T.S. Govindarajan vs State of Tamil Nadu and Another

Ramanujam, J.—The petitioner in this case was originally assessed under the Madras General Sales Tax Act for the assessment year 1966-

67 on a turnover of Rs. 49,176.26 at the rate of 1 per cent, under item 15 of Schedule I. Later, the assessing authority appears to have revised his

view and issued a notice u/s 16 proposing to reassess the said turnover at the rate of 21 per cent, treating the turnover as not coming under item 15

of Schedule I. Item 15 of Schedule I as amended by Madras Act 10 of 1963 is as follows: ""Bullion pure or alloy and specie.

It is at the stage of the issue of notice u/s 16 of the Act, that the petitioner filed the above writ petition and sought a writ of prohibition against the

proposed reassessment u/s 16. The petitioner also prayed for stay of the reassessment proceedings. Though the writ petition was admitted, this

court was not inclined to grant a stay of the reassessment proceedings and in fact, allowed the proceedings u/s 16 to be completed subject to the

condition that the tax, if levied, will not be collected from the assessee till the disposal of the writ petition. It is now seen that the assessing authority

has completed the assessment u/s 16 and has actually assessed the turnover at the rate of 2� per cent, treating it as subject to multi-point tax u/s

3(1) .

The articles whose sales constituted the above turnover are silver ingots got by the petitioner by purchasing old and unserviceable silver

ornaments, beating them out of shape and then converting them into ingots by smelting. The modus operandi adopted by the petitioner is to

purchase old silver articles and ornaments which are useless and convert them into ingots by smelting them and thereafter, sell the ingots, and the

turnover in question represented the sale value of the ingots so got. The assessing authority originally accepted the petitioner''s case that it came

under item 15 of Schedule I. But later, he has taken the view that the silver ingots sold by the petitioner would not fall under item 15 purporting to

follow the decision of the Sales Tax Appellate Tribunal, Madras, in T.A. No. 1076/67, etc. The question is whether the view taken by the

assessing authority in this case based on the view of the Tribunal is correct.

In this connection, it is necessary to refer to item 15 of Schedule I before it was amended by Madras Act 10 of 1963. Then the item was

bullion and specie"". While construing the said item, the Sales Tax. Appellate Tribunal then held that the word ""bullion"" would take in or refer only

pure gold or silver in the mass and that the expression could not be applied to ingots of gold or silver mixed with base metals like copper and lead

in any degree. Before the rendering of the said decision by the Tribunal, the department as well as the dealers were all along treating even gold or

silver got out of smelting as bullion and were construing the expression ""bullion"" as including alloy gold or alloy silver. As the said decision of the

Tribunal was contrary to the existing commercial practice adopted by the dealers and as it was likely to cause hardship to the dealers if the alloy

gold or silver is to be treated as not coming under the expression ""bullion"", the Legislature stepped in and the Madras Act 10 of 1963 was

enacted.

Even before the enactment of Madras Act 10 of 1963, to make the interpretation of the expression ""bullion and specie"" clear, a Division Bench

of this Court construed the scope of the words ""bullion and specie"" appearing in item 15 in Viswanathan & Co. v. State of Madras [1963] 14

S.T.C. 702, In that case, the petitioners purchased sokka thangam, mixed it with a small percentage of copper to make it sovereign gold and sold

it to their customers for the purpose of making jewellery. It was contended on behalf of the State that the alloy of gold and copper would not come

under the term ""bullion"" referred to in item 15. This court rejected that contention and held that the word ""bullion"" used in item 15 of Schedule I

includes all kinds of gold alloy of different grades of fineness suitable for the making of gold jewellery. This court while rendering that judgment

referred to the similar view taken by the Mysore High Court in Canara Jewellers v. Commercial Tax Officer [1962] 13 S.T.C. 668. In the light of

the amendment of item 15 brought about by Madras Act 10 of 1963 and the decision of this court in Viswanathan & Co. v. State of Madras

[1963] 14 S.T.C. 702, it is not possible for us to accept the view taken by the Tribunal in T.A. No. 1076/67, etc., which formed the basis of the

order of the assessing officer herein impugned. Apart from the reasoning given by the Tribunal in the said case, the assessing officer has not given

any independent reasoning. We are not satisfied that the view expressed by the Tribunal in the said case is correct and in accord with the object of

Madras Act 10 of 1963 and the decision rendered by this court in the Viswanathan''s case [1963] 14 S.T.C. 702 cited supra. The Tribunal in the

said case has taken the view that the term ""bullion pure or alloy and specie"" should be understood in a technical sense and that if so understood, it

would mean ""gold or silver in bulk as produced from the refinery"". It is obvious that the Tribunal overlooked the significance of the addition of the

word ""alloy"" in item 15. The Tribunal has proceeded on the basis that precious metals can be called ""bullion"" when smelted and not perfectly

refined or when refined, but in bars, ingots or in any form uncoined as in plate. The Tribunal refers to the commercial practice and states that the

words in item 15 have to be understood in a commercial sense. But as we understand, the commercial practice as set out in the objects and

reasons of Madras Act 10 of 1963, seems to be the other way. It is not, therefore, possible for us to agree with the Tribunal that silver ingots sold

by the petitioner would not fall within item 15. Even if we agree with the Tribunal that the silver ingots sold by the petitioner is not pure or of any

particular standard, still it will come clearly under the word ""alloy"". Even impure silver has to be treated as alloy. In our view, the view taken by the

assessing officer cannot be sustained.

Though the petitioner has asked for a writ of prohibition, in view of the changed circumstances, a writ of certiorari quashing the order of

reassessment made by the assessing authority will issue. The petitioner is entitled to his costs. ""Advocate''s fee is Rs. 150.