Holding

Rough un‑machined cast iron castings are to be treated as 'cast iron' and thus as declared goods under the Tamil Nadu General Sales Tax Act, rendering the circular and the notices issued under it void.

Summary

Vasanthan Foundry, a manufacturer of rough cast iron castings, challenged a Tamil Nadu Government circular dated 14 September 1993 that re‑characterised such castings as distinct from "cast iron" and thus not "declared goods" under the Tamil Nadu General Sales Tax Act, 1959, leading to higher tax assessments. The appellants argued that the circular misinterpreted the Supreme Court’s decision in Bengal Iron Corporation v. Commercial Tax Officer, which held that "cast iron" includes rough cast iron castings. The Court examined the statutory language of Section 14(iv)(i) of the Central Sales Tax Act and the corresponding provisions in the Tamil Nadu Act, and held that rough un‑machined cast iron castings are to be treated as "cast iron" and therefore as declared goods. Consequently, the circular and the show‑cause notices issued under it were quashed, and the earlier tax treatment at 4% was affirmed. The Court clarified that once the rough castings are machined or finished into products such as pipes or manhole covers, they become distinct goods and are not declared goods.

Issues considered

Whether 'cast iron' under Section 14(iv)(i) of the Central Sales Tax Act includes rough cast iron castings for the purpose of being declared goods.
Whether the Tamil Nadu circular of 14 September 1993 correctly re‑interprets the Supreme Court’s ruling in Bengal Iron Corporation v. Commercial Tax Officer.
Whether the circular and the subsequent show‑cause notices can be set aside.
Whether state tax authorities may levy a higher rate on rough cast iron castings by treating them as non‑declared goods.

Legislation cited

Central Sales Tax Acts. Section 14(iv)(i), s. Section 15
Tamil Nadu General Sales Tax Act, 1959s. Schedule II Entry 4 Item IV sub‑item (i), s. Section 4

Subjects

sales taxdeclared goodscast ironcast iron castingscirculartax assessmentinter‑state tradeCentral Sales Tax ActTamil Nadu General Sales Tax Actstatutory interpretation

Judgment

VASANTHAN FOUNDRY A
V.

UNION OF INDIA AND ORS.

AUGUST 9, 1995

(B.P. JEEVAN REDDY, N.P. SINGH AND SUHAS C. SEN, JJ.] B

Tamil Nadu General Sales Tax Act, 1959 :

Schedule II-Clause (i) of Entry 4-'Cast Iron Castings'-Sales
Tax-Levy of-Government circular stating that rough cast iron castings C .
should be treated as different from cast iron-Quashing of-Held 'Cast Iron
Casting' in its basic f onn is 'cast iron '-But products made by machining or
polishing the rough cast iron castings cannot be regarded as 'cast iron casting'.

The appellant-Foundry, manufacturer or rough Cast Iron Castings,.
unsuccessfully challenged the validity of a circular dated 14th September, D
1993 issued by the Special Commissioner and Commissioner of Commer-
cial Taxes Madras-Vas well as notices issued pursuant to the said circular
proposing to assess to tax sale of Cast Iron Castings @8%. The case of
the appellant is that before the judgment of this Court in Bengal Iron
Corporation v. Commercial Tax Officer, (1994] Supl. 1 SCC 310 'Cast Iron
E
Castings' were treated as declared goods and tax was levied at 4% at the
first point of sale in the State of Tamil Nadu. Subsequent to the judgment
the impugned circular was issued stating that rough 'cast iron castings'
whether machined or unmachined have to be treated as distinct and
different from cast iron and the earlier stand that rough cast iron castings
were 'declared goods' has to be reversed and tax shall be levied on cast F
iron castings accordingly. Thus, the question in these appeals is whether
the 'cast iron' in the list of declared goods in the Tamil Nadu Sales Tax
Act, 1959 should include 'Cast Iron Castings'.

It was contended for the appellant that (i) the circular dated
14.9.1993 is based on misconception of the law laid down by this Court in G
the case of Bengal Iron Corporation; and (ii) if in a given case it is found
that agricultural implements or parts of a motor vehicle or manhole
covers, bends, or cast iron pipes are being produced in a foundry, these
cannot be treated as 'cast iron', but will have to be treated as finished
goods made of cast iron. But, 'cast iron casting' at its primary stage must H
575
576 SUPREME COURT REPORTS (1995) SUPP. 2 S.C.R.

A be treated as declared goods. When pig iron or scrap iron is melted in the
foundry and mixed with carbon and silicon, it cannot be said that the
molten metal was cast· iron and when the molten metal is poured into a
mould, it ceased to be cast iron.

Allowing the appeals, this Court
B
HELD : 1. The circular dated 14.9.93 is quashed and the impugned
show cause notices issued pursuant to the aforesaid circular are also
quashed, with the clarification that 'rough unmachined cast iron castings'
will continue to be treated as declared goods under sub-item (i) or Item
(iv) of the Second Schedule to the Tamil Na du General Sales Tax Act, 1959.
c (588-G]
2. 'Cast Iron Casting' in its basic or rough form must be held to be
'cast iron'. But, if thereafter any machining or polishing or any other
process is done to the rough cast iron casting to produce things like pipes,
D manhole covers or bends, these cannot be regarded as 'cast iron casting in
its primary or rough form, but products made out of cast iron castings.
Such products cannot be regarded as 'cast iron' and cannot be treated as
'declared goods' under Section 14(iv) of the Centrai Sales Tax Act. This view
is not in conflict with the view taken in the case of Bengal Iron Corporation,
b'llt it is in con~ofiance with the decision in that case. (586-C-E]
E ..
Bengal Iron Corporation v. Commercial Tax Officer, (1994) Suppl. 1
S.C.C. 310, explained.

3. By including 'cast iron' among the goods of special importance in
inter-State trade or commerce, the Legislature could not have given the
F phrase 'cast iron' a narrow and limited meaning so as to exclude everything
made out of cast iron in molten form. It is not conceivable that molten .
metal can be sold or purchased in course of inter-State trade or for that
matter even in course of intra-State sale or purchase. It can only be
delivered by a foundry in a container. The molten metal will solidify on
G cooling and acquire the shape and size of the container. In other words, the
molten metal will become rough cast iron casting. Similarly, if the molten
metal is delivered in moulds, it will acquire the size and shape of the moulds
as soon as it cools down and will acquire the size and shape of the mould.
It is nobody's case that it is the molten metal which is dealt with in inter-
State trade or commerce. If rough cast iron castings are treated as some-
H thing distinct and separate from cast iron, the purpose behind Sections 14
VASANTHAN FOUNDRY v. U.0.1. [SEN, J.] 577

ad 15 of the Central Sales Tax Act will be defeated. [583-E; F;G-H; 584-A) A
McGraw-Hill's Encyclopedia of Science & Technology, 7th Edn. Vol.
3 & 11; Encyclopedia Americana, International Edn. Vol. 5, referred to.

4. This molten metal produced in a foundry cannot be described as
'cast iron'. In particular having the purpose behind Sections 14 and 15 of B
the Central Sales Tax Act in mind, cast iron cannot be construed to mean
anything but the solidified material which is bought and sold in inter-State
trade or commerce. The shape and size of the solidified material is quite
unimportant for the purpose of Section 14. If molten metal is poured into
a mould what comes out may be regarded as a casting. Even then such
iron casting in its solid form must be treated as 'cast iron' in Section 14(iv)
c
of the Central Sales Tax Act. The test is whether the goods in question are
being bought and sold, i.e., dealt with and understood, in commercial
parlance as cast iron or as different goods, e.g., manhole covers, pipes,
motor parts etc. (586-A-C]
D
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2638-39
of 1994.

From the Judgment and Order dated 7.12.93 of the Madras High
Court in W.P.Nos. 21165 and 21166 of 1993.
E
Soli J. Sorabjee, AN. Haksar, Mrs. Indu Malhotra and Ms. Ayesha
Khatri for the Appellants.

AK. Ganguli, A Mariarputham, Mrs. Aruna Mathur and A Kapoor
for Arputham Aruna & Co. for the Respondents.
F
The Judgment of the Court was delivered by

SEN, J. The question that falls for determination in this case is
whether the 'cast iron' in the list of declared goods in the Tamil Nadu
General Sales Tax Act would include 'Cast Iron Castings'. G
The case of the appellant is that the basic raw materials for produc-
ing cast iron are pig iron, steel scrap, iron scrap, cast iron scrap etc. After
melting these raw materials and adding requisite quantity of carbon, silica
etc., the molten metal in the cupola furnace is poured into the moulds of
different specifications to get the cast iron castings as required by the end H
578 SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.

A user. The foundry owners like the appellant, manufacture rough cast iron
castings according to the specifications of their customers, who in their turn
manufacture manhole covers, pipes, components for automobile industry,
agricultural implements, etc. For this the rough castings have to undergo
machining, grinding, polishing and various other process.

B Section 14 of the Central Sales Tax Act declared certain goods to be
of special importance in inter-State trade or commerce. In the list of goods,
set out in Section 14, 'lfl)n and Steel' has been included in the following
manner:-

c "14(iv). Iron and Steel, that is to say,-

(i) pig iron and cast iron including ingot moulds, bottom plates,
iron scrap, cast iron scrap, runner scrap and iron skull scrap;

(ii) steel semis (ingots, slabes, blooms and billets of all qualities,
D shapes and sizes);

(iii) skelp bars, tin bars, sheet bar, hoe-bars and sleeper bars;

(iv) steel bars (rounds, rods, squares, flats, octagons and
hexagons, plain and ribbed or twisted, in coil form as well as
E straight lengths)

(v) steel structurals (angles, joists, channels, tees, sheet piling
sections, Z sections or any other rolled sections);

(vi) sheets, hoops, strips and skelp, both black and galvanized, hot
F and cold rolled, plaint and corrugated, in all qualities in
straight lengths and in coil form, as rolled and in rivetted
conditions;

(vii) plates both plain and chequered in all qualities;
G
(viii) discs, rings, forgings and steel castings;

(ix) tool, alloy and special steels of any of the above categories;

(x) steel melting scrap in all forms including steel skull, turnings
H and borings;
VASAN1HAN FOUNDRY v. U.O.I. [SEN, J.] 579

(xi) steel tubes, both welded and seamless, of all diameters and A
lengths, including tube fittings;

(xii) tin-plates, both hot dipped and electrolytic and tinfree plates;

(xiii) fish plate bars, bearing plate bars, crossing sleeper bars, fish
plates, bearing plates, crossing sleeper£. and pressed steel B
sleepers, rails-heavy and light crane rails;

(xiv) wheels, tyres, axles and wheel sets;

(xv) wire rods and wire-rolled, drawn, galvanised aluminised, C
tinned or coated such as by copper;

(xvi) defective, rejects, cuttings or end pieces of any of the above
categories;"

Section 15 of the Act imposed restrictions and conditions in regard D
to sales tax on sale or purchase of declared goods within a State. By Section
15(a) of the Act, the sales tax payable under any State law in respect of
any sale or purchase of declared goods inside the State shall not exceed
4% of the sale or purchase price thereof and such sales tax shall not be
levied at more than one point. E

Section 4 of the Tamil Nadu General Sales Tax Act deals with tax in
respect of declared goods and reads as follows :

"Notwithstanding anything contained in sub-section (2) to (8) of
Section 3 or Section 3-A or Section 3-B but subject to the F
provisions of sub-section (1) of Section 3, the tax under this Act
shall be payable by a dealer on the sale or the purchase inside the
State of declare goods at the rate and only at the point specified
against each in the second schedule on the turnover in such goods
in each year."
G
Entry 4 of the Second Schedule to the Tamil Nadu General Sales
Tax Act has reproduced clause (iv) of Section 14 of the Central Sales Tax
Act word for word. Clause (i) of Entry 4 of the Second Schedule to the
Tamil Nadu General Sales Tax Act with effect from 1.4.1974 reads as
follows :- H
580 SUPREME COURT REPORTS (1995) SUPP. 2S.C.R.

A "(i) Pig iron and cast iron including ingot moulds, bottom plates,
iron scrap, cast iron scrap, runner scrap and iron skull scrap;

There is no dispute that sub-item (i) of Item II to the Third Schedule
B
of Andhra Pradesh General Sales Tax Act is also identically worded and
provides for levy of 4% tax on such goods.

The case of the appellant is that before the judgment of this Court
in the case of Bengal Iron Corporation v. Commercial Tax Office1; [1994]
C Suppl. 1 S.C.C. 310, 'cast iron castings' were treated as declared goods and
tax was levied at 4% at the first point of sale in the State of Tamil Nadu.
This is evident from the Commissioner of Commercial Taxes proceedings
in R.Dist. AZ/3402/81 dated 24.6.1981. It was clarified in that proceeding
that the expression 'cast iron' in the list of declared goods would cover 'cast
D iron castings'. Rough (unmachined) cast iron castings were to be treated
as declared goods under sub-item (i) of Item IV of the Second Schedule
to the Tamil Nadu General Sales Tax Act.

Similar views were expressed by the Central Government twice in
two clarificatory letters dated February 28, 1977 and January 31, 1984, in
E which it was stated that 'cast iron' used in Section 14(iv)(i) of the Central
Sales Tax Act would cover 'castings of cast iron'.

After the judgment of this Court in the case of Bengal Iron Corpora-
tion, delivered on 27th April, 1993, a circular has been issued dated 14th
F September, 1993 by the Special Commissioner and Commissioner of Com-
mercial Taxes, Madras-V, in which it has been stated that 'cast iron
castings' are liable to be taxed at the rates applicable to the products
according to their classification under the First Schedule to the Tamil Nadu
General Sales Tax Act. The circular referred to the decision in the case of
G Bengal Iron Corporation (supra) and stated that as a result of this decision
'rough cast iron castings whether machined or unmachined' have to be
treated as distinct and different from cast iron and the earlier stand that
rough cast iron castings were 'declared goods' has to be reversed and tax
shall be levied on cast iron casting accordingly. This circular superseded
all earlier circulars and it was declared that the revised classification will
H take effect from 1.4.1993.
VASANTHANFOUNDRYv. U.0.1.[SEN,J.] 581

lne case of the appellant, Vasantham Foundry, is that it is doubtful A
whether such clarification/circulars can have any binding effect on quasi
judicial authorities under the Sales Tax Act. But, f~!lowing this circular,
notices were issued by Commercial Tax Officer to various foundry owners
proposing to assess to tax sale of cast iron castings at the rate of 8%. A
group of writ petitions were moved by Vasantham Foundry, Coimbatore,
and members of Southern India Engineering Manufacturers Association,
B
Coimbatore and the Coimbatore, District Tiny and Small Scale Industries
Association, Coimbatore, challenging the aforesaid clarification as well as
notices. All these writ petitions were dismissed by a common order in
which it was held that there was absolutely no merit in all these cases. The
law as to the treatment of the cast iron castings and as to in what manner c
the goods by the description cast iron castings had to be treated for
assessment purposes, has been declared by the Supreme Court and is
binding not only. on all quasi judicial functionaries, but also upon all courts
and all persons in this country under Article 141 of the Constitution. It was
held that the relevant provisions of Andhra Pradesh General Sales Tax Act D
were identical with those of corresponding provisions of the Tamil Nadu
Act and in that view of the matter, the circular issued by the State of Tamil
Nadu to give effect to the judgment of the Supreme Court, cannot be
quashed by the issuance of a writ of certiorari as prayed.

E
The appellant has now come up before this Court and has c:Ontended
that the decision of this Curt in the case of Bengal Iron Corporation (supra)
is being misconstrued and misunderstood by all the States' revenue
authorities. The circular issued by the Tamil Nadu Government will affect
6,000 foundries in the State. In fact, all the foundries in the country will be
similarly affected by the misunderstanding of this judgment. It has been F
prayed that a large number of notices have been .issued to individual
foundry owners like Vasantham Foundry. Unless these notices are-
withdrawn a't once, they will suffer irreparable loss or damage.

Before going into the controversy raised in this case, it is necessary G
to examine the judgment in the case of Bengal Iron Corporation (supra)
and decide exactly what was decided in that case. Bengal Iron Corporation,
the appellant in that case, had purchased 'cast iron' and from that cast iron
the appellant manufactured several goods like manhole covers, bends, cast
iron pipes, etc. It was pointed out in the judgment :- H
582 SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.

A "It is thus clear that 'cast iron' is different from 'cast iron castings'
manufactured by the appellant. 'Cast iron' is purchased by the
appellant and from that 'cast iron', he manufactures several goods
like manhole covers, bends, cast iron pipes etc. In other words, 'cast
iron' used in Item (iv) of Section 14 of the Central Act is the
material out of which the petitioners products are manufactured.
B Position remains the same, even if the appellant purchases iron
and mixes it with carbon and silicon thereby deriving 'cast iron'
and then pours it into different moulds. In sum, 'cast iron' is
different from the cast iron pipes, manhole covers, bends etc.
manufactured and sold by the appellant. It cannot be denied, in
c such a situation that the products manufactured by the appellant
are, in commercial parlance, different and distinct goods from the
cast iron. Indeed this aspect is not seriously disputed by Shri
Ganguli, the learned counsel for the appellant."

D The appellant, in the instant case, has not disputed the above
proposition laid down in the case of Bengal Iron Corporation (supra). It has
been argued that if in a given case it is found that agricultural implements
or parts of a motor vehicles or manhole covers, bends, or cast iron pipes
are being produced in a foundry, these cannot be treated as 'cast iron', but
will have to be treated as finished goods made of cast ·iron. But, 'cast iron
E casting' at its primary stage must be treated as declared goods. When pig
iron or scrap iron is melted in the foundry and mixed with carbon and
silicon, it cannot be said that the molten metal was cast iron and when the
molten metal is poured into a mould, it ceased to be cast iron.

F In our judgment, this contention must be upheld. When Section 14
declared ·certain goods as of special importance in inter-State trade or
commerce, it could not have the molten metal in contemplation. It is
nobody's case that the molten metatis bought and sold in the market. What
is bought and sold is cast iron, which is obtained by pouring molten metal
in the moulds. The moulds may be of various shapes or sizes, but the type
G or nature or the size of the mould will not decide the question whether the
end product will be <cast iron' or not. Cast iron has to be in some shape,
whether as a bar, as a billet or in some other form. The molten metal has
to be poured into some mould to obtain 'cast iron' so that it can be traded,
transported and used in obtaining finished goods out of it. It is not the
H shape of this rough mould that is determinative of the issue. What is
V ASANTIIAN FOUNDRY v. U.0.1. [SEN, J.) 583

determinative is whether it is finished product or only a rough mould to be A
used in manufacturing finished products. The fact that the rough mould
approximates in shape to the finished goods that will be ultimately made
out of it does not make it any the less a rough mould. What emerges from
.•,. the moulds is a cast iron casting in its primary form, that is to say, rough
cast iron casting. But, that will not take it out of the ambit of declared B
goods. If cast iron or cast iron casting in the primary form is not to be
treated as declared goods, then the whole purpose of including cast iron
in the list of declared goods will be defeated.

The Central Sales Tax Act imposed a levy of tax on sale or purchase
of goods that takes place in course of inter-State trade or commerce. C
'Declared goods' and 'goods' have been defined in sub-sections (c) and (d)
of Section 2 of the Act:-

"(c) 'declared goods' means goods declared under Section 14 to
be of Special importance in inter-state trade or commerce;
D
(b) 'goods' includes all materials, articles, commodities and all
other kind of movable property, but does not include newspapers,
actionable claims, stocks, shares and securities;"

By including 'cast iron' amount the goods of special importance in
inter-State trade or commerce, the Legislature could not have given the E
phrase 'cast iron' a narrow and limited meaning so as to exclude everything
made out of cast iron in molten form. Only some of the goods which are
dealt with in inter-State trade or commerce, have been declared as goods
of special importance. On these goods tax can be levied only at one point
and the rate of tax will not exceed 4% of its price. It is not conceivable F
that molten metal can be sold or purchased in course of inter-State trade
or for that matter even in course of intra-State sale or purchase. Assuming
for argument's sake that a quantity of molten metal can be purchased by
a customer, it can only be delivered by a foundry in a container. The molten
metal will solidify on cooling and acquired the shape and size of the
container. In other words, the molten metal will become rough cast iron G
casting. Similarly, if the molten metal is delivered in moulds, it will acquired
the size and shape of the moulds as soon as it cools down and will acquired
the size and shape of mould. It is nobody's case that it is the molten metal
which is dealt with in inter-State trade or commerce. When the Central
Government declared cast iron as goods of special importance in inter- H
584 SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.

A State trade or commerce, it must have in contemplation some commodity
which is actually traded in inter-State trade or commerce. If rough cast
iron castings are treated as something distinct and separate from cast iron, ·
the purpose behind Sections 14 and 15 will be defeated.

It has been asserted on behalf of the appellant that 'cast iron' would
B have to be given its natural meaning and understood in the light in which
the expression has been understood by the trade for several decades. The
Central Government through the Department of Revenue has issued
several clarificatory letters confirming that 'cast iron' and 'cast iron
castings' would mean the same item for the purpose of declaration under
C the Act. This contention is sought to be supported by the following state-
ment in McGraw-Hill's Encyclopedia of Science & Technology, 7th Edi-
tion, Volume 3:-

"Cast Iron

D A generic term describing a family of iron alloys containing
1.8-4.5% carbon. Cast iron usually is made into specified shapes,
called castings, for direct use or for processing by machining, heat
treating, or assembly."

It will be seen from this that 'cast iron' and 'cast iron castings' are
E not being described as two different commodities. Cast iron usually is made
into specified shapes or castings. This corroborates the argument urged on
behalf of the appellant that cast iron can exist only in the form of cast iron
castings or cast iron scrap.

'Metal Casting' has been described in McGraw-Hill's Encyclopedia
F of Science & Technology, 7th Edition volume 11:-

"Metal Casting

The introduction of molten metal into a cavity or mold where,
upon solidification, it becomes an object whose shape is deter-
G
mined by mold cinfiguration."

But these statements have to be understood in the context of sales
tax enactment - the test being whether the basic metal remains the same
after the treatment or whether commercially known different goods
H emerge. It cannot be said that cast iron after it is machined and finished
V ASANTHAN FOUNDRY v. U.0.1. [SEN, J.] 585

and sold as different goods, e.g., bends, pipes, manhole covers, motor parts, A
etc. will still be treated as cast iron. The test is whether the goods are being
dealt with as cast iron or as different goods made out of cast iron in the
market place.

The Encyclopedia Americana, International Edition, Volume 5, has
explained 'cast iron' and 'casting' in the following manner :- B

"Cast Iron: Cast iron is a general term that describes a series of
iron-carbon-silicon alloys, which are produced by pouring the
molten alloy into molds. In contrast with steel, in which carbon is
chemically combined with the iron, cast irons contain more carbon C
than can be retained in solution. By varying the carbon and silicon
content of the alloy several types of cast iron are produced, each
with distinctive properties and uses. The production of a cast iron
object, regardless of the type of iron, involves several steps."

"Casting: Casting is the process of producing a metal object of a D
desired shape by pouring molten metal into a mold and allowing
the metal to cool and solidify. Man has been making cast metal
objects for artistic or practical purposes since very early times,
when the first castings probably were made of gold or copper
formed in a stone or clay mold. The earliest axes and other useful E
metal objects were cast in open molds of stone or baked clay. Early
art objections were made of cast gold, silver, copper, or bronze;
one existing life-sized portrait head in cast bronze from
Mesopotamia dates from about 2250 B.C.

The shaping of metals in the liquid state has been in develop- F
ment for centuries. With the growth of industrial societies, the need
for metal castings has become very great. In the united States alone
the industry produces more than 16 million tons of castings an-
nually, using iron, steel, copper aluminium, zinc, alloys, and mag-
nesium alloys."
G
Therefore, it appears from this that the molten form is not regarded
as 'cast iron' at all according to the Encyclopedia Americana. It. is
produced by pouring the molten alloy into moulds. 'Casting' is also used
generally to describe the process of producing a metal object of a desired
shape. H
586 SUPREME COURT REPORTS [1995] SUPP.2S.C.R.

A In our judgment, the molten metal produced in a foundry cannot be
described as 'cast iron'. In particular having the purpose behind Sections
14 and 15 of the Central Sales Tax Act in mind, cast iron cannot be
construed to mean anything but the solidified material which is bought and
sold in inter-State trade or commerce. The shape and size of the solidified
material is quite unimportant for the purpose of Section 14. If molten metal
B
is poured into a mould, what comes out may be regarded as a casting. Even
then such iron casting in its solid form must be treated as 'cast iron' in
Section 14(iv) of the Central Sales Tax Act. To repeat, the test is whether
the goods in question are being bought and sold, i.e., dealt with and
understood, in commercial parlance as cast iron or as different goods, e.g.,
c manhole covers, pipes, motor parts, etc.

Therefore, in our view 'cast iron casting' in its basic or rough form
must be held to be 'cast iron'. but, if thereafter any machining or polishing
or any other process is done to the rough cast iron casting to produce
D things like pipes, manhole covers or bends, these cannot be regarded as
'cast iron casting' in its primary or rough form, but products made out of
cast iron castings. Such products cannot be regarded as 'cast iron' and
cannot be treated as 'declared goods' under Section 14 (iv) of the Central
Sales Tax Act. This view is not in conflict with the view taken in the case
of Bengal Iron Corporation (supra), but it is in consonance with the decision
E in that case.

An argument was also made that from the very beginning when 'cast
iron' was brought in the list of declared goods under Central Sales Tax Act
and suitable legislation was passed by the State Governments to treat 'cast
p iron' as declared goods and levy tax thereon at the rate prescribed by the
Central Sales Tax Act and at a single point. All the State Governments
have taken the view that 'rough cast iron casting' should be treated as 'cast
iron'. Reliance has been placed on (i) circular dated 5.10.1979 issued by
the Commissioner of Commercial Taxes, Hyderabad, Andhra Pradesh; (ii)
G circular dated 24.6.91 issued by the Commissioner & Secretary, Commer-
cial Tax Department, Tamil Nadu; (iii) Memorandum of Government of
Andhra Pradesh issued on 27.7.1984; (iv) clarification made by the Govern-
ment of India vide its letters dated 28.2.1977 and 21.1.1984; (v) Memoran-
dum dated 17.4.85 issued by the Government of Andhra Pradesh; (vi)
communication Memo No. 11469 C.T/7Al2/88 dated 31.7.91 issued by the
H Commissioner of West Bengal and (vii) letter from the C.C.T. Andhra
VASANTHAN FOUNDRY v. U.0.1. [SEN, J.] 587

Pradesh dated 12.3.92. In all these communications consistent view has A
been taken that 'cast iron castings' have to be· treated as 'cast iron'.

It has been argued that the word 'cast iron' must be understood in
the way the trade understands it. This understanding has been recognized
and implemented by the various circulars issued by various State Govern-
ments and the Central Government from time to time in a consistent view. B
This meaning should not be discarded without very strong reasons. In the
instant case, if the well-understood meaning is discarded and the new
meaning is adopted, 6,000 foundries in the State of Tamil Nadu and
thousands of other foundries all over the country will suffer irreparable loss
or damage. c
Lastly, it has been contended that the circular dated 14.9.93 issued
by the Tamil Nadu Government is based on misconception of the law laid
down by this Court in the case of Bengal Iron Corporation (supra). The
aforesaid circular reads as follows :-
D
"Circular

Sub : TNGST Act 1959 - Cast iron rough castings - clarification
regarding rate of tax - judgment of Supreme Court in the case of
Bengal Iron Corporation - Revised Clarification - Issued.
E
Ref: 1. This Office Lr.R.Dis.A2/3492/81 dated 24.6.1981.

2. Judgment of Supreme Court in 90 STC 47.

In this office Lr. No. R.Dis.A2/3492/81 dated 23.6.81, it was
clarified (in modification of all previous instructions) that rough F
(un-machined) cast iron castings were liable to be taxed as
declared good under sub-item 1 of item 4 of the Second Schedule.

2. The Supreme Court in the case of Bengal Iron Corporation
(90 STC 47) has held that cast iron castings do not come under
the definition of cast iron mentioned in item (iv)(iv)(i) of Section G
14 of CST Act, as they are manufactured from cast iron and sold.
The Supreme Court has observed that cast iron used in item (iv)
(i) of Section 14 of CST Act is the material out of which the
products like man-hole covers, bends, cast iron pipes are manufac-
tures; that it cannot be denied that products manufactured are in H
588 SUPREME COURT REPORTS [1995) SUPP. 2 S.C.R.

A commercial parlance, different and distinct goods from cast iron.
The apex Court has gone into the clarifications issued by the
Government of India at various points of time and has come to
this conclusion. As a result of the judgment of Supreme Court cast
iron castings (whether machinised or unmachined) have to be
treated as distinct and different from cast iron. Therefore cast iron
B castings which are parts of machinery/automobiles etc. are to be
classified under tht: respectiye main items of the first schedule.
This will also call for the levy of surcharge, additional surcharge
and limit. These additional levies were hitherto not collected
because rough cast iron castings were treated as declared goods.
c The department and the trade have been following the above
clarifications that rough cast iron c::istings are declared goods. The
reversal of this stand by the department in view of the judgment
of Supreme Court has, therefore, to be given effect to from the
current year only.
D 3. In supersession of the clarification issued by this office
relating to the taxation of rough cast iron castings, it is hereby
clarified that such rough cast iron castings are liable to tax at the
rates applicable to the products according to their classification
under the First Schedule (for clarification will take effect from First
E April 1993. Government are being addressed for orders not to
re-open past assessment involving sales of rough cast iron castings.
In respect of pending assessments, revised rate of tax may be
applied, but collection of difference between the tax assessed and;

_4. Additional levies of surcharge, additional surcharge and
F additional sales tax may be deferred pending receipt of orders of
waiver from Government."

We are of the view that there is considerable force in the contention
of the appellant. The appeals are allowed. The circular ·dated 14.9.93 is
G quashed and the impugned show cause notices issued pursuant to the
aforesaid circular are also quashed, with the clarification that 'rough
unmachined cast iron castings' will continue to be treated as declared
goods under sub-item (i) of Item (iv) of the Second Schedule to the Tamil
Nadu General Sales tax Act, 1959.

H The respondents, however, will be at liberty to tax any product made
V ASANTHAN FOUNDRY v. U.0.1. [SEN, J.] 589

qut of the 'rough unmachined cast iron castings' in accordance with law. A
There will be no order as to costs.

Civil Appeal nos. 2640 and 2641of1994.

In view of our judgment in Civil Appeals Nos. 2638 and 2639 of 1994, B
the above appeals are also allowed. There will be no order as to costs.

T.N.A. Appeals allowed.