# THE STATE OF MADHYA BHARAT (Now the STATE OF Ac. MADHYA PRADESH) & ORS v. HIRALAL JI

- **Citation:** [1966] 2 S.C.R. 752
- **Court:** Supreme Court of India
- **Decided:** 1965-11-29
- **Case number:** Civil Appeal No. 814 of 1964
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-state-of-madhya-bharat-now-the-state-of-ac-madhya-pradesh-ors-v-hiralal-ji-3748
- **Pages:** 3

## Headnote

THE STATE OF MADHYA BHARAT (Now the STATE OF
Ac.
MADHYA PRADESH) & ORS.
v.
HIRALAL JI
November 29, 1965
[K. SUBBA RAo, J. C. SHAH ANDS. M. SIKRI, JJJ
Sales Tax-Madhya Bharat
Sales Tax Act, Samvat
2007 (30 of
1950)-Essential Goods (Declaration and Regulation of Tax on Sales
or Purchase) Act, 1952 (Central
Act 52 of 1952), s. 5-Notificatimis
issued under-Iron and steel exempted from 1ales tax-Iron bars, flats
and Plates whether 'Iron and steel' for the purpose of exemption.
The respondent as head of a joint Hindu family owned a re-rolling
mill at which scrap iron locally purchased, and iron plates imported from
ontside, were converted into bars, flats and plates in the Mills and thereafter sold in the market. The sales tax authorities held that iron ban,
fiats and plates sold by the respondent were not 'iron and steel' exempted
by notification No. 58 dated October 1953 issued under the Essential
Goods (Declaration and Regulation of Sales and Purchasees) Act, 1952.
Jn a petition under Arts. 226 and 227 filed by the respondent challenging
the said assessment the High Court decided
that iron bars, flats and
plates were exempted under the notification. The State appealed to this
Court.
B.
c
HELD : Goods prepared from metals other than gold and silver are
made taxable by notification No. 59 whereas notification No, 58 exempts
iron and steel from tax.
A comparison of the baid two notifications
brings out the distinction between raw.materials of iron and steel and
E
the goods prepared from iron and steel.
While the former is exempted
from. tax the latter is taxed.
Therefore iron and steel
used as raw ..
material for manufacturing other goods are exempted from taxation. So
long a~ iron and steel continue to be raw materials, they
enjoy the
exemption.
. Scrap iron purchased by the respondent
was
merely rerolled into bars, fiats and plates for
convenience
of sale. The rawmaterials were only re-rolled to give them
attractive and acceptable
forms.
They did not in the process lose their
character as iron and ,F
steel. The bars, flats and plates sold by the respondent were therefore
iron and steel exempt under the notification. (754 D-G]

## Text

THE STATE OF MADHYA BHARAT (Now the STATE OF
Ac.
MADHYA PRADESH) & ORS.
v.
HIRALAL JI
November 29, 1965
[K. SUBBA RAo, J. C. SHAH ANDS. M. SIKRI, JJJ
Sales Tax-Madhya Bharat
Sales Tax Act, Samvat
2007 (30 of
1950)-Essential Goods (Declaration and Regulation of Tax on Sales
or Purchase) Act, 1952 (Central
Act 52 of 1952), s. 5-Notificatimis
issued under-Iron and steel exempted from 1ales tax-Iron bars, flats
and Plates whether 'Iron and steel' for the purpose of exemption.
The respondent as head of a joint Hindu family owned a re-rolling
mill at which scrap iron locally purchased, and iron plates imported from
ontside, were converted into bars, flats and plates in the Mills and thereafter sold in the market. The sales tax authorities held that iron ban,
fiats and plates sold by the respondent were not 'iron and steel' exempted
by notification No. 58 dated October 1953 issued under the Essential
Goods (Declaration and Regulation of Sales and Purchasees) Act, 1952.
Jn a petition under Arts. 226 and 227 filed by the respondent challenging
the said assessment the High Court decided
that iron bars, flats and
plates were exempted under the notification. The State appealed to this
Court.
B.
c
HELD : Goods prepared from metals other than gold and silver are
made taxable by notification No. 59 whereas notification No, 58 exempts
iron and steel from tax.
A comparison of the baid two notifications
brings out the distinction between raw.materials of iron and steel and
E
the goods prepared from iron and steel.
While the former is exempted
from. tax the latter is taxed.
Therefore iron and steel
used as raw ..
material for manufacturing other goods are exempted from taxation. So
long a~ iron and steel continue to be raw materials, they
enjoy the
exemption.
. Scrap iron purchased by the respondent
was
merely rerolled into bars, fiats and plates for
convenience
of sale. The rawmaterials were only re-rolled to give them
attractive and acceptable
forms.
They did not in the process lose their
character as iron and ,F
steel. The bars, flats and plates sold by the respondent were therefore
iron and steel exempt under the notification. (754 D-G]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 814 of
1964.
Appeal by special leave from the judgment and order dated
October 24, 1961 of the Madhya Pradesh High Court in Misc.
Petition No. 125 of 1958.
I. N. Shroff, for the appellants.
C. B. Agarwa/a and C. P. Lal, for the respondent.
G
The Judgment of the Court was delivered by
n
Sobba Rao, J.
This appeal by special leave raises
the
question of the intepretation of Item No. 39 of the Notification
M. B. STATE v. HIRALAL (Subba Rao, J.)
753
A No. 58, dated October 24, 1953, hereinafter called the•
'Notification', issued by the Government of Madhya Bharat under
the Madhya Bharat Sales Tax Act, Samvat 2007 (Act No. 30 of
1950), hereinafter called the Act.
The facts are as follows : Hiralal, the respondent, is the•
B manager of a joint Hindu family carrying on business in the name
and style of "Messrs. Tilokchand Kalyanmal". The joint family
owns a re-rolling mill situated in Indore City called the Central
India Iron and Steel Company. The said family purchases scrap·
iron locally and imports iron plates from outside and after cone verting them into bars, flats and plates in the Mills sells them in
the market.
The respondent made a default in furnishing the
returns prescribed by s. 7(i) of the Act for the period April l,
1954, to March 31, 1955. On February 27, 1956, the Sales-tax
Officer, Indore, determined the taxable turnover at Rs. 2,26,000
and the sales-tax payable thereon at Rs. 8,000; and he also imD
posed a penalty of Rs. 1,000 under s. 14(1) (c) of the Act.
On·
the same day he issued demand notices to the respondent for the
payment of the said sales-tax and the penalty. On September 10,
1956, the respondent filed a petition in the High Court of Madhya
Bharat (afterwards Madhya Pradesh) under Arts. 226 and 227
of the Constitution for the issue of appropriate writs quashing.
E
the assessment of tax and penalty and to restrain the State from
giving effect to the said orders of the Sales-tax Officer. A Division Bench of the High Court held that the iron bars, flats and.
plates sold by the respondent were exempted from sales-tax under
the Notification. In that view, the orders of the Sales-tax Officer
were quashed. The state has filed the present appeal, by special
F
leave.
The only question in this appeal is whether the said iron bars,
flats and plates are not iron and steel within the meaning of
Item No. 39 of the Notification.
G
Parliament enacted Essential Goods (Declaration and Regulation of Tax on Sales or Purchases) Act, 1952 (Act No. 52 of
1952), which came into force on August 9, 1952. In Schedule I
of the said Act, iron and steel were declared essential for the
life of the community.
Thereafter, the Government of Madhya
Bharat, in exercise of the powers conferred by s. 5 of the Act,
H
issued the Notification as also Notification No. 59, dated Octo--
ber 24, 1953. The material part of Schedule I of Notification 58'
reads:
·754
SUPREME
COURT
REPORTS
[1966] 2 S.C.R.
"No tax shall be payable on the sale of the following
A
_goods:-
S.No.
Description of goods.
39
Iron and steel.
Notification No. 59 described the goods sales of which were
B
.taxable at particular rates. Schedule IV thereof reads :
"List of articles under section 5 of the Madhya
Bharat Sales Tax Act, 1950, on the assessable sale
proceeds of which sales tax at the rate of Rs. 3/2/- per
cent. shall be payable, showing the nature of articles on,
c
which the tax is payable.
S.No.
Name of article
Stage of sale in Madhya Bharat at
which the tax is payable.
9
.... goods prepared from any n1etal
sale by importer or producer.
other than gold and silver ....... .
Learned counsel for the State contends that the expression
"'iron and steel" means iron and steel in the original condition
:and not iron and steel in the shape of bars, flats and plates. In
our view, this contention is not sound.
A comparison of the
said two Notifications brings out the distinction between rawmaterials of iron and steel and the goods prepared from iron and
:steel : while the former is exempted from tax, the latter is taxed.
Therefore, iron and steel used as raw-material for manufacturing
other goods are exempted from taxation.
So long as iron and
:steel continue to be raw-materials, they enjoy the exemption. Scrap
fron purchased by the respondent was merely re-rolled into bars,
fiats and plates.
They were processed for convenience of sale.
The raw-materials were only re-rolled to give them attractive and
.acceptable forms. They did not in the process lose their character
as iron and steel.
The dealer sold "iron and steel" in the shape
of bars, fiats and plates and the customer purchased "iron and
steel" in that shape. We, therefore, hold that the bars, fiats and
plates sold by the assessee are iron and steel exempted under the
Notification.
The conclusion arrived at by the High Court is
-correct.
In the result, the appeal fails and is dismissed with costs.
.
Appeal dismissed.
D
E
F
G
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