Holding

Iron wires cannot be treated as a separate taxable commodity from wire rods and therefore are not subject to additional sales tax.

Summary

The appellants, Telangana Steel Industries and others, challenged the levy of sales tax on iron wires produced from wire rods that had already been taxed. The issue was whether wires constitute a separate taxable commodity from the rods under Section 14(iv)(xv) of the Central Sales Tax Act, 1956, invoking the single‑point tax rule of Section 15. The Court examined the legislative intent behind the grouping of wire rods and wires in the same sub‑item and considered earlier decisions on what constitutes a new commercial commodity. It held that wires are an integral part of the rods and not a distinct commodity, so no additional tax can be imposed. The Court allowed the appeals, set aside the lower court judgments, and directed the parties to seek any refund under Section 33‑B of the Andhra Pradesh General Sales Tax Act, 1957.

Issues considered

Whether iron wires are liable to sales tax when the wire rods from which they are derived have already been taxed.
Whether wire rods and wires constitute a single taxable commodity under Section 14(iv)(xv) and the single‑point tax principle of Section 15 of the Central Sales Tax Act, 1956.
Whether the appellants are entitled to a refund under Section 33‑B of the Andhra Pradesh General Sales Tax Act, 1957.

Legislation cited

Andhra Pradesh General Sales Tax Act, 1957s. 33-B
Central Sales Tax Act, 1956s. 14(iv)(xv), s. 15

Subjects

sales taxcentral sales taxdeclared goodssingle point taxwire rodsiron wirescommoditySection 14Section 15refundAndhra Pradesh General Sales Tax Act

Judgment

I

A TELANGANA STEEL INDUSTRIES AND ORS.
v.
STATE OF ANDHRA PRADESH AND ORS.

MARCH 4, 1994

B [B.P. JEEVAN REDDY AND B.L. HANSARIA, JJ.)

Central Sales Tax Act, 1956-Section 14(iv)(xv)-Wire rods and iron
wires-lron wires, held cannot be treated as a separate taxable commodity
from wire rods out of whic:h they are made since they are clubbed together in \~
C the same sub item-Hence liable to single-point tax, in view of Section 15.

Practice and Procedur~~ssessee left free to work out
remedies under Section 33B of the A.P. General Saks Tax Act, 1957.

The question arising In the present appeals by special leave at the
D instance or the assessees Is whether iron wires are exigible to sales tax whtn
the wire rods l"rom which they are produced have already been subjected
to sales tax; Ir they are one taxable commodity, they would be liable to
single point tax only in view or Section 15 of the Central Sales Tax Act,
1956.
E
Allowing thz appeals, this Court

HELD: The present cases concern a grey area viz. when a new
commercial commodity comes into existence following processing or
manufacturing undergone by the parent object, which serves as a raw
F material for the end producL This assumes Importance when a law taxes
sale or goods. To find out whether particular goods are exlglble to sales
tax or not despite the raw material having been taxed earlier, the test ;
evolved Is whether a new commercial commodity has come Into existence.
The decided cases Indicate the complexity of the concept of a different
G commercial product coming Into existence because of manufacturing
process undertaken. Therefore the present controversy is not being
decided by trying to answer the question whether a new commercial
commodity has come into existence. [326-C, DJ

Tungabhadra Industries Limited v. Commercial Tax Officer, 11 STC <l,t,
H 827; Hindustan Aluminium Corporation Ltd. v. State of Uuar Pradesh, (1982)
324
\
TELANGANASTEELINDUS. v. STATE 325

1 SCR ll9; Deputy Commissioner of Sales Tex v. Pio FooiPackers, 26 STC A
·6Z;A/ladi Venkatesurlu v. State of A.P., 41STA384, Ganesh Trading Co. v.
''1 State of Haryana, 32 STC 623; Babu Ram Jagdish Chemical Co. v. State of
Punjab, 44 STC 139; State of Kamataka v. Raghuram Shetty, 41 STC 369;
Modem Candle Woria v. Commissioner of Taxes, Assam, 71 STC 362 and
Rajasthan Roller Flour Mills Assn. v. State of Rajasthan, JT (1993) 6 SC 138,
mered to.
B

2. Wire rods and wires have been mentioned in one sub item in
section 14(1v)(xv) of the Central Sales Tax, 1956. The sub item being what
j
It Is, wires were thought as an integral part of rods and not distinct from
rods. This shows that the legislature did not want wires, even if the same c
be a separate commercial commodity, to be taken as a commodity different
from 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. [331-A-D)
D
Stale of Tamil Nadu v. Pyare Lal, (1976) 3 SCR 168, relied on.
;
~ Rajasthan Rolling Flour Mills Assn. v. State of Rajasthan, JT (1993) 5
SC 138, distinguished.

3. It Is therefore concluded that Iron wires cannot be taken as a E
separate taxable commodity and If wire rods which were purchased by the
appellants had sulrered sales tax, the same could not be realised from the
sale ohrlres. (332-C]

4. As far as the prayer for refund of the amounts recovered from the
F
assessees Is coneerned, the appellants are left to work out their remedies
~ under section 33-B of the A.P. General Sales Tax Act, 1957. (332-FJ

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 68 of 1986
etc. etc.
G
From the Judgment and Order dated 25.3.85 of the Andhra Pradesh
High Court in W.P. No. 1177 of 1985.

V.M:Tarkunde, M.L. Lahoty, Ms. Shipra Khazanchi, Anip Sachthey,
,.,,-.,.
. Mrs. Ruby Singh Ahuja, P.K. Mullick, Mrs. M. Karanjawala and T.V.S .
Narasimhacliari for the appearing Parties. H
I

326 SUPREME COURT REPORTS [1994] 2 S.C.R.

A The Judgment of the Court was delivered by ,
HANSARIA, J. Leave granted.
"
1. Law has some bright patches as well as some grey areas. Some
areas remain grey despite best efforts to illuminate them by enlightened
B judgments, as they get engulfed in darkness or become part of two light
zone either because of typical climatic condition or changes in conceptual
firmament.

2. In the present cases. We are concerned with one of the grey areas
C of the legal world. The same is as to when a new commercial commodity
comes into existence following processing or manufacturing undergone by
the parent object, which in most cases serves as a raw material for the
end-product. This aspect of the matter assumes importance when a law
taxes sale of goods. To find out whether a particular goods is exigible to
sales tax or not despite the raw material used in the production having been
D taxed earlier, the test evolved is whether a new commercial commodity has
come into existence.

3. As to when it can be said as aforesaid has been a subject matter
of catena of decisions. We do not propose either to catalogue them or even
examine some of them to find out as to why in one case it was held that a
E new commercial commodity had but come into existence and in another a
different view was taken. It would be enough if we note some of the leading
decisions. These are: (1) Tunghabhadra Industries Limited v. Commercial
Tax Officer, 11 STC 827 wherein hydrogenated groundnut oil (commonly
called Vanaspati) was not held to be a different product from groundnut
F oil. (2) Hindustan Aluminium Corporation Ltd. v. State of Unar Pradesh,
(1982) 1 SCR U9, where rolled products and extrusions were regarded as .•
different commercial commodity from aluminium ingots and billets. (3)
Deputy Commissioner of Sales Tax v. Pio Food Packers, 46 STC 63, where
pineapples slices sold in sealed cans after processing the pineapples were
G not regarded as different goods. {4) Alladi Venkatesurlu v. Government of
Andhra Pradesh, 41 STC 349, where parched rice (Atukulu) and puffed
rice (Muramaralu) were held not different from rice (5) Ganesh Trading
Co. v. State of Haryana, 32 STC 623 and Babu Ram Jagdish Chemical Co.
v. State of Punjab, 44 STC 159 in both of which rice was accepted as a
different commodity from paddy. (6) State of Kamataka v.. Raghuram
H Shetty, 47 STC 369 in which certain observations were. made regarding
'
TELANGANASTEELINDUS. v. STATE [HANSARIA,J.] 327

bread being different from wheat flour in as much as flour is consumed in A
'' the production of bread and so a new commodity comes into existence.

4. When the Gauhati High Court was confronted with a similar
situation in Modem Candle Works v. Commissioner of Taxes, Assam, 71
STC 362, to which decision one of us (Hansaria, J.) was a party, it had to
labour hard to find out as to whether any principle as such can be culled B
out from large number of decisions noted in that case. Saikia, CJ, as he
../ then was, stated for the .Bench that different considerations would apply
when the court is concerned with edible articles in contrast to non-edible
articles. As to what test, should be applied in both these types of articles
were then stated as below in paragraph 18:- c
'From the above decisions involving edible articles some of the
criteria found are- whether the entry article is a genus of which
the test article is a species; whether the essential characteristics of
the entry article are still to be found in the new articles; whether
there has been addition of external agents thereby J'.llaking it D
' different; and whether there has been a process of transformation
of such a nature and extent as to have resulted in the production
of a new article as commonly understood in the market where it
is dealt with. So long it does not result in a new article, the nature,
duration and transformation of the original commodity would not E
be material.

In the other line of decisions involving articles which are not
as such edible, we find that it is the concept of the consumption
of the original commodity in the course of production of a new
~ commodity as understood commonly by the people who use it F
would be material. The nature and extent of the process, whether
the labour is manual or mechanical. Whether the duration is short
or long, whether the production requires expertise or not would
no doubt be relevant but would not alone be decisive.

5. The above adequately shows how a valiant effort was made to read G
a common thread running through different judgment noted in the
decision. A Bench of this Court as well had gone through this exercise
~
recently in Rajasthan Roller Flour Mills Assn. v. State of Rajasthan, IT
(1993) 5 SC 132, (hereinafter the Rajasthan case in which, one of us Jeevan
Reddy, J.) delivering judgment for a two-Judge Bench noted some leading H
!
328 SUPREME COURT REPORTS [1994) 2 S.C.R.

A decisions on this aspect of the matter and. held that flour, maida and suji
are different commercial commodities from wheat. (

6. The above shows complexity of the concept of a different commer-
cial product coming into existence because of manufacturing process un-
dertaken. It is because of this that we do not propose to decide the
B controversy at hand, which is whether iron wires are separate commercial
goods from wire rods from which they are produced, by trying to answer
whether they are one commercial commodity or separate. The point has
however arisen for consideration because we are concerned with a single
point sales tax, which would not allow taxing of the same commodity again.
c It is also not in dispute that if the two goods at hand be different com-
modities, the single point taxing principle wciuld not debar realisation or
tax once again from the sale of wires. Shri Tarkunde's whole emphasis is
that goods in question cannot be regarded as two different commercial
commodities. Let it be seen why this stand has been taken by the learned
D counsel on behalf of the appellants and whether the same is sound?

7. The stand owes its origin to clubbing together of wires rods and
wires in sub-clause (xv) of clause (iv) of section 14 of the Central Sales Ta.-:
'
Act, 1956 (for short the Act), which deals with what is commonly known
as declared goods, in which case section 15 of the Act would come into ply
E which would not permit levying of sales tax at more than one stage on such
goods. On the strength of a four-judge Bench decision of this Court in Stale
of Tamil Nadu v. Pyan La~ (1976] 3 SCR 168. it is strongly contended by
Shri Tarkunde that wire rods and wires having been mentioned in one
sub-item, they have to be treated as one goods and not two different goods.
F
8. Pyarela/'s case being the king pin or sheet anchor of Shri •
Tarkunde's submission, we may carefully note as to what was really decided
in that case. There, this Court was exaiitining whether steel round·~ flats,
plates etc. were exigible to tax under the provisions of Tamil Nadu Sales
Tax Act. These products were also declared goods, and so, an argument
G was advanced that the iron scrap from which the goods had been manufac-
tured having suffered sales tax, tax could not be realised once again from
the sale of plates flates, rounds etc. This Court did not accept the conten-
tion but the reason given for rejecting the contention is what is pressed into
service by Shri Tarkunde, according to whom, the reason given therein
H establishes his contention conclusively.
I

TELANGANASTEELINDUS. v. STATE [HANSARIA,J.] 329

9. As we are concerned with the products of iron and steel, as was A
Pyarelal's case, let the relevant part of section 14 of the Act dealing wjth
it be noted:- '

14. "Certain goods to be of special importance in inter-State
trade or commerce:- It is hereby declared that the following goods
are of special importance in inter-state trade or commerce:- B

*******
--'
(iv) iron and steel, that is to say, -

••••••• c
(xv) Wire rods and wires-rolled, drawn, galvansied, aluminised,
tinned or coated such as by copper;

*******
D
10. In Pyarelal's case, the contention on behalf of the assessee was
that steel rounds, llates, plates etc. were not different commercial com-
modities because they were products of iron and steel, and so, were not
taxable once again, as all the products of iron and steel mentioned in
various sub-items of clause (iv) have to be taken as one commodity inas- E
much .as the legislature visualised iron and steel as one commodity. It may
be stated that the relevant time (as also now) iron scrap was one of the
sub-item; and steel plates, sheets etc. part of another sub- item, albeit in
separate sub-division. Assessees contention was rejected by this Court by
stating that it was not the substance (i.e. iron ancl steel) which should be
taken as an object of taxation, but goods of iron and steel, as o•herwise F
sales tax law itself would undergo a change from being a law whict taxes
sale of 'goods' to a law which taxes sale of "substance" out of which goods
are made. The Court also pointed out that steel plates, sheets etc. formed
part of a sub-item different from that of iron scrap. What is sought to be
relied on by Shri Tarkunde is the observation at page 171 of the Report G
that the amendment which was brought about in item (iv) by 1972 Act
following the recommendation of Select Committee was intended to "con-
...
"
sider each 'sub-item' as a separate taxable commodity for purpose of sales
tax".

11. Our attention is also invited to what has been stated at page 172 H
330 SUPREME COURT REPORTS (1994] 2S.C.R.
A the same being that each of the sub-category of a sub-item retains its '
ideotity as a commercially separate item so long as it retains the sub-
division. The argument, therefore, is that goods of one sub-item and in one
sub-division have to be taken as one commercial commodity.

12. Before expressing our opinion on the aforesaid submission, It
B would be necessary to note whether any different view in the matter has
been taken in the Rajasthan case, which also dealt with the question of as
to how products of a declruced goods have to be taxed. Shri Chari appearing ' --
for Revenue contends that in this case this Court held flour, maida and suji
derived from wheat as commodities different from wheat, but so, taxable
c once ·again, despite wheal: having defferent tax: and we should take the
same view qua wires. A perusal of this decision shows that the view in
question was taken because 'wheat simpliciter was mentioned as a declared
goods in sub-clause (iii) of clause (i) of Section 14 of the Act and not wheat
products. So this case has not departed from the view taken inPyare¥
which had been duly noted in this decision.
D
13. At this stage, we may note the objeet behind interdicting multi- 'J
hie-point tax on declared goods which follows from the mandate contained
in clause (a) of Section 15 of the Act. According to us, the purpose behind
this provision is to minimise the tax bunden on declared goods because of
E the special importance of these goods in inter-state trade and commerce.
14. When the attention of the Sales Tax Appellate Tribunal, againSt
whose orders present appeals have been filed, was drawn to Pyarelal's case
and the argument noted above was advanced, it observed that the two
goods being distinct, the argument was 'really a Cl\'Doufliiged attempt to
F
•
by-pass the judgment'. According to us, t~ Tribunal did not properly
understand the decision in Pyarelal, which indeed supports the appellants
case. This is for the reason that Pyarela/'s case ought to be taken to have
accepted that goods of one sub-item should be taken as one taxable
commodity. Rajasthan case does not lay down any different proposition.
G
15. Despite the aforesaid being the position. Shri Chari contends that
wires being known as a different commercial commodity from rods, as were
flour, maida and suji accepted as different from wheat in Rajasthan case, ~;.

wires would be exigible to tax on the ratio of that case. The position here
being different, as both rods and wires from part of one sub-item, Rajas-
H than case cannot assist the Revenue. hi view of rather persistent submission
\
'

TELANGANASTEELINDUS. v. STATE [HANSARIA,J.] 331

made by Shri Chari on this point, we have applied our mind afresh as to A
'
{ whether despite rods and wires having been. mentioned together in sub-
item (sub-clause) (xv) they have to be taken different commercial com-
modities 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, out the sub-item being what it is, we
state that wires were thought of as integral part of rods and not distinct B
from rods, because the sub-item speaks about wires "rolled, drawn, gal-
vanised 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 C
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 multipoint sales tax on the
declared goods being an interdiction of section 15 of the Act. we would
not be justified in conceding the present deniand of the Revenue unless a
strong and cogent case were to be made out, which we do not find. D

,
\
16. For the sake of completeness, we may say a few words about the
use of the expression "that is to say" in clause (iv), though Shri Chari has
not advanced any argument basing on this expression. Nonetheless, we are
addressing ourselves to this aspact because in Rajasthan case some obser- E
vations have been made about the purport of this expression. Reference
was made there to what had been stated in Pyarlal' case about this
expression. The meaning given in Stroud's Judicial Dictionary (fourth Edi-
tion, Volume 5, page 2753) was first noted and then what was observed by
Beg, J. in Pyare/al's case was quoted, we do not think that what has been
stated about this expression in these decisions makes any difference to the F
conclusion arrived at by us.

17. The aforesaid being the approach to the controversy at hand, we
do not propose to refer to what had been stated in the counter-affidavit
filed by the State before the Tribunal relating to the process of manufac- G
turing of wire from nids, to which our attention has been invited by Shri
Chari. We only wish to put on record that in meeting what was mentioned
in this regard in the counter-affidavit, Shri Lahoty, who assisted Shri
•• Tarkunde, drew our attention to what has been stated by the Indian
Standard Institution on this subject, reference of which is to be found at
page 19 of Volume 11 of the Paper Book of C.A. No.68/88 under the H
I
332 SUPREME COURT REPORTS [1994] 2S.C.R.

A· heading '2.4 Wire". We have refrained from going through the exercise of '•
deciding whether wire is a different commercial commodity from rod,
because our approach has been · diff~rent, as we wanted to base our
decision not on the touchstone of iron rod and wire being one or separate
commercial commodity, having found that these two goods have been
clubbed together in sub-item (xv) (supra) which, according to us, made
B material difference and clinched the issue.

18. We, therefore, conclude by stating that iron wires cannot be taken
as a separate taxable commodity and, if wire rods which were purchased
by the appellants had suffered sales tax, the same could not be realised
from the sale of wires. Shri Lahoty indeed brought to our notice Notifica-
C tions No.I and II issued by the Government of Andhra Pradesh under G.O.
Ms. No. 176 dated 13.2.86 as per which sale of wire was exempted from
sales tax starting from 1.4.76 if the wire rods used by the wire drawing units
in the State for the manufacture of wire had been subjected to tax under
the State Act.
D 19. What is left to be decided is about the nature of the order to be
passed on the prayer of refund Jn this connection, Shri Lahoty has to the ?'
order dated 6.1.86 passed by this Court while special leave reading as
below:-

E 'We make no order for restraining the recovery of the amount
from th petitioners but but we direct issue of notice returnable in
four weeks from today or considering the terms on which an order
of refund should be made.'

Our attention is then invited to section 33-B of the statute in question
F (Andhra Pradesh General Sales Tax Act) which deals with the subject
matter of refund in cases of the present nature. We leave the appellants to
work out their remedies relating to refund in accordance with the
provisions contained in this section.

G 20. ln view of the above, the appeals are allowed by setting aside the
impugned judgments and by leaving the appellants to pursue the matter of
refund as indicated above. In the facts and circumstances, we leave the
parties to bear their own costs. ".

R.R. Appeals allowed.
H