IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF APRIL, 2019 BEFORE:
THE HON’BLE MRS. JUSTICE S.SUJATHA WRIT PETITION No.28741/2017 (T – RES) BETWEEN:
SLN ROOFING AND CONSTRUCTION, HAVING ITS OFFICE AT SY.NO.29 PIPELINE ROAD, KAMMAGONDANAHALLI BENGALURU-560090 REP. BY ITS MANAGING PARTNER SRI M.N.PRATAP REDDY S/O SRI M.DASARATHA RAM REDDY AGED ABOUT 43 YEARS R/AT SURVEY NO.29, KAMMAGONDANAHALLI ABBIGERE PIPELINE ROAD CHIKKABANAVARA POST BANGALORE-560090 ... PETITIONER [BY SRI A.R.VIVEK, ADV.] AND:
1. THE COMMISSIONER OF COMMERCIAL TAXES, VANIJYA THERIGE KARYALAYA KALIDASA ROAD, GANDHI NAGAR BENGALURU-560009 2. THE ADDL. COMMISSIONER OF COMMERCIAL TAXES, (ENFORCEMENT) SOUTH ZONE, VANIJYA THERIGE KARYALAYA-2 VIVEKANAGAR POST KORAMANGALA BANGALORE-560047 …RESPONDENTS [BY SRI T.K.VADAMURTHY, AGA.] THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO SET ASIDE THE ORDER PASSED BY THE R-1 DATED 23.03.2017 VIDE ANNEXURE-A.
THIS PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:-
O R D E R The petitioner has challenged the order passed by respondent No.1 dated 23.03.2017 whereby it is clarified that “Pre-painted Galvanized Steel Metal Sheets” are liable to tax at 14.5% under Section 4(1)(b)(iii) of the Karnataka Value Added Tax Act, 2003 (‘KVAT Act, 2003’ for short) with effect from 01.08.2012 and onwards.
2. The petitioner is a partnership firm engaged in the manufacture and sale of pre-painted corrugated iron and steel sheets. The petitioner firm submitted an application under Section 59(4) of the KVAT Act seeking clarification regarding the rate of tax applicable to painted corrugated iron and steel sheets. Considering the same, the clarification impugned herein has been issued by the Commissioner of Commercial Taxes.
3. The learned counsel Sri Vivek A.R. appearing for the petitioner referring to Section 14(iv) of the Central Sales Tax Act, 1956 (‘CST Act, 1956’ for short) submits that pre-painted steel metal sheets squarely comes within the ambit of the said Section as “declared goods”. The Commissioner of Commercial Taxes merely for the reason that Galvanized Corrugated Steel Metal Sheets are pre-painted held to be a different commodity other than the goods enumerated in Section 14 of the CST Act, 1956. It is submitted that the reason of the Commissioner is glaringly contrary to the provisions of Section 14 of the CST Act, 1956 as well as the judgment of the Hon’ble Apex Court in the case of State of Tamil Nadu vs. Pyare Lal Malhotra reported in (1976) 37 STC 319.
4. The learned Additional Government Advocate appearing for the revenue would submit that in identical circumstances, the cognate bench of this Court in W.P.No.56388/2017 and allied matter relegated the petitioner to approach the concerned authorities. Hence, the matter deserves to be remanded to the Commissioner of Commercial Taxes for reconsideration.
5. I have carefully considered the rival submissions of the learned counsel appearing for the parties.
6. Relevant clause of Section 14 [iv] [vi] of the CST Act, 1956 are quoted below for ready reference:-
“(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;”
7. In W.P.No.56388/2017 and allied matter, the petitioner being aggrieved by the notice dated 17.11.2017 issued under Section 39(1) of the KVAT Act, 2003 for the tax periods 2014-15 was before this Court. The reassessment notice impugned therein was issued pursuant to the order passed by the Commissioner of Commercial Taxes under Section 59(4) of the KVAT Act, 2003 in the case of the present petitioner – M/s. SLN Roofing & Construction.
8. In the said proceedings, the cognate bench of this Court in paragraph No.5 has observed thus:-
“5. From a bare perusal of the order passed by the Respondent–Commissioner of Commercial Taxes under Section 59(4) of the KVAT Act, 2003, it is clear that the said Commissioner has not considered the effect of Section 14(vi) of the CST Act, 1956 at all and therefore, whether the commodity dealt with by the petitioner would fall under clause (vi) or not, was not an issue before the Respondent–Commissioner of Commercial Taxes.”
9. In the said circumstances, the commodity in question therein whether would fall under Section 14(vi) of the CST Act and not under Section 14(iv) of the CST Act was required to be decided by the Assessing Authority. Accordingly, the matter was disposed of as premature with liberty and direction to the petitioner to approach the concerned authorities with suitable replies and representations.
10. However, in the present set of facts, the assessee – petitioner has challenged the order of the Commissioner of Commercial Taxes clarifying the commodity “Pre-painted Galvanized Steel Metal Sheets” are liable to tax at 14.5.% under Section 14(1)(b)(iii) of the KVAT Act, 2003.
11. Section 14 of the CST Act, 1956 deals with the “declared goods” which are liable to tax at 5% during the relevant tax period. The Hon’ble Apex Court in the case of Pyare Lal Malhotra, supra, while considering the scope of Section 14 of the CST Act, 1956 with reference to 16 sub-clauses therein interpreting the phrase “that is to say” observed thus:-
“What we have inferred above also appears to us to be the significance and effect of the use of words “that is to say” in accordance with their normal connotation and effect. Thus, in Stroud’s Judicial Dictionary, 4th Edn. Vol. 5, at page 2753, we find:
“THAT IS TO SAY. (1) ‘That is to say’ is the commencement of an ancillary clause which explains the meaning of the principal clause. It has the following properties: (1) it must not be contrary to the principal clause: (2) it must neither increase nor diminish it: (3) but where the principal clause is general in terms it may restrict it: see this explained with many examples, Stukeloy v. Butler Hob. 171”;
The quotation, given above, from Stroud’s Judicial Dictionary shows that, ordinarily, the expression “that is to say” is employed to make clear and fix the meaning of what is to be explained or defined. Such words are not used, as a rule, to amplify a meaning while removing a possible doubt for which purpose the word “includes” is generally employed. In unusual cases, depending upon the context of the words “that is to say”, this expression may be followed by illustrative in stances. In Megh Raj & Anr. v. Allah Rakhia & Ors. (1) the words “that is to say.”, with reference to a general category “land” were held to introduce “the most general concept” when followed, inter alia, by the words: “Rights in or over land.” We think that the precise meaning of the words “that is to say” must vary with the context.
It is further held that:
“It is true that the question whether goods to be taxed have been subjected to a manufacturing process so as to produce a new market able 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 sale 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 a commercially different category and description.”
12. It is thus held that when one commercial commodity has altered the identity and becomes different commodity, it becomes a new commercial commodity for the purposes of sales tax law. It is further held that each of the categories falling under “Iron and Steel” constitutes a new species of commercial commodity more clearly new.
13. It is not in dispute that Galvanized Steel Metal Sheets comes within the ambit of clause (vi) of Section 14(iv). Now the question would be whether Pre- painted Galvanized Steel Metal Sheets would come within the ambit of the said entry or not. Pre-painted Galvanized Steel Metal Sheets are construed to be a different commodity other than Galvanized Steel Metal Sheets by the Commissioner of Commercial Taxes based on the commercial and common parlance theory, but the same is not substantiated except holding that Pre- painted Galvanized Steel Metal Sheets are ready to use than just Galvanized Steel Metal Sheets. Merely painting the iron and steel enumerated under different clauses of Section 14(iv) would not disqualify it as a “declared goods”. The pre-painting of iron and steel may be for different reasons mainly, to protect the iron and steel from rusting, that itself would not be construed as a different commodity altogether different from Galvanized Steel Metal Sheets. Where commercial goods without change of their identity as such goods if merely subjected to some processing or finishing, they do not cease to be goods of original description. Hence, the decision of the Commissioner of Commercial Taxes cannot be approved and the same deserves re- consideration. The impugned order dated 23.03.2017 at Annexure-A is set aside and the proceedings are restored to the file of the Commissioner of Commercial Taxes to reconsider the same in the light of the observations made hereinabove and take an appropriate decision in accordance with law in an expedite manner.
The petitioner is at liberty to provide any additional material before the Commissioner to substantiate his claim.
With the aforesaid observations, the writ petition stands disposed of.
Sd/- JUDGE PMR