- Bookmark
- Share
- CaseIQ
M/S Saru Smelting (P) Ltd. v. Commissioner Of Sales Tax, Lucknow .
Factual and Procedural Background
The appellant manufactured phosphorous bronze. The Judge (Revisions), Sales Tax, U.P., Lucknow held that the product fell within Entry 2(a) of Notification No. ST-II-333.X-1012-1971, issued under Section 3-A(2) of the U.P. Sales Tax Act, 1948. That entry imposed tax at 1% on copper, tin, nickel, zinc, or alloys containing only those metals. [1][2]
On December 14, 1979, the Allahabad High Court set aside the revisional order and held that the product was not covered by Entry 2(a), making it taxable as an unclassified commodity at 3.5%. The appellant challenged that judgment in this appeal. [1]
Legal Issues Presented
- Whether phosphorous bronze containing copper, tin, and a small quantity of phosphorous qualified as an alloy containing the metals specified in Entry 2(a) “only.” [1][3][4]
- Whether the product was taxable at 1% under Entry 2(a) or at 3.5% as an unclassified commodity. [1][2]
Arguments of the Parties
Appellant's Arguments
- Phosphorous bronze was covered by Entry 2(a) because it was made from tin and copper. [3]
- The small quantity of phosphorous was used merely to deoxidise the metal and was not an essential constituent of the product. [3]
- Nevertheless, the parties admitted that phosphorous bronze could not be produced without phosphorous and that some phosphorous remained in the finished product. [3]
Respondent's Arguments
- Phosphorous bronze contained phosphorous in addition to the metals specified in Entry 2(a), and therefore did not fall within that entry. [4]
- The word “only” restricted the entry to alloys composed exclusively of copper, tin, nickel, or zinc; the inclusion of any other metal or substance excluded the alloy. [4]
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| CST v. Hindustan Metal Works, Hathras (1964) 15 STC 97 | The word “only” excludes an alloy containing any substance other than the metals enumerated in the notification. [5] | The precedent supported treating phosphorous bronze containing phosphorous as outside the preferential entry. [5][6] |
Court's Reasoning and Analysis
The Court considered dictionary meanings of “phosphorous bronze” but held that the controlling question was the proper interpretation of Entry 2(a). [6]
The entry covered either pure copper, tin, nickel, or zinc, or an alloy composed exclusively of two or more of those metals. The Court regarded the word “only” as materially limiting the scope of the entry. [6]
Because the disputed alloy contained phosphorous, it could not fall within Entry 2(a), even though the amount of phosphorous was very small. [6]
Holding and Implications
APPEAL DISMISSED WITH COSTS. The Court held that phosphorous bronze containing phosphorous was not covered by Entry 2(a) of the notification. [6]
The dismissal left undisturbed the High Court's determination that the product was taxable as an unclassified commodity at 3.5%, rather than at the preferential rate of 1%. [1][2][6] No broader implications were discussed.
Yogeshwar Dayal, J.—This appeal is directed against the judgment of the Single Judge of the Allahabad High Court passed in Sales Tax Revision No. 214 of 1979 dated December 14, 1979. By the impugned judgment the High Court set aside the order of the Judge (Revisions), Sales Tax, U.P, Lucknow holding that the Phosphorous Bronze which the assessee/appellant herein have been manufacturing, fell within the ambit of Notification No. ST-II-333.X-1012-1971 dated November 15, 1971 issued in exercise of the powers under the second proviso to sub-section (2) of Section 3-A of the U.P Sales Tax Act, 1948 (U.P Act 15 of 1948), and took the view that the relevant entry at serial No. 2(a) of the said Notification did not cover the goods prepared by the appellant herein and was thus liable to be taxed as an unclassified commodity at the rate of 3.5%. The relevant entry reads as under:
Sl. No. Description of goods Rate of tax 1 … … 2 (a) Copper, tin, nickel or zinc or any other alloy containing any of these metals only 1 per cent (b) … …
2. The contention on behalf of the appellant is that Phosphorous Bronze manufactured and marketed by them is covered under the aforesaid entry. According to the appellant the said Phosphorous Bronze is made of tin and copper only. It is further contended on behalf of the appellant that the small quantity of Phosphorous is used to deoxidise the metal and as such the Phosphorous is not an essential substance of the Phosphorous Bronze. It is, however, the admitted case of the parties that without the use of Phosphorous the Phosphorous Bronze cannot be produced and certain quantity of Phosphorous still remains in the Phosphorous Bronze.
3. The contention of the respondent is that Phosphorous Bronze is an alloy containing not only the metals mentioned in the aforesaid entry but Phosphorous also and as such it is not covered under the aforesaid entry. The words “other alloy containing any of these metals only” mean that the alloy made of these metals i.e copper, tin, nickel or zinc only and that alone is covered under the said entry. It was submitted that if any other metal or substance is included in such an alloy, the same would not be covered under the aforesaid entry.
4. A similar question arose in the case of CST v. Hindustan Metal Works, Hathras (1964) 15 STC 97 wherein it was held as under:
“The notification exempts tax on the sale of alloys prepared from the solution of two or more of the metals enumerated therein. On account of the word ‘only’ the sale of an alloy prepared from the solution of two or more of those metals and some other substance or substances would not be exempt from tax. The assessee sold an alloy called phosphor bronze which was prepared from the solution of copper, tin, phosphorous and lead. Phosphorous and lead are not mentioned in the notification. They are deliberately added by the assessee as per agreement between the parties. The sale is, therefore, prima facie liable to be taxed.”
5. We were referred to various dictionary meanings of the words ‘Phosphorous Bronze’ which have been noticed by the learned Judge dealing with the case in the High Court. We are really concerned with the interpretation of the entry. The emphasis in the entry is — either it should be pure copper, tin, nickel or zinc and if it is an alloy containing two or more metals, it must be an alloy containing these metals only. The expression “only” is very material for understanding the meaning of the entry. Since the alloy in dispute contains Phosphorous, may be in a very small quantity, it cannot fall within Entry 2(a) of the aforesaid Notification. The appeal consequently fails and is dismissed with costs.
Alert