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2003 DIGILAW 75 (KER)

Noor Metals v. State of Kerala

2003-01-30

G.SIVARAJAN, J.M.JAMES

body2003
Judgment :- 1. The matter arises under the Kerala General Sales Tax Act, 1963 (for short 'the Act'). 2. The assessee is the revision petitioner. The State of Kerala is the respondent. The assessment year concerned is 1995-96. The assessee is a dealer in iron and steel. During the assessment year the assessee sold a lorry which was being used for the transport of iron and steel. The assessee had purchased a chassis from M/s. M.G.F. (India) Ltd. on 25.6.1992 (evidenced by Annexure F) after payment of tax. The assessee had also built body using materials purchased from registered dealers within the State. The body was mounted on the chassis and thereafter it was being used as a lorry. This lorry was sold by the assessee for a value of Rs.3,00,000/-. 3. In the assessment for the year 1995-96 the assessee claimed exemption on the sales turnover of lorry on the ground that it is a second sale of a single point commodity which has already suffered tax in the State. The Assessing Authority originally completed the assessment granting exemption in respect of the sales turnover of this lorry. However, the assessment was re-opened under S.19 of the Act on the ground that lorry which is sold is a motor vehicle which is different from chassis and body and therefore even if the chassis and the body had suffered tax at the point of first sale, the sales turnover of lorry is liable to tax under Entry 86 of the First Schedule to the Act being a different commercial commodity. Though the assessee had filed appeals against this assessment order before the first Appellate Authority and before the Tribunal the said Appellate Authorities had only confirmed the assessment order. 4. Dr. K.B. Mohamedkutty, learned counsel for the assessee submitted before us that the assessee admittedly had paid tax at the point of purchase of the chassis and also on the materials used for body building and since the mounting of the body on the chassis by using nuts and bolts will not convert the chassis into a different commercial commodity the sale of the lorry is not liable to tax. According to the counsel no manufacturing process is involved in mounting the body on the chassis by using nuts and bolts. According to the counsel no manufacturing process is involved in mounting the body on the chassis by using nuts and bolts. The counsel in support of the said contention had relied on the decisions of the Rajasthan Taxation Tribunal in Commercial Tax Officer v. Rajesh Motors (1997 (107) STC 468), the decision of the CEGAT, Court No.II, New Delhi in Collector of Central Excise, Pune v. Roplas (I) Ltd. (1998 (98) ELT (Tribunal) 441) as also the decision of the Punjab and Haryana High Courts in Darshan Singh Pavitar Singh v. U.O.I. (1988 (34) ELT 631). The counsel also brought to our notice the amendment to Entry 94 by which an explanation was added to the said entry with effect from 1.1.2000 and submitted that from the explanation it is clear that when once the chassis and the body has suffered tax there is no question of taxing the motor vehicle again which is made up of chassis and the body again. The counsel in support of his contention submitted that the explanation is clarificatory in nature as explained in the Division Bench decision of this Court in K.G. Keshava Bhat v. State of Kerala & Ors. (1999 (7) KTR 128. The counsel has alternatively submitted that at any rate, the assessee having paid tax on the purchase of the chassis and also on the materials used for making body in case the assessment is being made on the sales turnover of the lorry the tax already paid must be deducted. 5. The learned Government Pleader appearing for the respondent, on the other hand, submitted that under Entry 86 of the First Schedule to the Act motor vehicle is a different commercial commodity from chassis or body mounted on the chassis and therefore notwithstanding the fact that the chassis and the body which are used for making lorry had suffered tax at the point of first sale in the State still the sales turnover of the lorry has to be assessed at the hands of the assessee since it is a totally different commercial commodity. The Government Pleader in support of his contention relied on the decision of this Court in Rane (Madras) Ltd. v. State of Kerala (1967 KLT 890 (FB)) and another decision of the Division Bench of this Court in the judgment dated 11.10.2001 in T.R.C. No.37 of 2001 and the decision of the Supreme Court in M/s. MSCO Pvt. Ltd. v. Union of India & Ors. (AIR 1985 SC 76). The Government Pleader on the basis of these decisions submitted that the authorities and the Tribunal were perfectly justified in rejecting the claim of the assessee. 6. Before proceeding to consider the rival contentions it is necessary to advert to the relevant entries. Entry 86 of the First Schedule to the Act as it stood during the relevant period reads thus: 7. It is also necessary in this context to refer to Entry 94 with the Explanation added by the Finance Act 8/2000 with effect from 1.1.2000. It reads thus: Explanation:- When a tax has been levied on chassis of motor vehicle or on body built on such chassis within the State, the tax payable on the motor vehicle produced out of such chassis shall be reduced by the amount of tax paid on such chassis or body built on such chassis". 8. It can be seen from Entry 86 that motor vehicles, chassis of motor vehicles motor bodies built on chassis of motor vehicles among others are included in the same entry. From the above, it is clear that the Legislature itself has understood that motor vehicle is different from chassis of motor vehicles and bodies built on chassis of motor vehicles. The question as to whether when a series of items which are subjected to sales tax are grouped together in one entry whether all those items can be treated as one and the same commodity came up for consideration before the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra (1976 (37) STC 319). The Supreme Court was concerned with entry No.(iv) of the Central Sales Tax Act, 1956. The list of goods given there at No. (iv) as it stood in 1968 was "iron and steel", that is to say about 16 categories of articles were included. The Supreme Court was concerned with entry No.(iv) of the Central Sales Tax Act, 1956. The list of goods given there at No. (iv) as it stood in 1968 was "iron and steel", that is to say about 16 categories of articles were included. The Supreme Court in that context observed that "it will be seen that "iron and steel" is now divided into 16 categories which clearly embrace widely different commercial commodities, from mere scrap iron and leftovers of processes of manufacturing to "wires" and "wheels, tyres, axles and wheel sets". The Supreme Court observed that the object of using them for subject-matter of legislation, was obviously to lay down a wide power to legislate. It was observed that the purpose of an enumeration in a statute dealing with sales tax at a single point in a series of sales would, very naturally, be to indicate the types of goods each of which would constitute a separate class for a series of sales. Otherwise, the listing itself loses all meaning and would be without any purpose behind it. It was further observed thus: "As we all know, sales tax law is intended to tax sales of different commercial commodities and not to tax the production or manufacture of particular substances out of which these commodities may have been made. As soon as separate commercial commodities emerge or come into existence, they become separately taxable goods or entities for purposes of sales tax. Where commercial goods, without change of their identity as such goods, are merely subjected to some processing or finishing or are merely joined together, they may remain commercially the goods which cannot be taxed again, in a series of sales, so long as they retain their identity as goods of a particular type". The Supreme Court in fact referring to its earlier decision in Devi Dass Gopal Krishnan v. State of Punjab (1967 (20) STC 430 at 447) observed thus: "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. 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 ceased to be goods of one taxable description and become those of a commercially different category and description". The Supreme Court finally held 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 now and that when one commercial commodity is transformed into another, it becomes a separate commodity for purposes of sales tax. Again the Supreme Court in Telengana Steel Industries and Ors. v. State of Andhra Pradesh & Ors. (1994 (93) STC 187) considered a similar question in the context of the provisions of sub-item (xv) of item (iv) of S.14 of the Central Sales Tax Act. The Supreme Court after referring to the earlier decisions in Pyare Lal's case mentioned supra and the decision in Rajasthan case (1993 (91) STC 408) and referring to the contention of Shri. Chari, learned counsel for the assessee that wires being known as a different commercial commodity from rods, as were flour, maida and suji accepted as different from wheat, observed as follows: "In view of rather persistent submission made by Shri. Chari on this point, we have applied our mind afresh as to whether despite rods and wires having been mentioned together in sub-item (sub-clause) (xv) they have to be taken different commercial commodities for the purpose of imposition of sales tax. Had it been that the sub-item stopped after the word "wires", we would have perhaps examined the submission of Shri. Chari further, but the sub-item being what it is, we stated that wires were thought of as integral part of rods and not distinct from rods, because the sub-item speaks about wires "rolled, drawn, galvanised, aluminised, tinned or coated ". Had it been that the sub-item stopped after the word "wires", we would have perhaps examined the submission of Shri. Chari further, but the sub-item being what it is, we stated that wires were thought of as integral part of rods and not distinct from rods, because the sub-item speaks about wires "rolled, drawn, galvanised, aluminised, tinned or coated ". This shows that the Legislature did not want wires, even if the same be a separate commercial commodity, to be taken as a commodity different from the rods for the purpose of permitting imposition of sales tax once again on wires despite rods having been subjected to sales tax. Indeed, the two goods - rods and wires - are so closely knit in the sub-item that any separation of these does not seem permissible. It would bear repetition to say that multi-point sales tax on the declared goods being an interdiction of S.15 of the Act, we would not be justified in conceding the present demand of the Revenue unless a strong and cogent case were to be made out, which we do not find". 9. A Division Bench of this Court in the judgment dated 11.10.2001 in T.R.C. No.37 of 2001 relying on the aforesaid two judgments of the Supreme Court held that the field latex and centrifuged latex are two different commercial commodities. In that case a contention raised by the assessee based on the fact that both the product can come under entry 161 of the 1st schedule to the Act and hence they cannot be taxed separately cannot be accepted. 10. In the light of these decisions if we consider Entry 86 of the First Schedule to the Act it is at once clear that though motor vehicles, chassis of motor vehicles and body built on chassis of motor vehicles are grouped together in one item they are commercially different commodities. The lorry which is a motor vehicle, cannot be treated as the same as chassis of motor vehicle. The expression "chassis of motor vehicles" used in the Entry itself makes it clear that chassis is different from motor vehicle. The lorry which is a motor vehicle, cannot be treated as the same as chassis of motor vehicle. The expression "chassis of motor vehicles" used in the Entry itself makes it clear that chassis is different from motor vehicle. This being the legal position springs from a reading of the entry itself in the light of the decisions of the Supreme Court referred to above there is no need for going into the definition of 'manufacture' or the decision rendered by the Supreme Court or by other High Courts regarding the meaning of 'manufacture' or as to whether motor vehicle chassis and the motor vehicle are one and the same commodity. 11. In these circumstances, we are of the definite view that since the assessee had sold the lorry which was being used for its business purposes even though the chassis on which the body is built and the materials used for making the body itself had suffered tax the sale of motor vehicle cannot be treated as a second sale, which is exempted from tax. 12. The Karnataka High Court in State of Karnataka v. M. Madhavaraj (91 STC 572) considered the question as to whether truck plus chassis frame can be treated as a motor vehicle. The court considering the dictionary meaning of the word 'motor vehicle' and its object held that in order that it must be called a motor vehicle, the chassis has to be further equipped with a body, at least, in the nature of a plank fitted in the chassis frame so that it can be used as a means of transporting something. The Orissa High Court in Maharana and Maharana v. State of Orissa (1991 (82) STC 242) held that a chassis fitted with a bus body makes a bus which is a motor vehicle and therefore bus bodies are components of motor vehicle. These decisions also make the position clear that motor vehicle is different commercial commodity from chassis of a motor vehicle or body built on chassis of a motor vehicle separately taxable under the Act. 13. These decisions also make the position clear that motor vehicle is different commercial commodity from chassis of a motor vehicle or body built on chassis of a motor vehicle separately taxable under the Act. 13. Learned counsel for the assessee had placed reliance on the decision of the Rajasthan Tax Tribunal, which in turn relied on the decision of the Rajasthan Tribunal in Ropas India Ltd.'s case mentioned above which in turn relied on the decision of the Punjab and Haryana High Courts in Darshan Singh Pavitar Singh's case mentioned above all of which considered the meaning of the definition of the word 'manufacture' though in the context of determining as to whether in putting together a chassis and a body of chassis by using nuts and bolts there is a manufacture. Those decisions, according to us, have no relevance for the purpose of the present case since entry 86 itself treats these items as separate commercial commodities. In fact the entry relating to motor vehicles, chassis of motor vehicles, body built on motor vehicles substituted by entry 94 of the First Schedule with effect from 1.1.2000 itself makes the position clear that a motor vehicle is different from chassis of motor vehicle or a body of a motor vehicle. The explanation added to entry 94 clearly provides that when tax has been levied on chassis of motor vehicle or on body built on such chassis within the State the tax payable on the motor vehicle produced out of such chassis shall be reduced by the amount of tax paid on such chassis or body built on chassis. This is also a legislative recognition of the fact that a motor vehicle is different from chassis and body built on chassis. 14. In the above circumstance we are of the view that the authorities and the Tribunal are justified in holding that the sales turnover of lorry effected by the assessee is liable to tax under the Act. There is no scope for interference with the orders of the Tribunal and the authorities. Though the learned counsel for the assessee submitted that the benefit available under Explanation to entry 94 at least must be given to the assessee we are unable to issue any such direction because at the relevant time this Explanation was not available. Further the Explanation is not merely clarificatory in nature. Though the learned counsel for the assessee submitted that the benefit available under Explanation to entry 94 at least must be given to the assessee we are unable to issue any such direction because at the relevant time this Explanation was not available. Further the Explanation is not merely clarificatory in nature. It confers a new benefit provided the circumstances specified in the explanation are satisfied. Thus the explanation has to be treated only as perspective and not retrospective. In this view of the matter we cannot grant the relief provided under the Explanation to the assessee in the instant case. There is no merit in this revision. It is accordingly dismissed.