TMI Blog1976 (3) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ted as appearing in the statement of the case and the annexures thereto may be shortly stated as follows : The assessee manufactures steel wire rods in coils and straight lengths. These wire rods are sold as such and are also further processed in wire mills for the manufacture of annealed wire, galvanised wire, barbed wire, nails, bolts, nuts and rivets. In the assessments for the said assessment years the assessee claimed that its product, that is, wire rods, came within item 1 of the list of articles specified in Part III of the First Schedule under the Finance Act, 1965, and, therefore, it was entitled to the extra rebate for the assessment year 1965-66. For the assessment years 1966-67 and 1967-68, the assessee claimed deduction on similar provisions under the subsequent Finance Act of 1966 read with section 80E and the Fifth Schedule of the Income-tax Act, 1961. For the assessment year 1965-66 the Income-tax Officer rejected the assessee's claim holding that the assessee only manufactured products of iron and steel and such products did not come within the said item 1 in the specified list in Part III of the First Schedule to the Finance Act, 1965, and as such the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the wire products manufactured by the assessee would also come within the item " iron and steel (metal). On behalf of the revenue it was contended that the word " metal " used in the said items had a significance. Up to the stage of production of billets or ingots, iron and steel could be considered as metal and thereafter any further product manufactured or produced therefrom would cease to be understood as metal. In the items in issue the words used would cover all iron and steel in the stage of metal but not when they were in the stage of a product. A number of reported decisions of High Courts and the Supreme Court were cited before the Tribunal. The Tribunal rejected the plea of the assessee that its product came within item 1 of Part III of the First Schedule of the Finance Act, 1965, or item 1 of the Fifth Schedule of the Income-tax Act, 1961. From the definition of the words " metal ", " element iron " and steel " as appearing in the Readers' Digest Great Encyclopaedic Dictionary, the Tribunal held that iron as a basic product can alone be classified as a " metal ". Steel was primarly an alloy. " Iron " and " steel " in their basic forms only could be classif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax in the case of every company was 80% on the whole of the total income. But a rebate was provided in the case of companies wholly or mainly engaged in the manufacture or processing of goods on so much of the total income as would consist of profits and gains attributable to the manufacture or production of any one or more of the articles or things specified in the List in Part III of the Act as follows : " PART III List of articles and things (1) Iron and steel (metal), ferro-alloys and special steels. (2) Aluminium, Copper, Lead and Zinc (metals).... (4) Industrial machinery specified under the heading ' 8. Industrial machinery' sub-heading 'A. Major items of specialised equipment used in specific industries ', of the First Schedule to the Industries (Development and Regulation) Act, 1951 ...... (8) Machine tools and precision tools,(including their attachments and accessories, cutting tools and small tools) dies and jigs ............ (11) Steel castings and forgings and malleable iron and steel castings ............ (22) Gears. (23) Ball, roller and tapered bearings......" Section 80E which was introduced by the Finance Act, 1966, which came i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld restrict the benefit conferred by the statute only to the few primary producers of such metals in the country. This, according to Mr. Banerjee, was not the object of the legislature. Similar benefits conferred by other statutes using similar expressions have been extended to industries manufacturing articles out of iron and steel. One of the statutes which Mr. Banerjee brought to our notice was the Industries (Development and Regulation) Act, 1951, which empowered the Union of India to take under its control industries specified in the First Schedule to the Act. This Act defined an "existing industrial undertaking " to be an industrial undertaking pertaining to any of the industries specified in the First Schedule and a " scheduled industry to be any of the industries specified in the First Schedule of this Act under item No. 1A and specified the following : 1. Iron and steel (Metal). 2. Ferro-alloys. 3. Iron and steel castings, and forgings. 4. Iron and steel structurals. 5. Iron and steel pipes. 6. Special steels. 7. Other products of iron and steel. Mr. Bannerjee also drew our attention to the authorised Import Trade Control Policy of the Ministry of F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by different courts including the Supreme Court. In the premises we only note the decisions cited on this point. (a) Ramavatar Budhaiprasad v. Assistant Sales Tax Officer reported in [1961] 12 STC 286 (SC). Here the Supreme Court held that the word " vegetables " must be construed not in any technical sense nor from the botanical point of view but as in common parlance and consequently betel leaves were not held to be vegetable within the meaning of the C.P. and Berar Sales Tax Act. (b) Commissioner of Sales Tax v. Jaswant Singh Charan Singh reported in [1967] 19 STC 469 (SC). Here the Supreme Court held that for the purposes of the Madhya Pradesh General Sales Tax Act, in the absence of a technical term of science or art, the legislature must be presumed to have used an ordinary term according to common parlance. It was held that the item "charcoal " should be ordinarily understood as and included in the expression " coal ". (c) Deputy Commissioner (Sales Tax) v. R. A. Akbar Alikhan and Abdul Raheem and Co. reported in [1971] 27 STC 167 (Mad). Here the Madras High Court held that in a taxing statute the popular meaning or commercial understanding of a word should prevai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oil will be entitled to a deduction ...... equal to the value of the groundnut and/or kernel purchased by him and converted into oil and cake if he has paid the tax to the State on such purchases." The appellant produced raw, refined and hydrogenated oil and claimed deduction under the above rule in respect of all such products. The Supreme Court went into the question whether after hydrogenation the product which was originally raw groundnut oil still remained groundnut oil. The Supreme Court noted the chemistry of hydrogenation and held that absorption of hydrogen in the oil did not affect the identity of the substance, but made the product more suitable for use. It was held that hydrogenated groundnut oil was still groundnut oil within the meaning of the above rule. The next case was Vaiswaner Trading Company v. State of Gujarat, reported in [1964] 15 STC 586 (Guj). In this case the Gujarat High Court was considering the Bombay Sales Tax Act, 1953, and the Central Sales Tax Act, 1956. The item involved was rolled steel sections joined together by rivetting. The question arose whether the steel sections after rivetting retained the same form as when produced by the rolling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealer under the Punjab General Sales Tax Act, 1948. He used to purchase oil-seeds and after crushing the same sold the oil as also the oil-cake as a by-product. For purchase of oil-seeds the assessee had to pay a purchase tax. In respect of sales tax payable on the sale of oil and oil-cake by the assessee it was contended that the goods which the assessee purchased being identical with the goods sold, the same could not be taxed at two stages. The Supreme Court negatived this contention and held that the assessee by manufacturing oil and oil-cake out of oil seeds had changed the identity of the goods. The Supreme Court observed that if scrap iron or steel ingots were made into rolled steel sections the original material would lose its identity and the product would become a new marketable commodity. The next decision cited was State of Gujarat v. Shah Veljibhai Motichand reported in [1969] 23 STC 288 (Guj). Entry 15 of Schedule B of the Bombay Sales Tax Act, 1953, at the material time read Iron and steel ". The dispute before the Gujarat High Court was whether corrugated iron sheets would come under this entry. On a difference of opinion between two learned judges the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial, character as iron and steel and came within item (d)(ii) of entry No. 2 which included steel sheets. Mr. Banerjee contended that in the absence of any definition of the words " iron ", " steel " or "metal " in the Finance Act, 1965, Part III, and in the Fifth Schedule of the Income-tax Act, the expression " iron and steel (metal) " in the items in question was ambiguous. Whether the chemical or the metallurgical or the popular meaning was ascribed, such ambiguity could not be resolved. This ambiguity had to be resolved by taking the interpretation of similar expressions in other statutes. As in the decisions cited, an extended meaning had to be given to this expression for its proper interpretation. Mr. Banerjee also contended that, in any event, such interpretation ought to be one beneficial to the taxpayer on well-known principles of construction of taxing statutes. On this point he cited three decisions of the Supreme Court as follows : Controller of Estate Duty v. R. Kanakasabai [1973] 89 ITR 251 (SC). Central India Spinning, Weaving and Manufacturing Co. Ltd., v. Municipal Committee, Wardha AIR 1958 SC 341 and Commissioner of Income-tax v. Karamchand Premchand Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed that the subject-matter of both the statutes were displaced persons. Yet the Supreme Court held that in view of the difference in their respective objects the two Acts could not be stated to be in pari materia and expressions interpreted in one Act may not be similarly interpreted in the other. It appears to us that on a plain reading of the items in dispute reading " iron and steel (metal) ", it cannot be said that the same would include wire rods. Wire rods in the ordinary meaning are commercial products made out of the metals in question. This is so if we construe the expression " metal " in its popular sense. Even if we take the technical or metallurgical meaning, the expression " iron and steel (metal) " cannot be said to include wire rods. It is to be noted that the other items in the Schedule, e.g., item No. 11, steel castings and forgings and malleable iron and steel castings, are undoubtedly the products of iron and steel, yet they have been separately itemised in the Schedule. Similar items are ball bearings, boilers, automobile ancillaries, gears. If we interpret item No. 1 as suggested by Mr. Banerjee and extend its meaning then there would have been no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified certain goods being of special importance in inter-State trade or commerce. Under the heading " iron and steel " there comes 14 different specified items of iron and steel products starting from pig iron and ending in wire rods. The items are so specific that there is again no scope for extending the meaning of any particular item. It is in this background we have to consider the various decisions cited on behalf of the assessee. The Groundnut Oil case, Tungabhadra Industries Ltd. v. Commercial Tax Officer [1960] 11 STC 827 (SC), was concerned with the Madras Sales Tax Act where the only item was " groundnut oil " no product or derivative of groundnut oil was separately included in the statute. The Supreme Court for the purpose, of that statute and in the facts of that case gave an extended meaning to the item. Nothing more ought to be read from this decision. The Rivetted Bailing Hoops case, Vaiswaner Trading Co. v. State of Gujarat [1964] 15 STC 586 (Guj), was decided in the context of the Bombay Sales Tax Act, 1959. It was found as a fact that such hoops were nothing but rolled steel sections joined together and could fall within the expression in entry 4 of the Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en challenged. Whether this finding was without any evidence or based only on the dictionary makes no difference to its finality. Lastly, Mr. Banerjee faintly argued that from the order of the Tribunal it appeared that the assessee had been allowed development rebate under section 33(1)(b)(B)(i). This development rebate has been allowed on the basis of the same Schedule. Mr. Banerjee contended that if the assessee was entitled to development rebate for this item in the Schedule there was no reason why the assessee should be deprived of the benefit under section 80E or the Finance Act, 1965, on the identical item in the same Schedule. This particular point was not raised before nor considered by the Tribunal. The questions before us cannot be said to include this aspect. The revenue has not come up against the allowance of development rebate. Full facts in respect of such development rebate are not before us and we cannot go into such question. For the reasons stated above, the revenue succeeds in the instant case. Both the questions referred to us are answered in the affirmative and in favour of the revenue. In the facts and circumstances of the case, we do not make any or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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