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PETITIONER: THE STATE OF MADHYA BHARAT (Now the STATE OF MADHYA PRADESH)

       Vs.

RESPONDENT: HIRALALJI

DATE OF JUDGMENT: 29/11/1965

BENCH: SUBBARAO, K. BENCH: SUBBARAO, K. SHAH, J.C. SIKRI, S.M.

CITATION:  1966 AIR 1546            1966 SCR  (2) 752  CITATOR INFO :  RF         1974 SC1362  (4)  D          1976 SC 800  (10,11,15)  D          1981 SC1649  (13)  RF         1992 SC 422  (3,4)

ACT:       Sales Tax-Madhya Bharat Sales Tax Act, Samvat 2007 (30 of 1950)-Essential Goods (Declaration and Regulation of  Tax on Sales or Purchase) Act, 1952 (Central Act 52 of 1952), s. 5-Notifications  issued under-Iron and steel  exempted  from sales  tax-Iron  bars, flats and Plates  whether  ’Iron  and steel’ for the purpose of exemption.

HEADNOTE:       The respondent as head of a joint Hindu family owned a re-rolling  mill at which scrap iron locally purchased,  and iron  plate-,  imported from outside,  were  converted  into bars,  flats and plates in the Mills and thereafter sold  in the market.  The sales tax authorities held that iron  bars, flats  and plates sold by the respondent were not ’iron  and steel’  exempted by notification No. 58 dated  October  1953 issued under the Essential Goods (Declaration and Regulation of  Sales  and Purchasees) Act, 1952.  In a  petition  under Arts.  226 and 227 filed by the respondent  challenging  the said assessment the High Court decided that iron bars, flats and plates were exempted under the notification.  The  State appealed to this Court.      HELD  : Goods prepared from metals other than gold  and silver  are  made  taxable by notification  No.  59  whereas notification  No.  58 exempts iron and steel  from  tax.   A comparison  of  the said two notifications  brings  out  the distinction between raw-materials of iron and steel and  the goods  prepared  from iron and steel.  While the  former  is exempted  from tax the latter is taxed.  Therefore iron  and steel used as rawmaterial for manufacturing other goods  are exempted from taxation.  So long as iron and steel  continue to  be raw materials, they enjoy the exemption.  Scrap  iron purchased  by the respondent was merely rerolled into  bars, flats and plates for convenience of sale.  The  rawmaterials were  only re-rolled to give them attractive and  acceptable forms.  They did not in the process lose their character  as

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iron  and  steel.  The bars, flats and plates  sold  by  the respondent  were therefore iron and steel exempt  under  the notification. [754 D-G]

JUDGMENT:       CIVIL APPELLATE JURISDICTION: Civil Appeal No. 814  of 1964.       Appeal  by special leave from the judgment  and  order dated  October 24, 1961 of the Madhya Pradesh High Court  in Misc.  Petition No. 125 of 1958.       I.N. Shroff, for the appellants.       C.B. Agarwala and C. P. Lal, for the respondent.       The Judgment of the Court was delivered by       Subba Rao, J. This appeal by special leave raises  the question  of  the  intepretation  of  Item  No.  39  of  the Notification 753 No.  58,  dated  October 24, 1953,  hereinafter  called  the ’Notification’,  issued by the Government of  Madhya  Bharat under the Madhya Bharat Sales Tax Act, Samvat 2007 (Act  No. 30 of 1950), hereinafter called the Act.     The  facts are as follows : Hiralal, the respondent,  is the: manager of a joint Hindu family carrying on business in the name and style of "Messrs.  Tilokchand Kalyanmal".   The joint family owns a re-rolling mill situated in Indore  City called  the Central India Iron and Steel Company.  The  said family  purchases scrapiron locally and imports iron  plates from outside and after converting them into bars, flats  and plates  in  the  Mills  sells  them  in  the  market.    The respondent   made  a  default  in  furnishing  the   returns prescribed  by  s. 7(i) of the Act for the period  April  1, 1954,  to March 31, 1955.  On February 27, 1956, the  Sales- tax.   Officer, Indore, determined the taxable  turnover  at Rs. 2,26,000and the sales-tax payable thereon at Rs.  8,000; and  he also imposed a penalty of Rs. 1,000 under s. 14  (1) (c) of the Act.  On the same day he issued demand notices to the respondent for the payment of the said sales-tax and the penalty.   On  September 10, 1956, the  respondent  filed  a petition  in  the High Court of  Madhya  Bharat  (afterwards Madhya Pradesh) under Arts. 226 and 227 of the  Constitution for the issue of appropriate writs quashing, the  assessment of  tax  and penalty and to restrain the State  from  giving effect to the said orders of the Sales-tax Officer.  A Divi- sion Bench of the High Court held that the iron bars,  flats and’ plates sold by the respondent were exempted from sales- tax under the Notification.  In that view, the orders of the Sales-tax  Officer  were quashed.  The state has  filed  the present appeal, by special’ leave.      The  only question in this appeal is whether  the  said iron  bars, flats and plates are not iron and  steel  within the meaning of’ Item No. 39 of the Notification.       Parliament  enacted Essential Goods  (Declaration  and Regulation of Tax on Sales or Purchases) Act, 1952 (Act No. 52  of’ 1952), which came into force on August 9, 1952.   In Schedule  I  of the said Act, iron and steel  were  declared essential  for the life of the community.   Thereafter,  the Government  of  Madhya.  Bharat, in exercise of  the  powers conferred  by  S. 5 of the Act, issued the  Notification  as also  Notification  No.  59, dated October  24,  1953.   The material part of Schedule I of Notification 58 reads 754 "No tax shall be payable on the sale of the following goods S.No.

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                                   Description of goods. ---------------------------------------------------------- 39                                        Iron and steel. ---------------------------------------------------------- Notification No. 59 described the goods sales of which  were taxable at particular rates.  Schedule IV thereof reads :               "List  of  articles  under section  5  of  the               Madhya  Bharat  Sales Tax Act,  1950,  on  the               assessable sale proceeds of which sales tax at               the  rate  of  Rs. 3/2/- per  cent.  shall  be               payable,  showing  the nature of  articles  on               which the tax is payable. ----------------------------------------------------------- S.No.   Name of article   Stage of sale in Madhya  Bharat at                           which the tax is payable. ------------------------------------------------------------ 9    .... goods prepared from any   Sale by imported or pro- metal sale by importer or producer.  ducer. other than gold and silver........ ------------------------------------------------------------     Learned   counsel  for  the  State  contends  that   the expression  "iron  and steel" means iron and  steel  in  the original condition :-and not iron and steel in the shape  of bars, flats and plates.  In our view, this contention is not sound.   A comparison of the said two  Notifications  brings out  the distinction between rawmaterials of iron and  steel and  the  goods  prepared from iron and steel  :  while  the former   is  exempted  from  tax,  the  latter   is   taxed. ’Therefore,   iron  and  steel  used  as  raw-material   for manufacturing  other goods are exempted from  taxation.   So long  as iron and steel continue to be  raw-materials,  they enjoy the exemption.  Scrap iron purchased by the respondent was  merely re-rolled into bars,flats and plates. They  were processed  for  convenience of sale.The  raw-materials  were only re-rolled to give them attractive and acceptable forms. They did not in the process lose their character as iron and steel.   The  dealer sold "iron and steel" in the  shape  of bars, flats and plates and the customer purchased "iron  and steel"  in that shape.  We, therefore, hold that  the  bars, flats  and  plates sold by the assessee are iron  and  steel exempted under the Notification.  The conclusion arrived  at by the High Court is ,correct.     In  the result, the appeal fails and is  dismissed  with costs.                              Appeal dismissed. 755