate to the timing of the enacted law should be accepted as prima facie correct view of the provision in question.
12. In Collector of Central Excise, Bombay v. Parle Exports (P.) Ltd. [1989] 75 STC 105, the Supreme Court observed at page 117 thus :
"The question of interpretation involves determining the meaning of a text contained in one or more documents. Judges are often criticised for being tied too closely to the statutory words and for failing to give effect to the intention of the Parliament or the law-maker. Such language, it has been said, in Cross's 'Statutory Interpretation' (Second Edn.) at page 21, appears to suggest that there are two units of enquiry in statutory interpretation - the statutory text and the intention of the Parliament - and the Judge must seek to harmonise the two. This, however, is not correct. According to the tradition of our law, primacy is to be given to the text in which the intention of the law-giver has been expressed. Cross refers to Blackstone's observations that the fairest and most rational method to interpret the will of the law-maker is by exploring his intentions at the time when the law was made, by signs the most natural and probable. And these signs are either the words, the context, the subject-matter, the effects and consequences, or the spirit and reason of the law. We have no doubt, in our opinion, that having regard to the language used it would not be in consonance with the spirit and the reason of law to give exemption for non-alcoholic beverage bases under the notification in question."
On the second aspect of the contention the decision of the Supreme Court in K. P. Varghese v. Income-tax Officer, Ernakulam [1981] 131 ITR 597 at page 612 is quite apposite :
"These two circulars of the CBDT are, as we shall presently point out, binding on the tax department in administering or executing the provision enacted in sub-section (2), but quite apart from their binding character, they are clearly in the nature of contemporanea expositio furnishing legitimate aid in the construction of sub-section (2). The rule of construction by reference to contemporanea expositio is a well-established rule for interpreting a statute by reference to the exposition it has received from contemporary authority, though it must give way where the language of the statute is plain and unambiguous. This rule has been succinctly and felicitously expressed in Crawford on Statutory Construction, 1940 Edn., where it is stated in paragraph 219 that 'administrative construction (i.e., contemporaneous construction placed by administrative or executive officers charged with executing a statute) generally should be clearly wrong before it is overturned; such a construction, commonly referred to as practical construction, although non-controlling, is nevertheless entitled to considerable weight, it is highly persuasive."
Thereafter the Supreme Court also pointed out that the circulars issued by the Board therein were legally binding on the Revenue even if they deviate from the provisions of the Act. Similarly in the State of Orissa v. Dinabandhu Sahu & Sons [1976] 37 STC 583 the Supreme Court pointed out that even if the communication issued by the Central Government to the State Governments has no statutory force and as such was not binding still it has a great relevancy. At page 586, the court held :
"It cannot, however, be denied that the Ministry of Finance, Department of Economic Affairs, is intimately conversant not only with the policy of legislation for the purpose of implementation of the provisions of the Central Act but is also familiar with the nature and quality of the commodities as also their use from time to time. If, therefore, such an authority issued a notification including certain commodities under the head of 'oil-seeds', as defined under the Central Act, it cannot be said that the Tribunal and the High Court were not right in preferring such an opinion of the Government as good evidence for its conclusion, to the opinions relied upon by the Andhra Pradesh High Court on which great reliance has been placed by the appellant."
Under section 3A of the State Act the instructions issued by the Commissioner to the subordinate authorities under the Act are binding.
13. Section 14 of the Central Act as it was enacted originally was amended in the year 1972. Shortly thereafter the Government of India issued the communication referred above. In the year 1975 the Commissioner functioning under the State Act clarified the position regarding M.S. wires (referred by us already), annexure A, but the respondents in the present case relied upon another communication of the Commissioner dated July 6, 1987 (annexure C) wherein he opined that M.S. wire drawn from tax suffered M.S. rods are liable to tax; so also when tax suffered M.S. wires is galvanised, aluminised, etc., and sold it would be liable to tax. The petitioners have challenged this communication (communication is filed as annexure C).
14. Having regard to the scheme of sections 14 and 15 of the Central Act and the purpose behind it being to minimise the tax burden on the declared goods, it can be assumed that each sub-item forms one category of goods and any goods falling within the same sub-item cannot be treated as a different taxable commodity just because the said goods are produced out of another goods which also fall within the same sub-item. Each sub-item comprised within itself a particular category of taxable commodity for the purpose of section 14 of the Central Act. The opinion expressed by the Government of India near about the time section 14 of the Central Act was amended, and the earliest clarification issued by the Commissioner, in the year 1915, reflect the proper meaning.
14(a). It is necessary now to consider a few more citations placed before us by Mr. Dattu. R. R. Industries v. Commissioner of Commercial Taxes (S.T.A. No. 1 of 1985 decided on November 8, 1989) is a decision of a Division Bench of this Court of which one of us (K. Shivashankar Bhat, J.) was a party; the appellant therein challenged the levy of tax on the sale of H.B. wires produced out of M.S. rods purchased which had already been subjected to taxation. The appellant contended that both M.S. rods and the wires formed one taxable commodity. This was rejected on the ground that H.B. wires were commercially different articles though prepared or manufactured out of M.S. rods. Pyare Lal Malhotra's case was referred in support of the proposition applied by the Bench. However, it is necessary to note that the contention therein was considered with reference to item 2(iv) of the Fourth Schedule to the State Act read with sub-item (xv) thereof. Apart from this indication of the facts involved, no other facts are forthcoming. It is thus clear that the parent goods involved in the said decision was treated as falling under item 2(iv) and the product which was sought to be taxed again, as failing under item 2(xv). Thus the two commodities were treated as belonging to different sub-items altogether. It was not a case where the parent goods and the product emerging therefrom belong to the same sub-item. In the instant case before us we are concerned with a different context altogether.
15. The decision of the Madras High Court in State of Tamil Nadu v. S. Syam Steel Rolling Mills (P.) Ltd. [1977] 40 STC 156, pertains to the goods described as M.S. rounds from which M.S. angles and M.S. squares were produced. Obviously the "rounds" and "angles" do not fall within the same sub-item. However, in case any of the products therein fell within the same sub-item as the parent goods, we respectfully disagree with the conclusion arrived at by the Bench of the Madras High Court to that extent. In Udata Narasimha Rao and Co. v. State of Andhra Pradesh , the question was whether the "ravva" obtained from rice or wheat and fried gram dhall could be taxed when sold, when the main item of rice, wheat or fried gram dhall, respectively, had been taxed earlier. The Andhra Pradesh High Court held that "ravva" was not an enumerated item at all under section 14 of the Central Act and therefore sections 14 and 15 were not applicable to the said case and the levy of tax by the State on "ravva" was perfectly valid. It is not necessary for us to consider as to the leviability of the tax on the sale of a commercially different product, produced out of a declared goods when such product is not specifically mentioned in any of the items under section 14 of the Central Act. To complete the narration, however, we may point out that another Bench of this Court in New Swastik Flour Mill v. State of Karnataka , expressed a different view at page 60 of STC; at page 1407 of ILR thus :
"As is evident from the scheme of the Central Act, the very object of specifying certain goods as 'declared goods' under section 14 of the Act is to ensure that in each State the taxation on such goods which are of great importance and use to the people at large throughout the country shall not exceed 4 per cent and it shall not also be subjected to tax again and again. If we bear this principle in mind, when wheat is one of the declared goods and the same is a staple food article and is capable of being consumed only in the form of broken wheat or flour or rava (soji), these items cannot be treated as different from wheat. At common parlance, 'wheat' as a staple item of food means atta, maida and soji."
Consequently, the Bench held that 'rava' cannot be taxed again when the parent goods had been taxed at the point of sale or purchase.
16. We hold that M.S. wires drawn out of tax suffered M.S. wire rods cannot be taxed again when sold, by virtue of sections 14 and 15 of the Contral Act and the said benefit enures to the dealer in the interpretation of the Fourth Schedule to the State Act. The clarification issued by the Commissioner to one of the dealers on July 6, 1987 as per annexure C does not reflect the correct position in law.
17. The petitioners have come to this Court against the proposition notices. To what extent the proceedings should be continued is a matter for the respondents to consider in the light of the declaration of the law made in this judgment. We allow these writ petitions by declaring the law as stated above and further permit the petitioners to file objections to the proposition notices in case the respondents persist in proceeding with the earlier notices and the petitioners are granted six weeks time from today to file the necessary objections to the notices received by them. If for any reason orders have been finalised already in any of the cases and assessment orders have been made contrary to the law declared above and such an order is under challenge in any one of the writ petitions herein, the same shall stand quashed with liberty to the respondents to proceed afresh according to law. Rule made absolute. No order as to costs.
18. Writ petition allowed.