Mittal Steel Limited vs State of Tamil Nadu and others

Raju, J.—The above writ petition has been filed for the issue of a writ of a declaration, declaring that the benefit of exemption shall be

available irrespective of the fact that the end-products were manufactured by steel re-rolling mills in Tamil Nadu or where the steel re-rolling mills

were situate outside Tamil Nadu , provided that the steel re-rolling mills purchased the iron and steel raw materials falling within the scope of item 4

of the Second Schedule to the Tamil Nadu General Sales Tax Act and furnished a declaration regarding purchase.

The petitioner, in the affidavit filed in support of the writ petition, claims that it is a registered dealer under the Tamil Nadu General Sales Tax

Act, 1959 and Central Sales Tax Act, 1956, in Tamil Nadu and that they have registered office at White Field Road, Mahadevapura, Bangalore-

48 and branch office in Tamil Nadu at No. 109, Armenian Street, Madras-1 and branches at Coimbatore and Salem. It is claimed that the

petitioners purchased iron and steel raw materials through their office at Madras, Coimbatore and Salem after payment of sales tax or tax-suffered

raw materials, and transferred it to their unit at Bangalore and delivered to M/s. Andhra Steel Corporation Ltd., having mini-steel plant and

Bangalore for conversion into M.S. billets and ingots and return to the petitioner''s unit at Bangalore and converted by the petitioners into tor steel,

M.S. rounds and M.S. coil, etc., and transferred them back to the office at Madras and sold the same within the State. On such claims and

assumptions, the petitioners claimed that they are entitled to exemption under various Government orders, referred to in the affidavit. It is stated by

the petitioner that the notifications referred to therein are related for the period from January 19, 1976 to March 31, 1982 and April 1, 1982 to

March 17, 1986 and in the light of the said notifications, the petitioners are entitled to waiver and exemption in respect of the tax payable on the

end-products or iron and steel falling within the scope of item 4 of the Second Schedule on condition that the raw materials specified in item 4 of

the Second Schedule have suffered tax under the Tamil Nadu General Sales Tax Act, and, therefore, the end-products manufactured by them are

also entitled to such exemptions.

The occasion, as is claimed, for filing the writ petition is said to be the communication dated September 13, 1989 from the third respondent

stating that in the light of the orders of the Government in G.O.P. No. 253 CT & RE dated March 17, 1986, the Government granted exemption

in respect of the tax payable by any dealer under the Act on the sales of raw materials falling under item 4 of the Second Schedule to the Act to

steel re-rolling mills in Tamil Nadu for manufacture of end-products falling under item 4 itself of the said Schedule, subject to the production of a

declaration of purchase from the steel re-rolling mills and that since the petitioners are not having their re-rolling mills in Tamil Nadu, they are not

eligible for concession granted in the notification dated March 17, 1986. The petitioner mainly relied upon the Division Bench judgment of this

Court reported in Bhoruka Steel Limited v. Union of India (1989) 10 STC 19 and contended that the Government Order dated March 17, 1986

would be discriminatory and violative of article 301 read with article 304(a) of the Constitution of India. The petitioner also contends that the denial

of exemption to the second and subsequent sales of re-rolled end-products of iron and steel dealt with by the petitioner is opposed to law and that

there can be no denial of exemption to purchase of raw materials by re-rolling mills outside the State though the other facts and circumstances, as is

claimed by the petitioner would justify the grant of exemption.

The respondents have filed a counter-affidavit contending that the earlier notifications issued in G.O.Ms. No. 103 dated January 24, 1982, and

G.O.Ms. No. 311 dated March 13, 1982 whereby the State Government notified exemption in respect of the tax payable on the end-products of

iron and steel falling within the scope of item 4 of the Second Schedule, on condition that the raw materials specified in the same item have suffered

tax under the Act and the end-products are manufactured by the steel re-rolling mills in Tamil Nadu will have no relevance or application to the

present context or case, that in Writ Petition Nos. 11600 and 11613 of 1987 filed by the petitioner itself for the assessment years 1985-86 and

1986-87 this Court by an order dated November 23, 1987 only directed the authorities to consider the claim of the petitioner in the light of the

Division Bench judgment of this Court in Bhoruka Steel Limited case (1989) 10 STC 19, and remanded the matter for such fresh consideration,

and that unless the petitioner satisfies the conditions prescribed subject to which the exemption has been granted in the Government order dated

March 17, 1986 they are not entitled to the exemption or for the relief prayed for. It is contended that the steel re-rolling mills in Tamil Nadu have

to certify the purchase effected within Tamil Nadu of raw materials falling under item 4 of the Second Schedule for manufacturing of end-products

and it is only on such proper certification and sufficient proofs that the exemption claimed by the petitioner can be countenanced.

The respondent also contends that there is no provision for certifying the purchases in question by the third respondent, that the practice said to

have been followed by the petitioner was on their own account not authorised or permitted in law and the mere fact that they got the seals of the

third respondent affixed to the copies of declaration in form D cannot justify by itself the claim unless and until the conditions for the exemption are

found to be satisfied to the satisfaction of the concerned assessing authority. The respondents also denied that there has been any violation of

article 14, article 301 or 304(a) of the Constitution of India.

The learned counsel appearing for the petitioner contended before me at the time of hearing that in the light of the Division Bench judgment of

this Court in Bhoruka Steel Limited case (1989) 10 STC 19, the respondents cannot insist upon the location of the re-rolling mills inside the State

as a condition for granting the exemption and, therefore, the petitioners would be entitled for such exemption on the end-products of manufacture

even by the re-rolling mills situated outside the State of Tamil Nadu. To have a better and proper understanding of the submission made, it

becomes necessary to deal with the ratio of the decision in Bhoruka Steel Limited case (1989) 10 STC 19. That was a case where the petitioner-

assessee in that case before the court had his registered office at Coimbatore and purchased raw materials, namely, iron and steel scraps in Tamil

Nadu and carried them to its factory at Bangalore and after conversion of the same into bars or M.S. rods brought the end-product back to Tamil

Nadu for sale. The said assessee claimed exemption based on the notification of the Government in G.O.Ms. No. 103 CT&RE dated January 24,

1982, as amended by the Notification in G.O.P. No. 311 CT&RE dated March 13, 1982. The claim by the assessee/petitioner before the court in

the said case was that the orders of the Government referred to supra had the consequence of levying tax in some cases at raw material stage and

in some cases at (in respect of such product manufactured outside the State) * the end-products stage (*) having substantial impact on liability in

view of the differential value, violated articles 301 and 304(a) of the Constitution of India. The Division Bench while dealing with such a situation

has held that in so far as the Government orders dated January 24, 1982 and March 13, 1982 require that the re-rolling activity also should be

carried out inside the State of Tamil Nadu to enjoy all the benefit of exemption, it is illegal and unconstitutional. Instead of striking down the order

on that basis this Court issued a direction that the benefit of exemption covered by the two Government orders dated January 24, 1982 and March

13, 1982 referred to above shall be available irrespective of the fact whether the end-products were manufactured by the steel rolling mills in Tamil

Nadu or whether the steel rolling mills were situate outside Tamil Nadu, provided they were manufactured out of the raw materials which had

already suffered tax under the Tamil Nadu General Sales Tax Act, 1959. The factum of such payment under the local Act was specifically noticed

at para 6 of the said decision. It is to be noticed that the declaration by the Division Bench was subject to this very vital and essential condition,

namely, that before an assessee could be held entitled to exemption under the two Government orders referred to supra it should be shown or

substantiated that the end-products concerned were manufactured out of the raw materials which had already suffered tax under the Tamil Nadu

General Sales Tax Act, 1959. The Government order dated March 17, 1986 merely stipulated the condition or mode of such proof to prevent

abuse and evasion by manipulation.

The contention raised on behalf of the petitioner in the present case, in substance and effect is aimed to have the assistance of this Court to

wriggle out of the situation and avoid substantiating the said vital condition subject to which only the Division Bench has extended the benefits of

exemption under the Government orders referred to in cases of even end-products not processed by re-rolling carried out from mills outside the

State.

The contentions of the petitioner, in my view, cannot be countenanced in this proceeding at this stage of the matter. As the learned Additional

Government Pleader (Taxes) rightly pointed out that the claim now made for the petitioners has to be considered in the light of the subsequent

Notification in G.O.P. No. 253 CT&RE dated March 17, 1986 which reads as hereunder :

Sale of raw materials for manufacture of end-products to steel re-rolling mills - Exemption (Tamil Nadu)

Notification G.O.P. No. 253 dated March 17, 1986.

No. II(1)/CTRE/47(n)86. - In exercise of the powers conferred by sub-section (1) of section 17 of the Tamil Nadu General Sales Tax Act, 1959

(Tamil Nadu Act of 1959), the Governor of Tamil Nadu hereby makes an exemption in respect of the tax payable by any dealer under the said

Act, on the sales of raw materials falling under item 4 of the Second Schedule to the said Act, to steel re-rolling mills in Tamil Nadu for

manufacture of end-products falling under item 4 of the said Schedule subject to the production of the declaration of purchase from the steel re-

rolling mills.

The notification hereby made shall come into force with immediate effect.

After all amendments :

No. II(1)/CTRE/47(n)/86 dated March 17, 1986 with immediate effect.

Makes an exemption in respect of the tax payable by any dealer on the sales of the raw materials falling under item 4 of the Second Schedule to

steel re-rolling mills in Tamil Nadu for manufacture of end-products falling under item 4 of the said Schedule for sale inside the State, or in the

course of inter-State trade or commerce subject to the production of a declaration of purchase from the steel re-rolling mills and subject to the

condition that the steel re-rolling mills remit to its assessing authority, the tax on the raw materials so purchased and used in the manufacture of end-

products sent on consignment sales/branch transfer to other States.

A careful reading to the Notification in question would disclose that it does not suffer same vice or infirmity which the other notifications dated

January 24, 1982 and March 13, 1982 were held to suffer as noticed by the Division Bench of this Court in the judgment dealt with above. The

stipulation in the new notification dated March 17, 1986 ensures the remittance of tax at least at one stage and if the plea of the petitioner is to be

accepted it would be difficult to properly ascertain as to whether the end-products in respect of which exemption claimed has been really or actual

manufactured out of raw materials which actually suffered the tax at the raw material stage under the Tamil Nadu General Sales Tax Act. The plea

for the petitioner though appears to be innocuous, once granted, it is likely to defeat the very object of the exemption and completely throw over

board the enforcing machinery under the Tamil Nadu General Sales Tax Act, inevitably leading to large scale evasion of tax due to the State. It will

disable the authorities to properly verify the question as to whether the petitioner claiming exemption has in fact substantiated compliance with the

necessary conditions precedent and essential ingredient for claiming such exemptions, viz., payment of sales tax at the raw material stage.

The manner in which the relief has been prayed for in the writ petition without any reference to any particular period of taxation or any

assessment year or any particular proceeding is yet another reason on which the claim of the petitioner cannot be countenanced as prayed for in

these proceedings under article 226 of the Constitution of India. The claim as to whether in a particular case or in respect of a particular

commodity or the goods covered by a transaction has already suffered tax, and is therefore entitled to exemption at the end-product stage is a

pure factual issue which has to be proved by the assessee concerned before actually claiming that he is entitled to exemption under the notifications

in question or under the provisions of the Act, being the Tamil Nadu General Sales Tax Act, 1959, as well as the Central Sales Tax Act, 1956 and

till the factual basis is proved to exist, the claim of the petitioner cannot be sustained. It is well open to the petitioner to face the assessment

proceedings as and when they are initiated, make his objections to such proposals for assessment and substantiate the claim for exemption by

sufficient records and then pursue his remedies, otherwise available in law. In the absence of such procedure or exercise being initially gone through

before the competent assessing authorities it will be not only inappropriate but will lead to serious anomalies to grant any declaration as prayed for

in the writ petition, in general terms de hors the eligibility of the individual transaction for such exemption.

For all the reasons stated above, the writ petition, therefore, fails and shall stand dismissed with costs of Rs. 1,000.

Petition dismissed.