GEMINI STEEL TUBES LTD Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) IN these revision petitions the following questions have been raised by the Trial Court : " (a) Whether, under the facts and in the circumstances of the case, the Tribunal is justified in holding that the defective coils and defective steel pipes which was not subjected to any manufacturing process, which were purchased locally and sold as such is liable to tax under section 5 of the Karnataka Sales Tax Act, 1957 ? (b) Whether the Tribunal is justified in ignoring the contentions with regard to non-application of the mind by the revisional authority on the question of taxing defective pipes when it was specifically brought that there was no mention in the notice ? (c) Whether there is any material to the Tribunal to hold that the petitioner is liable to tax on the sales of defective pipes and coils purchased locally when the assessing authority has held that these goods were not subjected to any process of manufacturing ? (d) Whether the Tribunal is justified in holding that the end cuttings are different from what is being purchased ? (e) Whether the Tribunal is right in holding that end cutting are not subjected to any manufacturing operation though there is a difference between the purchased and sold goods ? (f) If the end cuttings are different from what is being purchased, whether the Tribunal is justified in refusing to give set-off on the purchases ? (g) Alternatively as the end cuttings are not different from the purchased goods, whether the tribunal is justified in holding that the end cuttings are different from the purchased goods and hence liable to tax ? (h) Whether the Tribunal is justified in levying tax on defective coils, pipes, when there is no physical or chemical change from that of the goods purchased? (i) If answer to the above is in affirmative, whether the Tribunal is justified in refusing the set-off on the local purchase of the goods which became defective?"

(2.) THE facts of the case are that, the petitioners are the manufacturers of steel tubes. Assessment for the period January 1,1987 to December 31, 1987, i. e. , 1987-88 and April 1, 1988 to March 31, 1989, i. e. , for 1988-89 was made. It has not come on record as to what has happened for the period from January 1, 1988 to March 31,1988. The assessing authority has given exemption while finalising the assessment in respect of sale of cuttings of defective coils and sheets as the petitioner has already paid the full tax while purchasing the coils and it was considered to be the second sale in the State of Karnataka. There were purchases from outside as well. The petitioner purchased the steel tubes and raw materials from the State of Karnataka as well as from outside. The steel tubes are manufactured and sold. Revisional proceedings under Section 21 (2) of the karnataka Sales Tax Act, 1957 were initiated on the ground that there were no classification of raw material and finished product and, therefore, it cannot be inferred that steel tubes manufactured and sold within the State of Karnataka were out of the raw materials which has suffered tax under the Karnataka Sales Tax Act. The set-off allowed as per explanation II of the fourth Schedule was considered improper and the exemption given by the assessing authority on the end cuttings and defective and rejected coils and sheets was also found improper. The revising authority observed that the defective, rejected cuttings are different commodities specified in item XVI of entry 2 (a) of the Fourth Schedule to the Karnataka Sales Tax Act, 1957 which are derived in the process of manufacture and constitute different and separate taxable goods. Relying on a judgment in the case of State of Tamil Nadu v. Pyare Lal Malhotra AIR1976 SC 800 , 1983 (13 )ELT1582 (SC ), (1976 )1 SCC834 , [1976 ]3 SCR168 , [1976 ]37 STC319 (SC ), it was found that the petitioners are not entitled for set-off of tax paid on purchases to set tax at the rate of 4 per cent under Section 5 (4) of the Karnataka sales Tax Act, 1957 was levied.

(3.) IN the appeal before the Karnataka Appellate Tribunal, it was contended that the end cuttings are not new commodities and as such cannot be liable to tax again. An alternative plea was also taken that set-off of the tax payable on the local purchases in accordance with explanation II of the Fourth Schedule should have been given. Both the contentions were rejected and the appeals were dismissed.