TMI Blog1979 (3) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... d that as such, such goods were not liable to tax, because such declared goods were, under section 14 of the Central Sales Tax Act, not liable to tax on second and subsequent sales. It was also their contention that the rolled mild steel rounds, flats and angles were not goods different from the iron and steel scraps purchased by them. The prayer was for issue of a writ of certiorari for quashing the sales tax assessment. In the main writ petition, which was heard along with this petition, the matter was remanded for investigation as to whether the tax had been paid in this State in respect of iron and steel scrap. If the tax had been so paid, it would follow in the view of this Court, that the turnover in M.S. rounds, flats and angles would not be liable to further tax. The main judgment is reported in Pyarelal Malhotra v. Joint Commercial Tax Officer, T. Nagar Division, Madras[1970] 26 S.T.C. 416. The State of Madras filed an appeal before the Supreme Court against the judgment in the case of Pyarelal Malhotra(1) and also in the present case. The Supreme Court in the case reported in State of Tamil Nadu v. Pyare Lal Malhotra(2) reversed the decision of this Court. In the appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in Pyarelal Malhotra v. Joint Commercial Tax Officer, T. Nagar Division, Madras, were dismissed. There were appeals to the Supreme Court and the Supreme Court has remitted the matter with the same direction as mentioned already. Thus, all these cases raise a common question as to whether the respective assessees are eligible for the exemption claimed by them. Article 286(3) of the Constitution of India provides that any law of a State shall, in so far as it imposes, or authorises the imposition of, a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify. The Central Sales Tax Act came to be passed in 1956 and section 14 declared certain goods to be of special importance in interState trade or commerce. Under section 15 of the same Act, every sales tax law of a State in so far as it imposed or authorised the imposition of a tax on the sale or purchase of declared goods was to be subject to restrictions and conditions set out therein. One of the conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and angles which were not goods different from the iron and steel scraps purchased by them could not be taxed again. It was, therefore, contended that the tax levied in these cases by the assessing authority was wrong and illegal. In the judgment of this Court it was held that the statute treated all forms of iron and steel either as raw material or finished product from the rolling mills. It was held also that the product as emerging from the various stages of manufacture could not be treated as different from "iron and steel", that even though mild steel rounds, flats and angles manufactured from iron and steel scraps might be commercially different from iron and steel scraps, they did not cease to be "iron and steel" and that tax could be levied only at a single point in the series of sales from the stage of raw material till the product was sold in the same form in which it was produced by the rolling mills, that is, till the manufactured articles had been converted into any other form of fabricated material. This judgment was challenged in the appeal before the Supreme Court. The Supreme Court noticed that there was an amendment to section 14 of the Central Sales Tax Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indicate the types of goods each of which would constitute a separate class for a series of sales. Otherwise, the listing itself loses all meaning and would be without any purpose behind it." With reference to the amended law, it was pointed out at page 326 as follows: "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." After the decision of the Supreme Court, the question of assessability to tax of M.S. rounds, flats, angles and M.S. squares, in the light of the amended provision, came up for consideration in State of Tamil Nadu v. S. Syam Steel Rolling Mills (P.) Ltd.[1977] 40 S.T.C. 156. In that case the assessee had a factory in Bangalore. It purchased in this State M.S. rounds, transported them to Bangalore, and after some processing brought them back and sold them within this State. The contention taken by the assessee was that these M.S. rounds, M.S. angles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pyare Lal Malhotra[1977] 40 S.T.C. 156. will have to be borne in mind: "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 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 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." Thus, a mere external processing or finishing may not convert the goods Into commercially different goods. But if the processing converted them into different commercial goods then their identity would have been lost and the payment of tax in respect of the goods before their conversion would not be of assistance to the assessee so as to exempt his transaction of the converted goods from liability to sales tax. Mr. V.K. Thiruvenkatachari, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t each sub-division dealt with, in the language of the Supreme Court is a "sub-item". In sub-clause (d) there is a further classification found in (i) to (v). In the words of the Supreme Court, these are "sub-categories". Employing distinctive vocabulary, the Supreme Court laid down that so long as a commodity retained its identity as a sub-category of a sub-item in a sub-division, it must be dealt with as retaining its identity as a commercially separate item for the purposes of sales tax. The Supreme Court underlined this construction by a reference to the marginal words which bracketed all the sub-divisions of sub-clause (d) of clause (iv). The words relied on by the court were "sold in the very form........." Whatever be the precise signification of the language employed by the Supreme Court in construing section 14(iv)(d), there is no justification for holding that in the particular passage relied on by the learned counsel the court had laid down any different principle from the one which it had laid down in the rest of the judgment which we have earlier quoted. As we understand the principle, the enumeration of the several commodities in clause (iv) must be regarded as each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be taken at this stage, as it had not been taken either in the writ petitions or actually in the course of the appeal before the Supreme Court. After hearing the parties, we considered that we could exercise our discretion in favour of the petitionerassessees and allow them to urge this point especially because this matter had been attempted to be urged before the Supreme Court. We gave earlier an opportunity to the Additional Government Pleader to file a counter-affidavit and he has filed a counter-affidavit in these two petitions. The point that is now sought to be urged is that as a result of the judgment of this Court in Pyarelal Malhotra v. Joint Commercial Tax Officer(1) the assessees were not taxed on the sales of steel bars, steel rods and steel flats and that as a result of section 22 there was also a prohibition from collecting tax. Section 22(2) of the Tamil Nadu General Sales Tax Act, 1959, provided that if any dealer or person who was not liable to tax under the Act collected any amount purporting to be by way of tax, such dealer or person should pay over to the Government within such time and in such manner as might be prescribed all amounts so collected. Sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Malhotra's case[1970] 26 S.T.C. 416. Thus in the view enunciated in the circular, rolled steel sections manufactured out of tax suffered billets could not be subjected again to local sales tax, as such manufactured steel sections remained "iron and steel". Though this circular was originally addressed only to the Secretary to Government of Mysore, Finance Department, the said communication was circulated to all the other States also. According to the learned counsel for the assessee, as a result of this circular the States were estopped from levying tax on the said goods. The submission for the State was that merely because the assessee had not collected tax or the assessee had not been taxed for the subsequent years in accordance with the judgment of this Court, it did not mean that the assessee was not liable to tax, and that there is no question of estoppel operating against this statutory liability. His further point was that even the circular of 4th September, 1972, was long after the years with which we are now concerned, so that the assessees in these cases could not have relied on this circular and altered their position in any manner. We find that there is consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, it would not be possible to enforce the representation against the Government, because the Government cannot be compelled to act contrary to the statute, but since section 4 of the U.P. Sales Tax Act, 1948, confers power on the Government to grant exemption from sales tax, the Government can legitimately be held bound by its promise to exempt the appellant from payment of sales tax. It is true that taxation is a sovereign or governmental function, but, for reasons which we have already discussed, no distinction can be made between the exercise of a sovereign or governmental function and a trading or business activity of the Government, so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it. We are, therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of vanaspati effected by it in the State of Uttar Pradesh for a period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular is in the form of a letter, No. 4127 S.T. 58 dated 21st July, 1958, issued by the Government of India, Ministry of Finance, Economic Affairs Department. A perusal of the extract, as found in the record, shows that in this letter the authorities were minded to describe what are all the items of iron and steel goods that are covered by section 14(iv) of the Central Sales Tax Act. It may be observed that the list of iron and steel goods set out in this explanatory letter did not adhere to the format or the enumeration in the several sub-clauses (a) to (d) of clause (iv), but adopted a different method of serialisation. The intention behind this so-called explanation only seemed to be an elaboration of the items mentioned in section 14(iv) and not an elucidation of that provision. The Finance Ministry's explanatory note by no means addressed itself to the question of the nature of the single point levy and its impact as between the several items found in the said provision. There is also nothing in the record to show that the assessee's attention had been drawn to this explanatory letter and he had thereupon desisted from collecting sales tax from his purchasers on his under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of different Governments. It was represented that ever since the decision of this Court in the Pyarelal Malhotra's case(1) and till the Supreme Court reversed that decision in appeal, the assessing authority, apparently acting under orders, desisted from making any assessment. It seems to us that this cannot be a matter for complaint. For until the Supreme Court allowed the appeal, the decision of this Court held the field, and the State Government and its officers were bound to administer the relevant sales tax provision only in accordance therewith. It was, however, said that the State Government, while appealing to the Supreme Court in that case, had not applied for a stay of the operation of the judgment of this Court. The point of this argument is that if a stay had been obtained, that would have enabled the assessing authorities to proceed with the assessments even without waiting for the Supreme Court's decision in the appeal. As it happened, in the intervening time-lag, the pending assessments had considerably accumulated, putting the assessees to extreme difficulty and distress in the matter of finding ready means for payment, when they came to be completed after th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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