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1972 Supreme(AP) 82
Andhra Pradesh High Court
Judges : ALLADI KUPPUSWAMI, SRIRAMULU
State Of A.P. - Appellant
Versus
Durga Hardware Stores, Vijayawada - Respondent
Decided On : 06-15-72
The main legal principle established in the judgment is that the interpretation of terms in a taxing statute should be based on their popular meaning or the meaning attributed to them by those dealing in the commodities, rather than their scientific or technical meaning. Additionally, the court emphasized that the test of possibility of substitution of one for the other is not the sole criterion for determining whether an article sold is the same or different from the articles specified in the entry in the schedule to the Sales Tax Act.
Headnote:
iron and steel - Sales Tax - Andhra Pradesh General Sales Tax Act - Entry No. 2 - [iron and steel, that is to say, (a) pig iron and iron scrap ; (b) iron plates sold in the same form in which they are directly produced by the rolling mills ; (c) steel scraps, steel in-gots, steel billets, steel bars and rods ; (d) (i) steel plates ; (ii) steel sheets ; (iii) steel bars and tin bars ; (iv) rolled steel sections; and (v) tool alloy steel, sold in the same form in which they are directly produced by the rolling mills] - The court discussed the interpretation of the term 'iron and steel' and its application to galvanised plain or corrugated sheets and B. P. Sheets. It highlighted the importance of the words 'that is to say' in the entry, emphasizing the intention of the legislature to adopt the most general concept of iron and steel and include all forms of iron and steel within that entry. The court also emphasized that the test of possibility of substitution of one for the other is not the sole criterion for determining whether the article sold was the same or different from the articles specified in the entry in the schedule to the Sales Tax Act. It further clarified that mere change of physical form or shape of the raw material by the application of some process or the other, so as to prevent it from oxidation or to increase its utility, does not change the essential character of the raw material.
Fact of the Case:
The State of Andhra Pradesh filed Tax Revision Cases regarding the exemption of sales tax on galvanised plain or corrugated sheets, B. P. Sheets, and wire-nails under the Andhra Pradesh General Sales Tax Act. The dispute arose from the interpretation of whether these commodities fell within the ambit of 'iron and steel' as per the Act.
Finding of the Court:
The court found that galvanised plain or corrugated sheets and B. P. Sheets fell within Entry No. 2 in the III Schedule to the Andhra Pradesh General Sales Tax Act. As the sales of those articles were not the first sales effected by the dealers but were the second sales, the dealers were not liable to pay the sales tax thereon.
Issues: The main issue was whether the commodities of galvanised plain or corrugated sheets and B. P. Sheets fell within the ambit of 'iron and steel' as per the Andhra Pradesh General Sales Tax Act.
Ratio Decidendi: The court emphasized the interpretation of the term 'iron and steel' and its application to the disputed commodities. It highlighted the importance of the words 'that is to say' in the entry, emphasizing the intention of the legislature to adopt the most general concept of iron and steel and include all forms of iron and steel within that entry. The court also clarified that the test of possibility of substitution of one for the other is not the sole criterion for determining whether the article sold was the same or different from the articles specified in the entry in the schedule to the Sales Tax Act. It further clarified that mere change of physical form or shape of the raw material by the application of some process or the other, so as to prevent it from oxidation or to increase its utility, does not change the essential character of the raw material.
Final Decision: The court decided in favor of the dealers, ruling that galvanised plain or corrugated sheets and B. P. Sheets fell within Entry No. 2 in the III Schedule to the Andhra Pradesh General Sales Tax Act, and the dealers were not liable to pay the sales tax on those articles.
( 1 ) THESE two Tax Revision cases give rise to a common question of law for our consideration and hence they are disposed of by a common order.
( 2 ) THE State of Andhra Pradesh is the revision petitioner in both the cases. The respondents are dealers in iron and hardware goods. While assessing the dealers to sales-tax, the Commercial Tax officer exempted the sales of: (i) galvanised plain or corrugated sheets ; and (ii) B. P. Sheets, in both the cares and of wire-nails in the first case, on the ground that those commodities fell within the ambit of the Entry No. 2 in the iii Schedule to the Andhra Pradesh general Sales Tax Act (hereinafter called "the Act"), namely, "iron and steel" and (hose sales were not the first sales, but secondary sales.
( 3 ) IN the exercise of his revisional powers under section 20 (2) of the Act, the Deputy Commisioner of Sales Tax, suo motu, revised the assessments by withdrawing the exemption that was granted by the Commercial Tax Officer as, in his opinion, the view taken by the Commercial Tax Officer that the corrugated and B. P. Sheets and wire- nails fell under the entry. "iron and steel" was erroneous, in law.
( 4 ) ON appeals filed by the dealers, the sales Tax Appellate Tribunal held that galvanised plain or corrugated sheets and B. P. shees fell within " iron and steel", Entry No. 2 in the III Schedule to the Act, and as their sale? effected by the dealers were not the first sales, those sales were exempted from payment of sales-tax. The Tribunal however, upheld the view of the Deputy Commissioner of the Sales-tax that the commodity of wire-nails did not fall within the entry "iron and steel. " in other words, the Sales tax Appellate tribunal disagreed with the Deputy commissioner s view in respect of the sales of the first two commodities and exempted the sales of those commodities from tax, but, with regard to the sales of wire-nails, the Sales-tax Appel- late Tribunal upheld the view of the deputy Commissioner of Sales tax that they were exigible to sales-tax.
( 5 ) AGGRIEVED by the orders of the sales-tax Appellate Tribunal, the State of Andhra Pradesh has filed these Tax revision Cases, raising four questions of law for our consideration. Those four questions can be re-framed into one question, and that question is :"whether the commodities of galvanised plain or corrugated sheets and b. P. Sheets fall within the ambit of iron and steel , i. e. , Entry No. 2 in the III Schedule to the Andhra pradesh General Sales Tax Act ?"
( 6 ) COMMODITIES mentioned in the III schedule to the Act are declared goods in respect of which a single point tax only is leviable. Entry No. 2 in that schedule is "iron and steel. " The sales of iron and steel are made taxable at the point of first sale at 0-3 pies in a rupee. The said entry defines "iron and steel " thus :"iron and steel, that is to say, (a) pig iron and iron scrap ; (b) iron plates sold in the same form in which they are directly produced by the rolling mills ; (c) steel scraps, steel in-gots, steel billets, steel bars and rods ; (d) (i) steel plates ; (ii) steel sheets ; (iii) steel bars and tin bars ; (iv) rolled steel sections; and (v) tool alloy steel, sold in the same form in which they are directly produced by the rolling mills".
( 7 ) THE learned Advocate appearing for the State contended that the real test that has to be applied for determining whether galvanised plain or corrugated sheets or B. P. sheets fall within "iron and steel" within the meaning of trie entry No. 2 in the III Schedule to the act, is the test of possibility of substitution of the one for the other,, so far as the consumers are concerned. If there is no such possibility,, it would be a different commodity,, but if there is such a possibility, it would be the same commodity. For that purpose, the entries in the Schedule to the Act must be construed or understood not in a technical sense but in a sense as understood in common parlance by persons who
