JUDGMENT C.S.P. Singh, J.
1. The petitioner manufactures aluminium in its factory situated at Renukoot, from bauxite by subjecting it to electrolytic processes. The aluminium produced by the petitioner, according to the petitioner's case, falls in three categories, i.e., cast products, rolled products and extrusions (see annexure C to the amendment application). The process adopted for manufacturing these products as set out by the petitioner is this. Alumina is extracted from bauxite and is then subjected to electrolytic processes in the potrooms. The alumina in the potrooms is in the shape of molten metal. This molten metal is fed into cast iron moulds and aluminium ingots and aluminium alloy ingots are produced. By the same process of casting, wire bars and properzi redraw rods are also produced. The process for making wire bars, as stated, is by pouring the molten metal in casts and then chilling it directly. So far as properzi redraw rods are concerned, the process is as follows : Molten metal is poured directly from pot-room crucible in the melting furnace and then transferred to holding furnace. It is then degassed, fed through a cast iron spout into the groove of a water-cooled circular steel casting wheel, which rotates at a slow speed. The top portion of the grooved steel mould is covered by a steel belt and during one half rotation of the casting wheel, the metal gets solidified and comes out in the form of a continuous bar of about 12 sq. centimeter cross-section at a temperature of 440 degrees to 480 degrees centigrade. This bar is fed through a 13 strand properzi mill where the area of cross-section is progressively reduced and finally 9.5 mm. dia redraw rods come out which are wound in the drum of a mechanical coiler. So far as rolled products are concerned, they consist of hot rolled plates, hot rolled coil and cold rolled sheet/coil and corrugated sheets, etc. The hot rolled plates/coils are produced by using rolling ingots, which are cast by direct chill (D.C.) casting process. The ingots are scaled to smoothen the surface, heated in soaking pits and then rolled in a reversing hot mill to the required thickness. The method of making cold rolled sheets/coils is by rolling the hot mills product on a reversing cold mill to fine thickness according to requirements of the ultimate manufacturer. Slug stock is produced by rolling of hot mill product on sheet mill to the required thickness and shearing it to desired widths in shearing machine. Circles are produced by using cold mill sheets which are cut to desired diameters on circle cutting machine and purchased by utensil manufacturers. Corrugated sheets are produced by using cold mill sheets and passing them through the roll corrugating machine. Extrusions are produced in the form of rods, bars, flats, squares, hexagonals, angles, channels, tees, I beams, tubes, round, oval, square, rectangular, triangular and other solid and hollow shapes. The process of manufacturing extrusions is by using a preheated billet in an extrusions press and forcing it through a die orifice of the desired shape and size by a hydraulically operated ram, when the desired extruded shape comes out on the run out table.
2. The State Government issued Notification No. ST-II-6628/X-1012-1972 dated 1st December, 1973, in exercise of its powers under Sub-section (2) of Section 3-A of the U.P. Sales Tax Act ordering that. with effect from 1st December, 1973, the turnover in respect of particular goods "including all kinds of minerals and ores, metals and alloys except copper, tin, zinc, nickel or alloy of these metals only" would be taxable at all points of sale at 31/2 per cent. This was followed by another Notification No. ST-II-4949/X-10(2)-74 dated 30th May, 1975, whereby the State Government imposed tax at the rate of 2 per cent at the point of sale by the manufacturer or importer on "all kinds of minerals, ores, metals and alloys, except those included in any other notification issued under the Act". Sometime in October, 1974, a notice was issued by the Sales Tax Officer, Mirzapur, to the petitioner intimating that save ingots, other items of aluminium manufactured by the petitioner, would be treated as unclassified items' and would (sic) fall under the heading of "metals and alloys" as set out in the notification of 1st December, 1973. The petitioner filed a writ petition challenging this notice but that was dismissed on 10th September, 1975, by a Bench of this Court on the view that the petitioner should contest the matter before the Sales Tax Officer before approaching this Court. Thereafter, there was some correspondence between the Sales Tax Officer and the petitioner-company and, finally, the Sales Tax Officer by his letter dated 30th October, 1975, informed the petitioner that under the notification of 30th May, 1975, only aluminium ingots would be treated in the category of "metals" while the rest of the items of aluminium manufactured by the petitioner would be treated as unclassified items. It appears that shortly before this communication, the Commissioner of Sales Tax by a circular dated 15th October, 1975, had intimated all the sales tax authorities including the Sales Tax Officer that the department had sought the opinion of the Government on the question as to whether all categories of aluminium would fall within the description of the words "metals and alloys" as occurring in the notification dated 30th May, 1975 and the Government had after consulting the Law Department intimated that apart from aluminium ingots, nothing else should be treated as coming within the description of the word "metals". The circular directed the various authorities including the Sales Tax Officer concerned to faithfully follow this interpretation. This circular is annexure 5 to the writ petition filed in this court. After this, the petitioner filed his quarterly returns for the period ending 30th June, 1975 and 30th September, 1975, showing the turnover of the sales of various items of aluminium, which have already been detailed above and deposited the tax at the reduced rate, on the footing that the items of aluminium manufactured and sold would be covered by the notifications dated 1st December, 1973 and 30th May, 1975. On 12th November, 1975, a show cause notice was issued by the Sales Tax Officer asking for an explanation as to why tax at lower rate had been deposited and also to show cause why the return filed should not be rejected. A reply was given to this by the company on 24th November, 1975, stating the various reasons why the entire products manufactured and sold by the company should be treated as "metals and alloys". The Sales Tax Officer, however, passed the assessment order on 30th December, 1975, treating all other items as unclassified items except aluminium ingots. As a result of this order, an additional liability of Rs. 4,75,335.91 was created for the first quarter ending 30th June, 1975 and Rs. 6,42,906 for the quarter ending 30th September, 1975. The petitioner filed two petitions challenging this order and the notice of demand issued by the Sales Tax Officer. When the petition came up for hearing, we thought it advisable to hear the petition after the final assessment order in the matter was passed. Subsequently, the Sales Tax Officer has now passed a final assessment order for the assessment year 1975-76. An application for amendment was made for amending the petition so as to enable the petitioner to challenge the final assessment order. This was allowed on 5th October, 1976 and now we are concerned with the validity of the final assessment order passed on 3rd August, 1976.
3. Before we enter into the merits of the case, we think it advisable to dispose of the preliminary objection raised on behalf of the State. It was contended by Sri V. K. Mehrotra, appearing on behalf of the respondents, that since the petitioner has an alternative remedy, we should not exercise our discretionary powers under Article 226 of the Constitution. It was also contended that the assessee has already filed an appeal against the assessment order and that matter should also be taken into consideration while considering the feasibility of entertaining the petition. This contention would have force, if an effective alternative remedy is open to the petitioner; then it would not be proper exercise of judicial discretion to entertain a petition so as to enable the petitioner to by-pass the statutory remedy provided under the taxing statute. However, this is not an invariable rule of law and the question as to whether the extraordinary jurisdiction conferred on a court under Article 226 should be exercised in a particular case depends upon the facts and circumstances of each case. In the present case, we think that it would be appropriate to decide the question raised for the reasons now being set out.
4. In the first place, it is not disputed that the Commissioner of Sales Tax has already issued a circular to all the Sales Tax Officers and the Assistant Appellate Commissioners on the interpretation to be put on the notification dated 30th May, 1975 and informing them that only aluminium ingots should be treated as falling in the category of "metals" and all the other items should be treated as unclassified items. The matter does not rest here. The circular further directs that the instructions contained therein should be faithfully obeyed. The Sales Tax Officer and the Assistant Appellate Commissioner while deciding the appeal may be exercising quasi-judicial functions, but the fact cannot be lost sight of that they are also administrative officers under the direct control of the State Government and the Commissioner of Sales Tax. No statutory provision has been pointed to us authorising the Commissioner of Sales Tax to issue directions of such a nature. The State counsel contended that the assessment order does not indicate that the Sales Tax Officer relied on that notification while making the assessment and, as such, even if such a circular is there, that should not be sufficient ground for entertaining the petition. We are not impressed by this argument. In a case where the State Government or the immediate officer, who has supervisory control over its subordinate officer, issues directions which are not warranted by law and wants them to comply with it faithfully, we do not feel that the officer concerned would be able to decide the matter dispassionately. The other reason why we think it would be appropriate to decide the question in this petition is that the question about the correct interpretation of the notification is a question which will affect the aluminium manufacturers by and large and the question is of a repetitive character which is likely to occur so long as the notification mentioned above holds the field. Further, we have already entertained the petition and have also heard the matter at some length and the point involved is manifestly one of law. This being so, we do not think it advisable to relegate the petitioner to seek his remedy before the appellate authority, who may feel himself bound by the circular even though he may not explicitly express it. For all these reasons, we think it advisable to decide the controversy.
5. The only question involved in this case is whether the aluminium items manufactured by the assessee, which we set out, fall within the description of the words "metals and alloys" used in the notification of 1973 or of the notification of 30th May, 1975. Counsel for the State has contended that the word "metals" as occurring in the notification embraces "metals" in the primary form, i.e., ingots and not other items which are manufactured from ingots. The Sales Tax Officer has taken the same view in the assessment order. On the other hand, counsel for the petitioner contended that, the words "metals and alloys" as used in the notification are wide enough to embrace "metals and alloys in all shapes and sizes so long as they did not assume the form of a new commodity". The argument raised by the parties had to be resolved on the principles laid down by the Supreme Court in three cases: (1) State of Madhya Bharat v. Hiralal [1966] 17 S.T.C. 313 (S.C.), (2) Devgam Iron & Steel Rolling Mills v. State of Punjab A.I.R. 1967 S.C. 1895 and (3) State of Tamil Nadu v. Pyare Lal Malhotra A.I.R. 1976 S.C. 800. In Hiralal's case [1966] 17 S.T.C. 313 (S.C), the Parliament had enacted the Essential Goods (Declaration and Regulation of Tax on Sales or Purchases) Act, 1952 (Act No. 52 of 1952). In Schedule I of the Act "iron and steel" were declared essential for the life of the community. The Government of Madhya Bharat in exercise of the power conferred on it by Section 5 of the Act, issued a notification, the material part of which ran :
No tax shall be payable on the sale of the following goods :-
8. In the case of Devgam Iron & Steel Rolling Mills v. State of Punjab A.I.R. 1967 S.C. 1895, the appellant carried on the business of rolling steel at Govindgarh. They purchased some scrap and steel ingots and converted them into rolled steel sections. The assessing authority imposed purchase tax at the rate of 2 per cent on the purchases of steel scrap and steel ingots for making rolling steel sections and selling them. The question arose as to whether the levy was justified. The contention raised was that the provision under the Punjab Act was void inasmuch as it contravened Sections 14 and 15 of the Central Sales Tax Act which prohibited imposition of sales tax on declared goods at more than one stage. It was contended that under the Punjab Act, tax was being imposed both on the purchase as well as sale. In order to decide the controversy whether the Act contravened the provisions of the Central Act, the point as to whether rolled steel was a new commodity distinct altogether from iron scrap was considered. This contention was dealt with by their Lordships at page 1905 of the Reports (page 447 of 20 S.T.C.) and rejected in the following words:
Now coming to Civil Appeals Nos. 39 to 43 of 1965, the first additional point raised is that when iron scrap is converted into rolled steel it does not involve the process of manufacture. It is contended that the said conversion does not involve any process of manufacture, but the scrap is made into a better marketable commodity. Before the High Court this contention was not pressed. That apart, it is clear that scrap iron ingots undergo a vital change in the process of manufacture and are converted into a different commodity, viz., rolled steel sections. During the process the scrap iron loses its identity and becomes a new marketable commodity. The process is certainly one of manufacture.
9. Counsel for the State has strongly relied on this case and contended that inasmuch as all the other products of aluminium save ingots are made out of ingots, they became a different commodity altogether and would not come in the category of "metals and alloys" as understood under the notification. Hiralal's case [1966] 17 S.T.C. 313 (S.C.) and Devgam Iron & Steel Rolling Mills case A.I.R. 1967 S.C. 1895 were both considered in a recent decision of the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra A.I.R. 1976 S.C. 800. In Pyare Lal Malhotra's case A.I.R. 1976 S.C. 800, the question that arose for decision was whether steel rounds, flats, angles, plates, bars and similar goods in other forms and shapes made out of iron and steel could be taxed under the State law, when iron and steel was, by Section 14 of the Central Sales Tax Act, a declared commodity. Section 14(iv) of the Central Sales Tax Act declared certain goods enumerated therein to be of special importance in inter-State trade or commerce. Section 14(iv) declared iron and steel to be goods of special importance and described various items of iron and steel. As many as sixteen items of iron and steel were set out as comprised in the term "iron and steel". One of the contentions raised was that the chemical composition of iron and steel afforded a clue to the meaning of iron and steel used in Section 14 of the Central Sales Tax Act. This was repelled on the ground that when specified items were set out as taxable items in a list, they were to be treated separately and each item so specified formed a separate species for each series of sale although they may all belong to the same genus. As regards Hiralal's case [1966] 17 S.T.C. 313 (S.C.), it was observed that although that case laid down that a mere change in the form of the substance exempted from sales tax did not matter, the case really turned on the language of the notifications involved therein. It was held that the principles of that case were not applicable to Malhotra's case A.I.R. 1976 S.C. 800, for the object of single point taxation under Section 14 was that each commercial commodity and not the substance out of which it was made, enjoyed exemption. Each commercial commodity, in view of the phraseology of Section. 14 of the Central Sales Tax Act, was a separate item for taxation. It was observed that the principle laid down in Devgam Iron & Steel Rolling Mills v. State of Punjab A.I.R. 1967 S.C. 1895 was more appropriate to the facts of Malhotra's case A.I.R. 1976 S.C. 800. After discussing these two cases, their Lordships laid down the following test which we think is vital to this case and, as such, we propose to quote it in extenso:
It is true that the question whether goods to be taxed have been subjected to a manufacturing process so as to produce a new marketable commodity, is the decisive test in determining whether an excise duty is leviable or not on certain goods. No doubt, in the law dealing with the sales tax, the taxable event is the sale and not the manufacture of goods. Nevertheless, if the question is whether a new commercial commodity has come into existence or not, so that its sale is a new taxable event, in the sales tax law, it may also become necessary to consider whether a manufacturing process, which has altered the identity of the commercial commodity, has taken place. The law of sales tax is also concerned with 'goods' of various descriptions. It, therefore, becomes necessary to determine when they cease to be goods of one taxable description and become those of commercially different category and description.
10. The principle that emerges from this case is that in case the question arises as to whether a new commercial commodity has come into existence or not, it is necessary to consider as to whether by a manufacturing process the identity of the commodity has been altered. In the present case, the two notifications of 1973 and 1975 imposed a concessional rate of tax on metals and alloys. Now, metals and alloys do not occur in the raw state. It is only after the mineral ore which contains the metal has been subjected to some manufacturing process that a particular metal is obtained. In the present case, it is not disputed that aluminium as a pure metal does not occur. It occurs in the form of bauxite. From bauxite, alumina is extracted and thereafter alumina is by a manufacturing process converted into aluminium which is in a molten form. It hardly admits of any doubt that molten aluminium is not a salable commodity. It becomes salable only after it is given a particular shape. At this stage, we may also notice the contention raised on behalf of the State that the words "metals and alloys" as used in the notification only embraces alumina which is the basic metal. It might be that alumina is also a metal or a "metal alloy". In this case, we are not concerned with the tax on the sale of alumina. We are concerned with the sale of aluminium in its various forms. There is a basic difference between alumina and aluminium. Alumina is an oxide of aluminium while aluminium is a pure metal. This is borne out by the standard books of chemistry. This being so, it cannot be said that aluminium is not also a metal. The basic question in the case is as to whether only aluminium ingots, as has been held by the Sales Tax Officer, come within the description of the words "metals or alloys" as used in the notification, or other products also qualify. It appears from annexure C to the amendment application that the petitioner manufactures three types of aluminium products, (1) cast products, (2) rolled products and (3) extrusions. Cast products consist of (i) aluminium ingots, (ii) aluminium alloy ingots, (iii) wire bars, (iv) properzi redraw rods and (v) billets. Rolled products are obtained by rolling ingots and extrusions are manufactured from billets. It can hardly be doubted that ingots and billets are salable commodities as such. By subjecting them to further process of manufacture, i.e., either by rolling them or by processing them by the extrusion process, a new commercial commodity comes into existence, i.e., rolled products and extrusions. Thus, so far as rolled products and extrusions are concerned, since they are manufactured either from ingots or billets, they cannot come in the category of metals and alloys. They are new commercial commodities distinct from ingots and billets giving out the cast products. As regards cast products, we have already seen, as appears from annexure C, they consist of aluminium ingots, aluminium alloy ingots, wire bars, properzi redraw rods and billets. During the course of argument, it appeared that so far as aluminium alloy ingots, wire bars and billets are concerned, the process for manufacture of these items is similar to those of aluminium ingots. Standing counsel could not dispute this. There is no justification for treating aluminium alloy ingots, wire bars and billets as not coming within the description of "metals and alloys". The dispute so far as cast products are concerned centres round properzi redraw rods. We have already set out the process of manufacture of pro-perzi redraw rods. Counsel for the State contended that as soon as molten metal is solidified into 12 sq. centimeter cross-section, they assume the nature of a commercial commodity and, subsequently, when they are further processed by being fed into the properzi mill, another new commodity, properzi redraw rods, comes into existence. Parties do not appear to have led evidence on the point as to whether the solidified 12 sq. centimeter cross-sections are a commercial commodity at that stage. As such it would not be proper to decide in these proceedings as to whether properzi redraw rods fall within the description of "metals and alloys" without giving the parties a further opportunity to lead evidence in the matter. We, therefore, think it appropriate to direct the Sales Tax Officer to look into this aspect of the matter and decide whether properzi redraw rods come within the description of "metals and alloys", after considering the evidence, if any, which the petitioner may choose to lead and in the light of the principles laid down in the case of State of Tamil Nadu v. Pyare Lal Malhotra A.I.R. 1976 S.C. 800.
11. It was contended on behalf of the State by reference to some decisions of the Supreme Court that, normally, an interpretation put by the taxing authorities as regards the nature of goods for purposes of classification should be accepted. There is no getting away from that principle, but in case the taxing authorities come to a decision which is not in consonance with the law declared by the Supreme Court or by the High Court, this principle can hardly be applied.
12. Counsel for the State also drew our attention to certain other notifications where concessional rate of tax was granted in respect of copper, tin, zinc sheets and circles used in the manufacture of brassware. It was contended that wherever the notification granting concessional tax intended to grant concessional rate to articles manufactured out of metals or alloys, it did so by specifically mentioning the specified shapes of the metals which were to enjoy the exemption. This argument is not decisive of the matter, for sheets, circles, etc., are products which are made out of ingots or billets after processing them. They are not cast products.
13. We may at this stage dispose of the last contention made on behalf of the State. It was contended that the petitioner has been realising tax from its purchasers on the basis that all the products save ingots were unclassified items and, therefore, no relief should be granted. Counsel for the petitioner contended that it realised tax at a higher rate in order to safeguard its interest in case the matter was decided against it and has given an undertaking to refund the excess tax to its purchasers. Now, it is not disputed that the State can charge only such tax as is permissible under the law. Liability to tax does not depend on the fact as to whether a dealer has or has not charged any sales tax from its customers, or has charged a higher amount. Thus, if a sale is liable to be charged at a lower rate, the State cannot insist on realising a higher amount solely on the ground of a larger amount being charged. Relief can be given when an illegal impost not authorised by the law is made. This apart, as the petitioner has all along been challenging the rate of tax and has undertaken to refund the excess amount to its purchasers, we see no ground for not interfering with an illegal order imposing a tax not authorised under the law.
14. We, accordingly, allow this petition in part and direct the Sales Tax Officer to reframe the assessment as indicated above, after deciding the question as to whether properzi redraw rods come within the description of "metals and alloys" in the light of the observation made above and in accordance with the law. Parties to bear their own costs.