Case: State of Tamil Nadu Vs. Pyare Lal Malhotra Etc

out of which it is made. each commercial commodity here becomes a separate object of taxation in series of sales of that commercial commodity so long as it retains its identity as that commodity.5. We think that the correct rule to apply in the cases before us is the one laid down by this Court in Devi Dass Gopal Krishan &Ors. v. The State of Punjab &ors.((1967) 20 S.T.C. 430 at 447.) where Subba Rao, C.J. speaking for a Constitution Bench of this Court, said at (p. 447) :"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 scarp 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 steer sections. During the process the scarp iron loses its identity and becomes a new marketable commodity."The process is certainly one of manufacture.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, become s necessary to determine when they cease to be goods of one taxable description and become those of a commercially different category and description.It appears to us that the position has been simplified by the amendment of the law, as indicated above, so that each of the categories falling under "Iron and Steel" constitutes a new species of commercial commodity more clearly new. It follows that when one commercial commodity is transformed into another, it becomes a separate commodity for purposes of sales tax.6. We think that the Madras High Court had committed an error in applying Hiralals case (supra) to the decision of cases now before us which turns really on a correct interpretation of Section 14 of the Central Act. On the question now before us, we approve of the reasoning adopted by a Division Bench of the Punjab High Court in Devgun Iron &Steel Rolling Mills v. State of Punjab((1961) 12 S.T. C. p. 590).7. Section 15 of the Central Act places certain restrictions and conditions upon State enactments imposing Sales tax. It says:Every sales tax law of a State shall, in so for as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restrictions and conditions, namely:"(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed three per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage;(b) where a tax has been levied under that law in respect of the sale or purchase inside the State of any declared goods and such goods are sold in the course of inter-State trade or commerce, and tax has been paid under this Act in respect of the sale of such goods in the course of inter State trade or commerce, the tax levied under such law shall be reimbursed to the person making such sale ill the course of inter State trade or commerce in such manner and subject to such condition as may be provided in any law in force in that State". It has not been shown to us that any provision of the Tamil Nadu Sales Tax Act violates Section 15 of the Central Act enacted in accordance with Article 266(3) of the Constitution. Section 3 of the Tamil Nadu Act levies. taxes on sales and purchases of "goods" as defined in Section 2(j) of the Act:"(j) goods, means all kinds of movable property (other than newspapers, actionable claims, stocks and shares and securities) and includes all materials, commodities, and articles (including these to be used in the fitting out, improvement or repair of movable property), and all growing crops grass or things attached to, or forming part of the land which are agree to be severed before sale or under the contract of sale, "8. Section 4 of the Tamil Nadu Act lays down:"4. Tax in respect of declared goods. Notwithstanding anything contained in Section 3, the tax under this Act shall be payable by a dealer or the sale or purchase inside the State of declared goods at the rate and only at the point specified against each in the Second Schedule on the turn over in such good s in each year, whatever be the quantum of turnover in that year".Item 4 of the second schedule specifies the rates of tax in accordance with the Central Act. It reproduces Section 14(iv) of the Central Act. On an amendment of Section 14(iv) of the Central Act, serial No. 4 of the second schedule of the Tamil Nadu Act was also correspondingly amended so as to reproduce the sixteen items found in Section 14(iv) of the Central Act. Hence, the decision of these cases really depends on an interpretation of Section 14 of the Central Act which we have already given above. Other provisions only fortify our conclusion.9.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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, become s necessary to determine when they cease to be goods of one taxable description and become those of a commercially different category and description.It appears to us that the position has been simplified by the amendment of the law, as indicated above, so that each of the categories falling under "Iron and Steel" constitutes a new species of commercial commodity more clearly new. It follows that when one commercial commodity is transformed into another, it becomes a separate commodity for purposes of salesthink that the Madras High Court had committed an error in applying Hiralals case (supra) to the decision of cases now before us which turns really on a correct interpretation of Section 14 of the Central Act. On the question now before us, we approve of the reasoning adopted by a Division Bench of the Punjab High Court in Devgun Iron &Steel Rolling Mills v. State of Punjab((1961) 12 S.T. C. p.15 of the Central Act places certain restrictions and conditions upon State enactments imposing Sales4 of the second schedule specifies the rates of tax in accordance with the Central Act. It reproduces Section 14(iv) of the Central Act. On an amendment of Section 14(iv) of the Central Act, serial No. 4 of the second schedule of the Tamil Nadu Act was also correspondingly amended so as to reproduce the sixteen items found in Section 14(iv) of the Central Act. Hence, the decision of these cases really depends on an interpretation of Section 14 of the Central Act which we have already given above. Other provisions only fortify our conclusion.think that the Madras High Court had committed an error in applying Hiralals case (supra) to the decision of cases now before us which turns really on a correct interpretation of Section 14 of the Central Act. On the question now before us, we approve of the reasoning adopted by a Division Bench of the Punjab High Court in Devgun Iron &Steel Rolling Mills v. State of Punjab((1961) 12 S.T. C. p.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, become s necessary to determine when they cease to be goods of one taxable description and become those of a commercially different category and description.It appears to us that the position has been simplified by the amendment of the law, as indicated above, so that each of the categories falling under "Iron and Steel" constitutes a new species of commercial commodity more clearly new. It follows that when one commercial commodity is transformed into another, it becomes a separate commodity for purposes of sales4 of the second schedule specifies the rates of tax in accordance with the Central Act. It reproduces Section 14(iv) of the Central Act. On an amendment of Section 14(iv) of the Central Act, serial No. 4 of the second schedule of the Tamil Nadu Act was also correspondingly amended so as to reproduce the sixteen items found in Section 14(iv) of the Central Act. Hence, the decision of these cases really depends on an interpretation of Section 14 of the Central Act which we have already given above. Other provisions only fortify our conclusion.