Lakshmi Industries vs Deputy Commercial Tax Officer-VI, Madurai

Swamikkannu, J.—This is a petition for the issue of a writ of certiorari calling for the records of the respondent in his proceedings TNGST

415579/80-81 and quash the garnishee notice in form B6 dated 20th August, 1983.

The only controversy that has been placed before this Court on behalf of the petitioner is that the ""end-products"" mentioned in Notification I in

the annexure of the Government of Tamil Nadu Abstract G.O. Ps. No. 311 Commercial Taxes and Religious Endowments Department dated 24th

March, 1982, includes the scrap that is obtained subsequently after production of finished and shaped products out of the raw materials (scrap)

that were utilised once for the manufacture of the finished and shaped products. The contention raised on behalf of the petitioner by Mr. K. J.

Chandran is that the ""raw material"" in the instant case are the scraps, that they are melted to get shaped and finished products, and that during that

process there are certain scraps that are left, which do not constitute something different from ""end-products"" as contemplated in the annexure

Notification I to G.O. Ps. No. 311 C.T. & R.E., dated 24th March, 1982. In this regard, Mr. K. J. Chandran also point out sections 14 and 15 of

the Central Sales Tax Act, 1956, which deal about goods if special importance in inter-State trade or commerce and restrictions and conditions in

regard to tax on sale or purchase of declared goods within a State, respectively. Section 15 of the Central Sales Tax Act, 1956, states that the tax

payable under the State law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase

price thereof, and such tax shall not be levied at more than one stage.

According to Mr. R. Lokapriya, learned Government Advocate (Taxes), the provisions of sections 14 and 15 of the Central Sales Tax Act,

1956, are not applicable to the instant case, that the waiver and exemption granted in G.O. Ms. No. 4, C.T. & R.E., dated 3rd January, 1977 and

G.O. Ms. No. 103, C.T. & R.E., dated 24th January, 1982, are applicable only to the sales of end-products manufactured by steel rolling mills in

Tamil Nadu out of scraps which had suffered tax under the Tamil Nadu General Sales Tax Act, 1959, and that they do not apply to scraps

produced by the rolling mills. According to the learned Government Advocate, exemption notifications have to be construed strictly because they

increase the burden on others. He would submit that the shaped products alone can be construed as ""end-products"" and not the scraps that are

obtained in the course of manufacture of the shaped products. This contention raised on behalf of the respondent cannot be accepted since, even

applying clause (xvi) to item 4 in the Second Schedule to the Tamil Nadu General sales Tax Act, we see that ""iron and steel"" include also

defectives, rejects, cuttings or end-pieces of any of the above categories"" [mentioned in (i) to (iv) of item 4], and they cannot be subjected to

taxation when once at the point of first sales, they had been taxed. In the instant case, the scraps were raw materials that were purchased by the

petitioner for the manufacture of the shaped and finished materials and during the process of melting and manufacturing the shaped and finished

products there remained some scraps. These scraps cannot be the subject-matter of another taxation or second taxation, because, already, at the

time of purchase of the raw materials (scraps), they have suffered tax. Notification I of the annexure to G.O. Ps. No. 311, commercial Taxes and

Religious Endowments Departments, dated 24th March, 1982, reads as follows :

In exercise of the powers conferred by sub-section (1) of section 17 of Tamil Nadu General Sales Tax Act, 1959 (Tamil Nadu Act 1 of 1959),

the Governor of Tamil Nadu hereby makes an exemption in respect of the tax payable on the end-products coming under item 4 of the Second

Schedule to the said Act manufacture by the steel re-rolling mills in Tamil Nadu subject to the conditions that the raw materials specified in item 4

of the said Schedule to the said Act out of which the end-products are manufactured have suffered tax under the said Act and that the dealers do

not collect tax either directly or indirectly or make provision in the balance sheet to pay sales tax under outstanding expenses and get Income Tax

relief.

The notification hereby made shall come into force on and from the 1st April, 1982.

On a careful reading of the above, I am of the view that the scraps that are left during the course of the manufacture of shaped and finished

products by utilising the scraps purchased as raw materials after paying the sales tax do come under the definition of ""end-products"" in the above

notification. Under these circumstances, the proceedings of the respondent in TNGST 415579/80-81 resulting in garnishee notice in from B6

dated 20th August, 1983, are set aside. The writ petition is allowed. No costs.

Writ petition allowed.