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S.T.As No. 13/113 of 1983-84 and S.T.As Nos. 1/IB to 3/113 of 1984-85, decided on 7th October, 1986.

---S. 10(3)--Notification No. S.R.O. 121(1)/70, dated 29-6-1970, item No. 2--C. B. R. Circular No. 11, dated 27-6-1951--Notification No. S. R. O. 9, dated 27-6-1951-- Exemption from sales tax--Notification which refers to iron and steel do not include product of iron and steel--Manufacture of iron and steel is liable at reduced rate of sales tax but not the products made from iron and steel--Goods predominantly of steel and iron would be taxed on reduced rates of that part which is made of that material--To qualify for exemption under Notification No. 9, dated 27-6-1951 goods should be such as are produced from pressure of steam on hammer works--If one part of such essential process is missing the goods will not qualify for exemption--Words "and products of iron foundries" used in item 15 of the Notification will have to be read disjunctively from the words "steam and hammer works". K.

Haji Fakar-ud-Din Khan for Appellant.

Date of hearing: 9th September, 1986.

--These four appeals or behalf of the assessee are directed against the impugned order of learned Appellate Assistant Commissioner by virtue of which he confirmed sales-tax assessments relating to the charge years 1977-78 to 1980-81.

2. Brief facts giving rise to these appeals are that the assessee, namely Messrs Daud Sons Armoury. derives income from the manufacture of shotguns, revolvers and pistols. It filed returns to declare turnover for the charge years 1977-78 to 1980-81 as under:-

3. In respect of the above turnover, assessee claimed exemption from payment of sales-tax as also application of reduced sales-tax on the plea that goods manufactured by it are products of hammer work. Both pleas of the assessee were however, rejected by the Sales Tax officer in consequence of which assessee was subjected to sales-tax at the standard rate of 20% for the charge years 1977-78 to 1980-81 under section 10(3) of the Sales-tax Act, 1951 (Act III of 1951). Having felt aggrieved with this order, the assessee filed first appeals before the learned Appellate Assistant Commissioner which were rejected by virtue of Appeals Nos. 23 and 291 to 293, dated 20-2-1984 and 20-1-1985 respectively. In this view of the matter, second appeals were filed before the Tribunal on the following grounds:

(i) that the learned A.A.C. was not justified to confirm orders of the Sales Tax Officer particularly when the higher authorities had accepted plea of the assessee.

(ii) that the learned A.A.C. and Sales Tax Officer should have followed the decision of the Income-tax Appellate Tribunal.

(iii) that in the light of evidence furnished by the assessee the Sales Tax Officer erred in subjecting the entire turnover to sales-tax at the rate of 20%

(iv) that sales of revolvers were totally exempted as these were products of iron foundry and hammer work."

(v) that sales should have been assessed at the reduced rate of 7-1/2% being the products of iron and steel.

I4. After hearing learned counsel of the assessee and evidence furnished by him we find that the assessee was charged to sales-tax for the first time in respect of the charge years 1963-64 to 1971-72. In appeal, the learned A.A.C. confirmed levy of sales-tax for these years. In second appeal, however, vide S.T.A. Nos. 37, 38, 24, 93, 94, 95, 96, and 97 (PB), dated 23-8-1974 the Tribunal held as under:----

"On plain reading of the notification also the same conclusion is possible but, the learned counsel has drawn our attention to the Tribunal's decision in S.T.A. 82 to 84 of 1967-68 decided on 28-2-1968 and reported as (1968) 18-Taxation 4 (Tribunal) where it was held that the notification in question which refers to iron and steel does' include the products of iron and steel. In view of the case already decided by the Tribunal we are unable to give a different opinion. We are, therefore, of the view that the goods of the appellant being predominantly of steel and iron the tax would be leviable on reduced rates of that part which is made of that material. The fact, however, cannot be denied that in revolvers as also in shotguns and rifles wood or plastic is also used. On estimate basis we take 1% of the value of the revolvers as relatable to wood and plastic etc. and direct that the same should be taxed at the normal rates. Similarly, in case of rifles and shotguns 2% of the value be taken as of wood and plastic etc. and be taxed at the normal rates. The remaining value should be taxed at 7-1/2% for the assessment years 1970-71 and 1971-72 and at 5% for other years of assessment under appeal."

5. Similar treatment was accorded to the assessee vide S.T.A. Nos. 14, 15, 16 and 17(PB)/78--79, dated 2-12-1981 in respect of the charge years 1972-73, 1973-74, 1974-75 and 1975-76. In so far as assessment year 1976-77 is concerned the learned Commissioner of Sales-tax followed the pattern of assessments set by the Tribunal vide appeals dated 23-8-1974. We have been told that this finding by Tear-led Commissioner of Sales-tax was not further agitated before the Tribunal by the department.

6. We find that the Sales-tax Officer while making assessments for the charge years 1977-78 to 1980-81 again subjected to sales-tax disclosed turnover at the standard rate of 20%. As has been stated above this treatment was confirmed by the learned A.A.C. vide Appeals Nos. 23 and 291. 292 and 293 dated 20-2-1984 and 20-1-1985 respectively. This confirmation of sales-tax assessments at the hands of learned A.A.C. has given rise to the present appeals before the Tribunal.

7. There is no denying the fact that a certain pattern of making sales-tax assessments was set vide S.T.As. Nos. 37, 38, 24, 93, 95, 96 and 97 (PB) of 1971-72, 1972-73 and 1973-74, dated 23-8-1974 and was followed in S.T.As. Nos. 14, 15, 16 and 17 (PB) of 1978-79, dated 2-12-1981. Similarly, learned Commissioner of Sales-tax also followed this pattern vide Appeal No. 1435, dated 24-5-1981 against which no appeal was filed by the department. But the Sales Tax Officer again charged to tax entire turnover confirmed in appeal vide order No. 23, dated 20-2-84. This action has the support of law as we see it presently.

8. The Central Government in exercise of the powers conferred on it by subsection (1) of section 7 of the Act ibid had provided reduced rate of sales tax at the rate of 7-1/2% in respect of iron and steel excluding imported billets vide SRO 121 (1)/70, dated 29-6-1970. Subsequently, this rate was reduced to 5%. The question for consideration here is whether goods or class of goods specified as iron and steel but excluding imported billets also include products of iron and steel or not We have considered this question at some length amongst ourselves and have concluded that on a plain reading of item 2 of SRO 121 (1)/70, dated 29-6-1970 the words iron and steel do not include products of iron and steel. In arriving at this conclusion, we have also drawn strength from C.B.R's. Circular No. 11, dated 27-6-1951 wherein the words iron and steel as used in the notification are to cover the following items only:---

9. From the above clarification we have been left in no manner of, doubt that the Board had allowed reduced rate of sales tax to iron and steel and certain other kinds of iron and steel items listed in notification) No.11 dated 27-6-1951. Therefore, in our opinion only the manufacture of iron and steel vide item No.2 of SRO 121 (1)/70, dated 29-6-1970 is liable at reduced rate of sales tax but not the products made from iron and steel.

10. By virtue of notification No.9, dated 27-6-1951 the Central Government in exercise of the powers conferred on it under subsection (1) of section 7 of the Act ibid had exempted products of iron foundries and steam and hammer works from charge of sales tax. In sales tax assessments and relevant appellate orders for the charge years 1977-78 to 1980-81 it is not the case of either the assessee or the department that goods manufactured by the assessee were products of iron foundries. On the other hand, we find that exemption was claimed in respect of goods manufactured by the assessee on the ground that these were products of hammer works. The only question for examination, therefore, at this stage, is whether the goods manufactured by the assessee were the products of steam and hammer works or not" As we shall see presently the answer to this question will be in the negative.

11. The products of iron foundries and steam and hammer works were exempted from payment of sales tax vide Item No.15 of Notification No.9, dated 27-6-1951. According to our analysis the products of iron foundries have to be read disjunctively from the words steam and hammer works. We have reached this conclusion as the word "and" disjoins products of iron foundries and steam and hammer works. As has been stated in para. 9/N, it is not the case of either the assessee or the department that goods manufactured by the assessee were products of iron foundries. Therefore, we are now left with the question whether) goods manufactured by the assessee were products of steam and hammer, works or not. As has been stated above exemption was claimed on the ground that goods manufactured by the assessee were products of hammer work. However, on this ground exemption is not admissible as this is not a correct interpretation of the second part of item 15 of SRO ibid. With a view to qualify for exemption goods should be such as are produced from the pressure of steam en hammer works. If one part of this essential process is missing the goods will not qualify for exemption. In the present case element of steam from hammer works was missing and, therefore, assessee was not entitled to exemption and consequently it was rightly charged to sales tax.

12. In view of the above discussion we have reached the inescapable conclusion that on the facts of this case entire turnover was chargeable to sales tax at the standard rate of 20%. Therefore, by agreeing with the finding of the learned A.A.C. we hereby reject all the appeals.

M.B.A./343/T Appeals dismissed.

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