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The Commissioner of Sales Tax Versus M/s. Jai Hind Industries Limited.

2015 (11) TMI 940 - BOMBAY HIGH COURT

Classification - whether raw aluminum castings manufactured and sold by the Respondent herein, are covered by the residual Entry C-II-102 of the BST Act and exigible to tax @ 10% or whether they fall under Entry C-I-29 exigible to tax @ 4%. - Held that:- what is manufactured by the Respondent herein is very much in the raw, unfinished and primary form and are not finished goods. These findings of fact have been arrived at by the MSTT after taking into consideration all the material placed before .....

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luminum castings manufactured and sold by the Respondent herein to the automobile industry, are in its raw, unfinished and primary form which require further processes such as milling, drilling, tapping etc. by the purchaser before they are used in the manufacture of their motor vehicles / chassis. This being the case, we find that the ratio of the Supreme Court in the case of Vasantham Foundry would apply with full force and accordingly, the raw aluminum castings manufactured by the Respondent .....

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g from any patent illegality giving rise to any substantial question of law that would persuade us to take a different view. - Decided in favour of assessee. - Sales Tax Reference No. 58 of 2012, Reference Application No. 54 of 1997 - Dated:- 30-10-2015 - S. C. Dharmadhikari And B. P. Colabawalla, JJ. For the Petitioner : Mr. V. A. Sonpal, Special Counsel For the Respondent : Mr. P. C. Joshi a/w Mr. Piyush Shah JUDGMENT [ Per B. P. Colabawalla, J ] 1. By this Reference, the First Bench of the Ma .....

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non-ferrous metal ingots? (b) Whether on the facts and circumstances of the case and on true and correct interpretation of Entry C-I-29, the Tribunal was justified in law in holding that the non-ferrous metal castings, namely aluminum castings manufactured and sold by the respondents (original appellants) are covered by Entry C-I-29? 2. The real dispute in the present Reference is whether raw aluminum castings manufactured and sold by the Respondent herein, are covered by the residual Entry C-II .....

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he case of the Respondent that they purchase aluminum alloy in the form of ingots which are then melted with the help of a melting furnace at 700° C. This molten metal is put into a dye through a special opening and considerable pressure is applied to the molten aluminum, due to which it reaches all the cavities inside the mould to form a necessary casting on solidification. This casting is then ejected and further cleaned, after which it is dispatched to their customers. At the time of maki .....

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, wherein the MSTT took a different view in respect of nonferrous raw castings. In this decision, the MSTT had diverted from the earlier view and non-ferrous castings were held to be covered by the residual Entry C-II-102. 4. In this view of the matter, the Respondent on or about 28th December, 1994 filed an application under Section 52 of the BST Act before the Commissioner of Sales Tax and sought determination regarding the rate of sales tax applicable on the sale of raw aluminum castings. The .....

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4% sales tax on the sale of the same goods i.e. the aluminum castings. 5. Being aggrieved by this order of determination, the Respondent approached the MSTT by filing Appeal No.33 of 1996. This Appeal, along with the Appeals filed by M/s Jay Bhawani Engineering Works (Appeal No.26 of 1996) and M/s Balwant Industries (Appeal No.28 of 1996) were heard by the Third Bench of the MSTT at Mumbai and after considering the arguments of the Revenue as well as the respective Appellants before it, the MST .....

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ated 16th December, 2000. On this rejection, the Revenue moved this Court by filing an application under the first proviso to Section 61(1) of the BST Act which application was registered as Sales Tax Application No.3 of 2001. When this Sales Tax Application No.3 of 2001 reached hearing before this Court, by an order dated 25th July, 2003, this Court directed the MSTT to draw and refer the questions of law set out in paragraph 1 above to this Court for its decision. It is in these circumstances .....

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d never fall within the meaning of the word 'ingots' appearing in Entry C-I-29. It was therefore his submission that raw aluminum castings were correctly classified under the residual Entry C-II-102, and the MSTT was in error in overturning the order of determination passed by the Commissioner dated 13th January, 1996. In support of the aforesaid submission, Mr Sonpal placed heavy reliance on a decision of the Supreme Court in the case of Bengal Oil Corporation and another v/s Commercial .....

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e items sold by the Respondent herein vide their Invoice No.1682 dated 13th December, 1994 fell in Entry C-I-29 exigible to tax at 4% and not in the residual Entry C-II-102 exigible to tax at 10%. He submitted that the reliance placed on the decision of the Supreme Court in Vasantham Foundry's case (1995) 5 SCC 289 was wholly misplaced as the facts in that case were totally different from the facts before us. He therefore submitted that the questions of law referred to this Court for its det .....

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t. The MSTT has taken into consideration all the facts including the processes that are required to be undertaken for manufacturing raw aluminum castings as well as the processes these castings further undergo at the purchaser s end before they are put to use. He submitted that in this factual matrix, the case of the Respondent was squarely covered by the decision of the Supreme Court in the case of Vasantham Foundry (1995) 5 SCC 289 and therefore, in any event, the question of law as framed in .....

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the Respondent fall within Entry C-I-29 of the BST Act, or whether the same could be classified under the residual Entry C-II-102. Entry C-I-29 reads as under :- Sr. No. Description of Goods Rate of Sales Tax Rate of Purchase Tax Period of Operation 1 2 3 4 5 29 (i) Non-ferrous metal powder and scrap (ii) Non-ferrous metal foils, sheets,rods, wires, bars, slabs, blocks, ingots, circles, tubes, angles, strips, plates and slugs (other than those of gold and silver specified in entry 1 of Part1 of .....

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Tax Period of Operation 1 2 3 4 5 102 All goods other than those covered from time to time by the other schedules and the preceding entries of this schedule. 10% 10% 1-4-1994 to 30-9-1995 11. It is not in dispute before us that aluminum is a nonferrous metal. The facts before us and which have been elaborately set out in the order of the MSTT dated 13th June, 1997 are really undisputed. The facts are that the Respondent manufactures raw aluminum castings required by the automobile industry. It .....

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this, the raw casting is subjected to preliminary machining, such as milling or drilling operations to suit the jigs and fixtures for further finishing. The proof machining and final machining operations are not carried out by the Respondent but by their customers viz. Telco Ltd. and Premier Automobiles Ltd. It is in these circumstances and looking to these facts that the Respondent contended that therefore these are raw castings. In support of the aforesaid argument, Mr Joshi pointed out that M .....

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d not be relied upon for any reason. 12. On the basis of these facts, we have to now examine whether the case of the Respondent falls within the ratio of the decision of the Supreme Court in the case of Vasantham Foundry (1995) 5 SCC 289 or whether the same would be covered by Bengal Iron Corporation s case. 1994 Supp (1) SCC 310. 13. The facts of Bengal Iron Corporation's case 1994 Supp (1) SCC 310 reveal that the Appellant before the Supreme Court manufactured and sold cast iron pipes, man .....

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ured by the Appellant were not declared goods falling within the relevant entries of the Andhra Pradesh General Sales Tax Act, 1957 and correspondingly not liable to tax only at the rate of 4%. When this matter was carried all the way to the highest court of the land, the Supreme Court, after relying upon another judgment of the Andhra Pradesh High Court in the case of Deccan Engineers v/s State of Andhra Pradesh [1992 Vol.84 S.T.C. 92 (AP)] came to the conclusion that the words cast iron were d .....

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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 .....

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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. (emphasis supplied) 14. What can be discerned from the aforesaid decision is that the products manufactured by Bengal Iron Corporation though called cast iron castings were different from the words cast iron and were in fact different and distinct goods from cast iron being manufactured and sold in the market. It is in this factual scenar .....

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n scrap, cast iron scrap etc. After melting these raw materials and adding the requisite quantity of carbon, silica etc., the molten metal in the cupola furnace was poured into moulds of different specifications to get the cast iron castings as required by the end users. The foundry owners like the Appellant manufactured these rough cast iron castings according to the specifications of their customers, who in turn, after putting them through various other processes like machining, grinding, poli .....

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ndry's case (1995) 5 SCC 289 that if in a given case, it is found that the products / goods manufactured from cast iron are finished goods, it is only in those circumstances that the ratio of Bengal Iron Corporation's case 1994 Supp (1) SCC 310 would apply. If cast iron castings in its raw form and at its preliminary stage are manufactured, they would fall within the words cast iron exigible to tax at 4%. In this light, it was argued by the Appellant that the judgment of the Supreme Cour .....

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the molten metal in contemplation. It is nobody's case that the molten metal is bought and sold in the market. What is bought and sold is cast iron, which is obtained by pouring molten metal in the moulds. The moulds may be of various shapes or sizes, but the type or nature or the size of the mould will not decide the question whether the end product will be cast iron or not. Cast iron has to be in some shape, whether as a bar, as a billet or in some other form. The molten metal has to be p .....

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s from the moulds is a cast iron casting in its primary form, that is to say, rough cast iron casting. But, that will not take it out of the ambit of declared goods. If cast iron or cast iron casting in the primary form is not to be treated as declared goods, then the whole purpose of including cast iron in the list of declared goods will be defeated. 16. The Central Sales Tax Act imposed a levy of tax on sale or purchase of goods that takes place in course of inter-State trade or commerce. Decl .....

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rce, the legislature could not have given the phrase cast iron a narrow and limited meaning so as to exclude everything made out of cast iron in molten form. Only some of the goods which are dealt with in inter-State trade or commerce, have been declared as goods of special importance. On these goods tax can be levied only at one point and the rate of tax will not exceed 4% of its price. It is not conceivable that molten metal can be sold or purchased in course of inter-State trade or for that m .....

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is nobody's case that it is the molten metal which is dealt with in inter-State trade or commerce. When the Central Government declared cast iron as goods of special importance in inter-State trade or commerce, it must have in contemplation some commodity which is actually traded in inter- State trade or commerce. If rough cast iron castings are treated as something distinct and separate from cast iron, the purpose behind Sections 14 and 15 will be defeated. (emphasis supplied) 16. On perusi .....

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t raw cast iron castings (and which require some further processes by the purchaser before they are put to use), would be included in the words cast iron and would therefore be exigible to tax at 4%. To put it simply, if cast iron castings are in the raw form, it would be exigible to tax at 4%, whereas if they culminate into finished goods they would exigible to tax as general goods under the respective sales tax legislations. 17. Having noted this distinction, we would now have to examine which .....

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biles Ltd. The Certificate issued by M/s Telco Ltd. dated 30th October, 1994 reads as under:- We state that the raw castings being procured by us from M/s Jayahind Industries Ltd. are subjected to extensive machining such as milling, drilling, tapping etc. at our end, before they are further used in the manufacture of our motor vehicle/chassis. (emphasis supplied) Similarly, the Certificate dated 17th October, 1994 from M/s Premier Automobiles Ltd. reads thus:- This is to certify that the variou .....

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arrived at by the MSTT after taking into consideration all the material placed before it and we do not think that these findings are in any way perverse and/or contrary to the record. Further it is not even the case of the Applicant - Revenue that these Certificates are unreliable and therefore the MSTT was in error in placing reliance thereon. To be fair to Mr. Sonpal, he did not even urge such an argument. 19. In view of this factual position, we find that the reliance placed by Mr Joshi on th .....

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ntham Foundry (1995) 5 SCC 289 would apply with full force and accordingly, the raw aluminum castings manufactured by the Respondent herein would fall within Entry C-I-29 of the Bombay Sales Tax Act, 1959 and not within the residual Entry C-II-102. 20. Having said this, we must now deal the argument of Mr Sonpal, that the word castings is not found in Entry C-I-29 appended to the Bombay Sales Tax Act, 1959 and therefore the raw aluminum castings manufactured by the Respondent cannot be classifie .....

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