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PETITIONER: BENGAL IRON CORPORATION

       Vs.

RESPONDENT: C. T. O

DATE OF JUDGMENT27/04/1993

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) VENKATACHALA N. (J)

CITATION:  1993 AIR 2414            1993 SCR  (3) 433  1994 SCC  Supl.  (1) 310 JT 1993 (3)   134  1993 SCALE  (2)702

ACT:

HEADNOTE:

JUDGMENT: The judgment of the court was delivered by B.P.JEEVAN REDDY J.- Civil Appeal No. 4474 of 1992 1.The appellant is engaged in the manufacture and sale of products  like cast-iron pipes, manhole covers,  bends  etc. For the assessment year 1989-90, the Commercial Tax Officer, Narayanguda  Circle,  Hyderabad levied sales  tax  upon  the turnover relating to said products treating them as  general goods.   He overruled the petitioner’s contention  that  the said  products are declared goods liable to tax at the  rate of  4%  only.  The assessees’ appeal  preferred  before  the Appellate  Deputy Commissioner is still pending.   Evidently because  no  stay  was granted pending the  said  appeal,  a notice  was issued to the appellant calling upon him to  pay the  tax assessed, against which notice he preferred a  writ petition, being W.P. No. 9315 of 1992, in the High Court  of Andhra  Pradesh.  His main contention in the  writ  petition was that by virtue of G.O.Ms. No. 383 Revenue(s)  Department dated April 17, 1985, his products are ’declared goods’  and are, therefore, liable to tax only @ 4%. 2.The Division Bench of the High Court dismissed the writ petition following its earlier decision in Deccan  Engineers v.  State of A.P.1 In Deccan Engineers’ it was held  by  the A.P.  High  Court that the expression ’cast  iron’  in  Item (2)(i)  of the Third Schedule to the Andhra Pradesh  General Sales  Tax  Act does not include  cast-iron  pipes,  manhole covers  and bends etc.  In this appeal, the  correctness  of the said view is questioned. 3.  Third Schedule to the Andhra Pradesh General  Sales  Tax Act pertains to "declared goods in respect of which a single point tax only is leviable under Section 6".  Section 6  was enacted  by the A.P. Legislature to accord with Sections  14 and 15 of the Central Sales Tax Act.  Item (2) of the  Third Schedule in the A.P. Act reads as follows:

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1 (1992) 84 STC 92(AP) 313                        THIRD SCHEDULE             (As amended up to 15th August 1987) Declared  goods in respect of which a single point tax  only is leviable under                Section 6 S.      Descri-     Point of        Rate of No.     ption of    levy tax      goods (1)    (2)           (3)              (4) (2)  Iron and      At the         4 paise      steel, that   point of       in the      is to say,   first sale      rupee      (3002)    in the State                          (i)Pig   iron   and   cast   iron                         including   ingot   moulds,   bottom                         plates, iron scrap, cast iron scrap,                         runner scrap and iron skull scrap;                          (ii)steel  semis  (ingots,  slabs,                         blooms and billets of all qualities,                         shapes and sizes);                          (iii)skelp  bars,  tin   bars,                         sheet  bars,  hoe-bars  and  sleeper                         bars;                          (iv)steel   bars  (rounds,   rods,                         squares,    flats,   octagons    and                         hexagons,   plain  and   ribbed   or                         twisted,  in  coil form as  well  as                         straight lengths);                          (v)steel   structurals   (angles,                         joists, channels, tees, sheet piling                         sections,  2 sections or  any  other                         rolled sections);                          (vi)sheets,   hoops,  strips   and                         skelp,  both black  and  galvanised,                         hot  and  cold  rolled,  plain   and                         corrugated  in  all  qualities,   in                         straight  lengths and in coil  form,                         as rolled and in riveted condition;                          (vii)   plates   both   plain   and                         checkered in all qualities;                          (viii)discs,  rings,   forgings                         and steel castings;                          (ix)tool, alloy and special steels                         of any of the above categories;                          (x)steel  melting  scrap  in  all                         forms    including   steel    skull,                         turnings and borings;                         314                          (xi)steel  tubes, both welded  and                         seamless,   of  all  diameters   and                         lengths including tube fittings;                          (xii)  tin-plates, both hot  dipped                         and   electrolytic  and   tin   free                         plates;                          (xiii)fish plate bars,  bearing                         plate  bars, crossing sleeper  bars,                         fish    plates,   bearing    plates,                         crossing sleepers and pressed  steel                         sleepers,  rails  heavy  and   light                         crane rails;                          (xiv)wheels, tyres, axles  and                         wheel sets;                          (xv)wire  rods and  wires  rolled,

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                       drawn,    galvanised,    aluminised,                         tinned or coated such as by copper;                          (xvi) detectives, rejects, cuttings                         or  end pieces of any of  the  above                         categories. 4.   Item  (2) of the Third Schedule to the A.P. Act  is  an exact  replica  of Item (iv) of Section 14  of  the  Central Sales Tax Act.  According to Section 15 of the Central  Act, ’declared goods’ cannot be taxed at a rate exceeding 4 or at more than one stage. 5.   The  precise  question that was  considered  in  Deccan Engineers’  (followed  in  the judgment  under  appeal)  was whether  the  ’cast  iron  castings’  manufactured  by   the petitioner  in that case are ’cast iron’ within the  meaning of  Item (2)(i) of the Third Schedule to the  A.P.  Act/Item (iv)(i) of Section 14 of the CST Act.  At this stage, it  is necessary to ascertain precisely what does ’cast iron’  mean and  how  are the products of  the  appellant  manufactured. ’Cast  iron’ is defined in the Concise Oxford Dictionary  as "a hard alloy of iron, carbon and silicon cast in a  mould". According  to  New Lexicon Webster’s Dictionary  of  English Language,  the word ’cast iron’ means "an iron-carbon  alloy produced in a blast furnace.  It contains tip to 4%  carbon, and  is  more brittle, but more easily fused,  than  steel". According to Van Nostrand’s Scientific Encyclopedia, I  cast iron’ is "primarily the product of remelting and casting pig iron".  (Interestingly, the expression ’cast-iron’   with  a hyphen   between  ’cast’  and  ’iron’   has   been   defined separately  as meaning "made of cast iron".  So far as  item (iv)  of Section 14 is concerned, the  official  publication spells the expression ’cast iron’ without a hyphen.   Though an  authorised  publication of the A.P. Act  is  not  placed before  us,  we  presume  that  the  printing  of  the  said expression  in  the  private publication  placed  before  us represents  the correct rendering  it is without a  hyphen.) That  ’cast iron’ is different from ’cast iron castings’  is brought  out in the following extract from the  judgment  in Deccan  Engineers’ which is equally true in the case of  the appellant as well:               "The  assessee manufactures and sells  various               goods  mentioned earlier made from  cast  iron               which has suffered sales tax.  The controversy               is  whether  these several goods sold  by  the               petitioner  continue to be the  same  declared               goods  covered by the aforesaid entry  or  are               different commercial commodity liable to  levy               of  State sales tax.  The case of the  Revenue               is  that,  items sold by  the  petitioner  are               commodities different from cast iron, though               315               made out of it and are, therefore, exigible to               tax as a distinct commercial commodity.  It is               contended  by  the  learned  counsel  for  the               assessee that the relevant entry in Section 14               of the Central Act also Third Schedule of  the               State Act speak of cast iron including ingots,               moulds  and  bottom plates,  iron  scrap  etc.               which  indicates that any casting made out  of               cast  iron also should be treated as  included               in   the  entry  because  of  the  word   used               ’including’  in  the  entry.   It  is  further               contended  that  the Government  of  India  in               their  letters have clarified that  cast  iron               castings  are  covered by cast  iron  and  the               State Government has also issued the aforesaid

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             G.O.  subsequently under Section 42(2) of  the               State  Act  clarifying  that  the  cast   iron               castings  are  covered within  the  term  cast               iron." 6. It is thus clear that ’cast iron’ is different from ’cast iron  castings’ manufactured by the appellant.  ’Cast  iron’ is 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 pipes,  manhole covers,  bends etc. manufactured and sold by the  appellant. It  cannot be denied, in such a situation that the  products manufactured  by the appellant are, in commercial  parlance, different  and  distinct goods from the cast  iron.   Indeed this  aspect is not seriously disputed by Shri Ganguli,  the learned  counsel  for the appellant.  His case  is  entirely based upon certain clarifications and circulars issued  both by the Central and State Governments and in particular  upon an  order  issued  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. 7.  The earliest clarification is the one contained  in  the letter  dated  February  28, 1977  from  the  Department  of Revenue  and  Banking  (Revenue Wing)  Government  of  India addressed  to the Finance/Revenue Secretaries of  all  State Governments and Union Territories.  It reads thus:               "Subject:Clarification  as  to  whether  the               term   ’Cast   Iron’  mentioned   in   Section               14(iv)(i)  of the Central Sales Tax Act,  1956               would cover cast iron casting.               In   continuation  of  the  marginally   noted               communications  and  with  reference  to  this               Department’s letter No. 24/3/73/ST dt.  20-11-               1973,  I am directed to say that the  question               whether  the  expression ’cast iron’  used  in               Section (iv)(i) of the Central Sales Tax  Act,               1956 will include ’Cast iron casting’ has been               reexamined    in   consultation    with    the               Directorate General of Technical  Development,               Chief Chemist and the Ministry of Law, Justice               &  Company Affairs.  This department has  been               advised  that  the existing  expression  ’cast               iron’  in  the aforesaid  section  will  cover               ’cast iron casting’ also.                Yours faithfully,                                    Sd/-                 Deputy Secretary to the                Govt. of India." 8.  Pursuant  to  the above  clarification  by  the  Central Government, the Commissioner of Commercial Taxes, Government of Andhra Pradesh intimated 316 all  the  Deputy Commissioners of Commercial  Taxes  of  the State that "Cast Iron Pipes and specials should be subjected to  tax as falling under ’Cast Iron’ liable to tax @  4%  at the  point of first sale in the State under Entry 2  of  the Third  Schedule of A.P.G.S.T. Act".  To the same  effect  is another   clarification  issued  by  the   Commissioner   of Commercial  Taxes,  Government  of  Andhra  Pradesh  to  his

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subordinate officials on March 12, 1982. 9.The next clarification from the Government of India was on  January  31, 1984.  It appears that  the  Government  of Haryana  had written to the Central Government stating  that ’cast iron castings’ cannot be treated as declared goods and requested  the Ministry of Finance, Government of  India  to examine  the same.  It was in reply to the said  query  that the  letter  dated  January  31, 1984  was  written  by  the Government  of  India, Ministry of  Finance,  Department  of Revenue   to  the  Financial  Commissioner  and   Secretary, Government of Haryana, Excise and Taxation Department.   The letter says that the matter has been considered carefully by the Department in consultation with the Ministry of Law  and the  Director General of Technical Development.  It set  out the  opinion of the Ministry of Law as also the  opinion  of the Director General of Technical Development.  The latter’s opinion reads:               "Cast iron is an alloy iron of Carbon  silicon               and  other alloying elements if required  i.e.               ’Cast  Iron  Castings’ are covered  under  the               term  ’Cast Iron’.  It may also  be  clarified               that  ’Cast Iron’ includes Gray Iron,  Chilled               Malleable and Nodular Iron.  Ingot Moulds  and               Bottom  Plates  are  nothing  but  Cast   Iron               Castings."               10.After setting out the said two opinions,               the Government of India expressed its  opinion               in the following words:               "In  accordance  with the above  advice,  cast               iron castings are covered under the term ’Cast               Iron’  State Government may kindly bring  this               position   to   the  notice   of   sales   tax               authorities  of  the  State.   If   considered               necessary  this  may  be  placed  before   the               Committee    of   Commissioners    of    Sales               Tax/Commercial   Tax   set   up   under   this               Ministry’s  letter  No....  Receipt  of   this               letter may please be acknowledged." 11.Copies  of  this letter were communicated  to  all  the State Governments and administrations of Union Territories. 12.On  July  20, 1984 the Government  of  Andhra  Pradesh, Revenue(s) Department issued a memorandum, referring to  the aforesaid letter of the Central Government dated January 31, 1984 and reaffirming that " ’cast iron castings’ are covered within the item ’cast iron including ingot’ in sub-item  (i) of  Item No. 2 of the Third Schedule to the  Andhra  Pradesh General  Sales  Tax  Act".  On the same  day  the  Principal Secretary to the Government, Revenue Department addressed  a letter   to  the  Secretary,  Andhra  Pradesh  Small   Scale Industries Association, Vijayawada informing the Association that "a clarification has been issued to the Commissioner of Commercial Taxes to the effect that ’cast iron castings’ are covered within the term ’cast iron including ingot’ in  sub- item  (i) of Item No. 2 of the Third Schedule to the  Andhra Pradesh General Sales Tax Act, 1957." 13.On  March  27,  1984,  however,  the  Commissioner   of Commercial  Taxes, Government of Andhra Pradesh addressed  a letter  to  all his subordinate officers  stating  that  the question  whether  ’cast  iron  castings’  fall  within  the expression I cast iron’ is pending before the High Court  of Andhra Pradesh and, therefore, 317 the  collection of arrears of tax due on ’raw  castings’  is stayed for a period of one year.  At the end of one year, he said, the matter will be reexamined.

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14.On  April  17, 1985 the Government  of  Andhra  Pradesh issued  a clarification contained in G.O.Ms. No.  383  under sub-section  (2) of Section 42 of the A.P. Act.  It will  be appropriate to set out the G.O. in full:                "GOVERNMENT OF ANDHRA PRADESH ABSTRACT Andhra  Pradesh General Sales Tax Act, 1957  Levy  of  Sales Tax on ’Cast Iron Casting’ Clarification issued. REVENUE(S) DEPARTMENT G. O. Ms. No. 383                 Dated 17-4-1985 Read the following:       1.  Govt. Memo. 2216/SI/83-4, dt. 20-7-1984       2.  Lr.  No.  2216/83-4, dt.  20-7-1984  addressed  to Secretary,   A.P.   Small  Scale   Industries   Association, Vijayawada 3.   From  the CCT’s Ref.  D.O.FE. Lr.  111(3)/1490/84,  dt. 24-7-1984 4.   Government Memo 3166/SI/84-4, dt. 13-11-1984 5.   From the CCT.  D.O. on CCT’s Ref.  LI/(1)/1063/82 6.   Govt.  Memo No. 3166/SI/84-5, dt. 22-2-1985 7.   From   the  Commissioner  of  Commercial  Taxes,   Ref. A3/LI/1093/82, dt. 19-3-1983.                            ORDER The  Andhra  Pradesh  Small  Scale  Industries   Association Vijayawada requested the Government to clarify whether ’cast iron’  and  ’cast  iron  castings’  are  one  and  the  same commercial commodity. 2.   This matter was examined at length by the Government of India in consultation with the Ministry of Law,  (Department of   Legal  Affairs)  and  Director  General  of   Technical Development.    The  Ministry  of  Finance,  Department   of Revenue,  Government of India clarified, in their letter  F. No.  24/10/80-ST,  dt. 31-1-1984, to the effect  that  ’cast iron castings’ are covered within the term ’cast iron’. 3.   Government have examined in detail the legal aspects of the  issue  and observe that the term ’cast  iron  including ingot,  moulds, bottom plates’ as in sub-item (i) of Item  2 in  the Third Schedule to the Andhra Pradesh  Central  Sales Tax  covers  ’cast  iron casting’ and  as  such  ’cast  iron castings’  is not a different commercial commodity from  the commodity   ’cast  iron  including  ingot,  moulds,   bottom plates’. 4.   Under  sub-section  (2)  of Section 42  of  the  Andhra Pradesh  General Sales Tax Act, 1957 the  Government  hereby clarify that the ’cast iron castings’ are covered within the term  ’cast  iron including ingot,  moulds,  bottom  plates’ occurring  in sub-item (i) of Item 2 of this Third  Schedule to the Andhra Pradesh General Sales Tax Act, 1957. (emphasis added)  (By order in the name of the Governor of Andhra Pradesh)                          C.R. Nair, Principal Secretary to Government."  15.  Section  42  of the A.P. Act confers  upon  the  State Government  the power to remove  difficulties.   Sub-section (1) confers the said power to meet the 318 problems arising from transition from the previous Sales Tax Act  to  the  present Sales Tax Act.  An  order  under  sub- section (1) is required to be published in the A.P. Gazette. Sub-section  (2) is general in nature.  An order under  sub- section (2)    is  not required to be published in the  A.P. Gazette.  Section 42 reads:               "42.   Power to remove difficulties.-  (1)  If               any difficulty arises in giving effect to  the               provisions  of this Act in consequence of  the

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             transition  to  the said provisions  from  the               corresponding provisions of the Acts in  force               immediately  before the commencement  of  this               Act, the State Government may, by order in the               Andhra  Pradesh Gazette, make such  provisions               as appear to them to be necessary or expedient                             for removing the difficulty.               (2)   If  any  difficulty  arises  in   giving               effect   to   the  provisions  of   this   Act               (otherwise than in relation to the  transition               from  the provisions of the corresponding  Act               in force before the commencement of this Act),               the  State Government may, by order make  such               provisions, not inconsistent with the purposes               of this Act, as appear to them to be necessary               or expedient for removing the difficulty." 16.  An  order  issued  under  Section  42  is   undoubtedly statutory in character. 17.  A  word  about the validity of Section 42 of  the  A.P. Act.   Section  37 of the Payment of Bonus Act  conferred  a similar  power  upon  the  Central  Government;  it  further declared that any such order would be final.  It was  struck down by a Constitution Bench of this Court in Jalan  Trading Co.  (P)  Ltd.  v.  Mill  Mazdoor  Sabha2  as  amounting  to excessive  delegation of legislative power.  However,  in  a subsequent decision in Gammon India Ltd. v. Union of  India3 it has been explained by another Constitution Bench that the decision  in  Jalan  Trading2 was influenced  by  the  words occurring  at the end of Section 37 of the Payment of  Bonus Act  to  the  effect that the direction  of  the  Government issued thereunder was final.  Inasmuch as the said words are not  there in Section 34 of the Contract Labour  (Regulation and Abolition) Act, 1970, it was held, Section 34 cannot  be said  to  suffer from the vice of  excessive  delegation  of legislative  power.  It is meant "for giving effect  to  the provisions  of  the Act", it was held.  Sub-section  (2)  of Section  42  of the A.P. Act does no doubt not  contain  the aforesaid   offending   words,  and  cannot   therefore   be characterised  as invalid.  Yet, it must be remembered  that the  said power can be exercised "for giving effect  to  the provisions  of the Act", and not in derogation thereof.   As we  shall  presently indicate it is necessary to  bear  this limitation in mind while examining the effect of G.O.Ms. No. 383. 18.  So  far  as  clarifications/circulars  issued  by   the Central  Government and/or State Government  are  concerned, they  represent merely their understanding of the  statutory provisions.   They are not binding upon the courts.   It  is true   that   those  clarifications   and   circulars   were communicated  to the concerned dealers but even  so  nothing prevents the State from recovering the tax, if in truth such tax was leviable according to law.  There can be no estoppel against  the statute.  The understanding of the  Government, whether  in favour or against the assessee, is nothing  more than its understanding and opinion.  It is doubtful  whether such  clarifications and circulars bind  the  quasi-judicial functioning of the authorities under the Act.  While  acting in quasi-judicial 2 (1967) 1 SCR 15 : AIR 1967 SC 691 :(1966) 2 LLJ 546 3 (1974) 1 SCC 596: 1974 SCC (L&S) 252: (1974) 3 SCR 665 319 capacity,   they   are  bound  by  law  and   not   by   any administrative  instructions,  opinions,  clarifications  or circulars.   Law is what is declared by this Court  and  the High Court  to wit, it is for this Court and the High  Court

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to declare what does a particular provision of statute  say, and    not    for   the   executive.    Of    course,    the Parliament/Legislature never speaks or explains what does  a provision enacted by it mean. (See Sanjeev Coke Mfg.  Co. v. Bharat Coking Coal Ltd.4) 19.  Now  coming to G.O.Ms. No. 383, it is undoubtedly of  a statutory character but, as explained hereinbefore the power under  Section  42  cannot  be  utilised  for  altering  the provisions  of  the Act but only for giving  effect  to  the provisions of the Act.  Since the goods manufactured by  the appellant  are different and distinct goods from cast  iron, their sale attracts the levy created by the Act.  In such  a case,  the Government cannot say, in exercise of  its  power under  Section 42(2) that the levy created by the Act  shall not  be  effective or operative.  In other words,  the  said power  cannot  be  utilised for  dispensing  with  the  levy created  by  the Act, over a class of goods or  a  class  of persons,  as the case may be.  For doing that, the power  of exemption  conferred by Section 9 of the A.P. Act has to  be exercised.   Though it is not argued before us, we tried  to see  the possibility but we find it difficult to relate  the order  in  G.O.Ms. No. 383 to the power  of  the  Government under  Section  9, apart from the fact that the  nature  and character  of the power under Section 42 is  different  from the one conferred by Section 9. As exemption under Section 9 has  to be granted, not only by a notification, it  is  also required  to be published in the Andhra Pradesh Gazette.  it is  not  suggested, nor is it brought to  our  notice,  that G.O.Ms. No. 383 was published in the Andhra Pradesh Gazette. This  does not, however, preclude the Government  of  Andhra Pradesh  from  exercising the said power  of  exemption,  in accordance  with law, if it is so advised.  We need  express no opinion on that score. 20.  The  learned counsel for the appellant brought  to  our notice that the very same Division Bench which rendered  the decision in Deccan Engineers’ had rendered another  decision in  Tax  Revision  Case No. 93 of 1990 (State of  A.  P.  v. Pratap Steel) applying G.O.Ms. No. 383 and giving relief  to the  dealer.  It is argued that the Division Bench ought  to have  taken the same view in Deccan Engineers1 as well.   We have  perused the decision in Pratap Steel’.  It is a  short judgment  dismissing the revision applying G.O.Ms. No.  383. It does not appear that the matter was argued in the  manner it was in Deccan Engineers’.  The said argument,  therefore, cannot advance the case of the appellant. 21.  In  this view of the matter it is not necessary for  us to  go  into the question whether the  word  ’including’  in Section  14(iv)(i) of Central Sales Tax Act and item  (2)(i) of  the  Third Schedule to the A.P. Act has  the  effect  of making the said sub-clause exhaustive or otherwise. 22.  Accordingly,  we  hold  that  the  cast  iron  castings manufactured  by  the  appellants do  not  fall  within  the expression  ’cast iron’ in Entry 2(i) of the Third  Schedule to  the  Andhra  Pradesh General Sales  Tax  Act  or  within Section 14(iv)(i) of the Central Sales Tax Act. 23.  The  appeal  accordingly fails and  is  dismissed.   No order as to costs. 4 (1983) 1 SCC 147 : AIR 1983 SC 239 320 W P. No. 763 of 1992 24.  This  writ petition preferred under Article 32  of  the Constitution  is directed against the notices issued by  the Assessing  Authority proposing to reopen the assessments  of the petitioner/appellant with respect to earlier  assessment years  and  also seeking to apply the  principle  of  Deccan

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Engineers1  to  the pending assessments.   For  the  reasons stated   hereinabove  this  writ  petition  fails   and   is accordingly dismissed.  No costs.