IMPORTANT POINTS
Steel rods and bars used as reinforcement are taxable @ 4% only because no manufacturing process is involved before their user in cement-concrete.
Iron and steel rods an bars used to make doors/window frames and grills involve manufacturing process, hence are not eligible to exemption.

Headnote:(a) Constitution of India – Article 286(3) r/w section 15, Central Sales Tax Act – Iron and steel – Chargeable at single point and at rate not exceeding 4% – Taxable at the point of accretion, i.e., point of incorporation into the building or structure. (Para 13,
       (1989) 2 SCC 645; (1993) 1 SCC 364 – Relied upon
       (b) Constitution of India – Article 286(3) r/w section 15, Central Sales Tax Act – Iron and steel – Processes applied to reinforcement steel rods/bars before embedding into cement concrete – Bending at ends after cutting to required size and tying them at intersections with binding wires – Processes not constituting manufacture – No new commodity produced before incorporation into the works – Hence these goods can be charged only at the rate of 4%. (Para 15, 18)
       (1976) 1 SCC 834 – Relied upon
       (c) Karnataka Sales Tax Rules, 1957 – Rule 6(4)(m) – fabrication of doors and window frames, grills etc. from iron and steel rods/bars – Process involves manufacturing of frames and grills from rods/ bars – Used in turn in execution of works contracts – Not exempt from tax. (Para 21)
       Facts of the case:
       This group of appeals concerns the rate of taxability of declared goods – i.e. goods declared to be of special importance under Section 14 of the Central Sales Tax Act, 1956. The question that has to be answered in these appeals is whether iron and steel reinforcements of cement concrete that are used in buildings lose their character as iron and steel at the point of taxability, that is, at the point of accretion in a works contract. All these appeals come from the State of Karnataka and can be divided into two groups – one group relatable to the provisions of the Karnataka Sales Tax Act, 1957 and post 1.4.2005, appeals that are relatable to the Karnataka Value Added Tax Act, 2003. The facts in these appeals are more or less similar. Iron and Steel products are used in the execution of works contracts for reinforcement of cement, the iron and steel products becoming part of pillars, beams, roofs, etc. which are all parts of the ultimate immovable structure that is the building or other structure to be constructed.
       Finding of the Court:
       Steel rods and bars used as reinforcement are taxable @ 4% only because no manufacturing process is involved before their user in cement-concrete. On the other hand iron and steel rods an bars used to make doors/window frames and grills involve manufacturing process, hence are not eligible to exemption.
       Result: Appeals dismissed.

JUDGMENT :

R.F. Nariman, J.

1. Leave granted in SLP(C) Nos.15253/2015, 18646-19117/2015, 10081-10124/2015.

2. This group of appeals concerns the rate of taxability of declared goods – i.e. goods declared to be of special importance under Section 14 of the Central Sales Tax Act, 1956. The question that has to be answered in these appeals is whether iron and steel reinforcements of cement concrete that are used in buildings lose their character as iron and steel at the point of taxability, that is, at the point of accretion in a works contract. All these appeals come from the State of Karnataka and can be divided into two groups – one group relatable to the provisions of the Karnataka Sales Tax Act, 1957 and post 1.4.2005, appeals that are relatable to the Karnataka Value Added Tax Act, 2003. The facts in these appeals are more or less similar. Iron and Steel products are used in the execution of works contracts for reinforcement of cement, the iron and steel products becoming part of pillars, beams, roofs, etc. which are all parts of the ultimate immovable structure that is the building or other structure to be constructed.

3. Before coming to the submissions of learned counsel for the parties, it is necessary to first set out the relevant provisions of the Constitution, the Central Sales Tax Act and the two Karnataka Acts in question.

4. Article 286(3) of the Constitution reads as follows:-

“Article 286. Restrictions as to imposition of tax on the sale or purchase of goods

xx xx xx

(3) Any law of a State shall, in so far as it imposes, or authorises the imposition of,

(a) 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; or

(b) a tax on the sale or purchase of goods, being a tax of the nature referred to in sub clause (b), sub clause (c) or sub clause (d) of clause 29 A of Article 366, 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.”

5. Section 14 of the Central Sales Tax Act, insofar as it is relevant to the present case reads as follows:

“Section-14

Certain goods to be of special importance in inter-State trade or commerce.-

It is hereby declared that the following goods are of special importance in inter-State trade or commerce:-

(iv) iron and steel, that is to say,-

(i) [pig iron, sponge iron and] cast iron including [ingot moulds, bottom plates], iron scrap, cost 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-bar and sleeper bars;

(iv) Steel bars, rounds, rods, squares, flat, 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, Z-sections or any other rolled sections);

(vi) sheets, hoops, strips and skelp, both black and galvanized, 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 chequered in all qualities;

(viii) Discs, rings, forgings and steel castings;

(ix) Tools, alloy and special steels of any of the above categories;

(x) Steel melting scrap in all forms including steel skull, turnings and borings;

(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) Fist plate bars, bearing plate bars, crossing sleeper bars, fish plates, bearing plates, crossing sleepers and pressed steel sleepers--heavy and light crane rails;

(xiv) Wheels, tyres, axles and wheels sets;

(xv) Wire rods and wires—rolled, drawn, galvanized, aluminized, tinned or coated such as by copper;

(xvi) Defectives, rejects, c

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2016 Supreme(SC) 634

Cases Referred (3)