Madon, C.J.
1. As the points which arise for determination in these two References under section 61(1) of the Bombay Sales Tax Act, 1959, are the same, we have thought it convenient to dispose them of by a common judgment.
2. The Applicants in both these References are registered as dealers under the Bombay Sales Tax Act, 1959 (hereinafter referred to as 'the Bombay Act') as also the Central Sales Tax Act, 1956 (hereinafter referred to as 'the Central Act'). The Applicants in Sales Tax Reference No. 51 of 1977 Shri Ram Steel Rolling Mills own a steel rolling mills at Kolshed Road, Thane. In the course of their business, they inter alia purchased M. S. Ingots and after re-rolling them in their mills and turning them into M.S. rounds they sold these rounds to their customers. So far as the present Reference is concerned, Shree Ram Steel Rolling Mills purchased certain quantity of M.S. ingots from Mohta Ispat Ltd., also a registered dealer under the Bombay Act. In respect of this sale, the said Mohta Ltd. issued to Shree Ram Steel Rolling Mills a bill dated April 14, 1976 for a sum of Rs. 67,554.58. As this was a first sale of these ingots, the said Mohta Ispat Ltd. became liable to pay to the Government sales tax under section 7(1) of the Bombay Act. They accordingly recovered from Shree Ram Steel Rolling Mills the amount which they would have to pay to the Government as sales tax and included the said amount in the said bill. After these ingots were re-rolled into M.S. rounds of 25 mm., some of these rounds were sold by Shree Ram Steel Rolling Mills to Messrs V. K. Steel, Bombay, for a sum of Rs. 11,973.23. Shree Ram Steel Rolling Mills were under the impression that this transaction of sale by them was not exigible to sales tax by reason of the provisions of section 7(1)(ii) of the Bombay Act and the question that we have to decide is whether this transaction of sale by Shree Ram Steel Rolling Mills is exigible to sales tax or not.
3. So far as Sales Tax Reference No. 7 of 1978 is concerned, the Applicants Metro Steel Rolling Mills also own a steel rolling mill at Dombivli in Thane District and are also registered as dealers both under the Bombay Act and the Central Act. They purchased rolling scrap of the value of Rs. 1,657.50. on February 5, 1976 from an unregistered dealer of Bombay. The scrap so purchased was re-rolled by Metro Steel Rolling Mills into rounds of 6 mm and sold by them to Ms. Tilak Talkies of Bombay on February 21, 1976 for Rs. 1,916.64. In respect of this sale, they issued an invoice to Ms. Tilak Talkies. Admittedly, Metro Steel Rolling Mills were liable to pay sales tax at the rate of 4% on the sale of the said rounds to Tilak Talkies, and they accordingly paid such tax. The question which arises is whether they are also liable to pay purchase tax under section 13 of the Bombay Act, on their purchase of rolling scrap from an unregistered dealer.
4. In view of the interpretation till then consistently placed by the Department upon certain statutory provisions of the Bombay Act and the Rules made thereunder, neither Shree Ram Steel Rolling Mills were liable to pay sales tax on the sales of M.S. rounds to V. K. Steel nor were Metro Steel Rolling Mills liable to pay any purchase tax in respect of their purchase of rolling scrap from an unregistered dealer. However, in view of a judgment of the Supreme Court delivered on January 19, 1976 in state of Tamil Nadu v. Pyare Lal Malhotra (1976) 37 S.T.C. 319 : 1983 E.L.T. 1582 (S.C.), the Commissioner of Sales Tax took a view that all such transactions were liable to tax. He accordingly issued a circular No. B-11 of 1976, dated April 20, 1976, giving notice that in view of the aforesaid decision of the Supreme Court, manufactured goods consisting of steel rounds, flats, angles, plates, bars or similar goods in other forms and shapes could be taxed again even when the material out of which they were made had already been subjected to tax as iron and steel scrap. The said circular further stated that it had been decided on administrative grounds to apply the ratio of the said judgment in matters of deciding claims grant of resale, set off and liability under section 3 of the Bombay Act as well as the grant of recognitions only in respect of transactions effected on and after the Supreme Court judgment, namely January 19, 1976.
5. In view of the aforesaid circular of the Commissioner both the above Applicants made applications to the Commissioner under Section 52(1) of the Bombay Act to determine their tax liability in respect of their aforesaid transactions. The questions which Shree Ram Steel Rolling Mills posed to the Commissioner were as follows :
'(1) Whether the activity of re-rolling ingots into M.S. rounds of 25 mm. amounts to process of manufacture as defined under the Bombay Sales Tax Act 1959 ?
(2) Whether any tax is payable on the M.S. rounds of 25 mm. sold by them under their invoice No. 983 of 28-4-1976 and if so, the rate thereof ?'
The Commissioner purporting to follow the aforesaid decision of the Supreme Court held by his order dated July 5, 1976 that the activity of re-rolling ingots into M.S. rounds would amount to 'manufacture' within the meaning of section 2(17) of the Bombay Act and the case of Shree Ram Steel Rolling Mills would not fall within the scope of clause (xviii) of Rule 3 of the Bombay Sales Tax Rules, 1959 (herein after for the sake of brevity referred to as 'the said Rules') and that consequently the sale of M.S. rounds in question made by them was liable to sales tax at the rate of 4 per cent by reason of the provisions of Section 7(1) of the Bombay Act. He further ordered that his determination would not affect the liability of Shree Ram Steel Rolling Mills to pay tax on sales M.S. rounds manufactured from M.S. ingots during all the assessment periods up to January 18, 1976 and that for such periods sales of M.S. rounds manufactured should be allowed as 're-sales' of the purchased goods subject, however to the provisions contained in section 7(1) and that their activity of converting M.S. ingots into M.S. rounds should not be treated as an activity of manufacture within the meaning of that expression in section 2(17) of the Bombay Act read with clause (xviii) of Rule 3 of the Rules during all the aforesaid periods. Against this order of the Commissioner, Shree Ram Steel Rolling Mills filed an appeal to the Tribunal.
6. The questions posed by Metro Steel Rolling Mills in their application for determination made to the commissioner were as follows :
'(a) Whether the activity of re-rolling rolling scrap into rounds of 6 mm. amounts to process or manufacture as defined under the Bombay Sales Tax Act, 1959 ?
(b) Whether any purchase tax under section 13 is payable on the rolling scrap of Rs. 1,657.50 purchased on 5-3-1976 from an unregistered dealer; and if so the rate of tax thereof ?'
The Commissioner decided these questions against Metro Steel Rolling Mills and held that they were liable to pay purchase tax at the rate of four per cent on their purchase of rolling scrap made on February 5, 1976 from the unregistered dealer. In their case also, he further directed that their liability to pay purchase tax on the purchases of rolling scrap used in the manufacture of rounds during all the assessment periods up to January 19, 1976 and consequently purchases of rolling scrap effected from unregistered dealers used similarly in the manufacture of rounds should not be assessed to purchase tax under section 13 of the Act and their activity of converting rolling scrap into rounds should not be treated as an activity of manufacture within the meaning of that expression in Section 2(17) of the Bombay Act read with clause (xviii) of Rule 3 of the Rules during the aforesaid periods. Metro Steel Rolling Mills also filed an appeal to the Tribunal against the order of the Commissioner.
7. Both these appeals along with one other appeal were heard together by the Tribunal and disposed of by a common judgment. It is out of this judgment and order of the Tribunal that the present References have been made at the instance of the assessees.
8. In order to appreciate what the Tribunal has held, the questions referred to this Court and the arguments advanced at the Bar, it is necessary to set out at this stage the relevant statuary provisions.
9. Clause (3) of Article 286 of the Constitution of India as substituted by the Constitution (Sixth Amendment) Act, 1956, provides that 'Any law of a State shall, in so far as it imposes, or authorises the imposition of a tax on the sale or purchase of goods declared by Parliament by law to be of special importance in inter-State trade or commerce, be subject to such restrictions and conditions in regard to the system of levy, rates and other incidents of the tax as Parliament may by law specify'. Parliament has, in pursuance of the above power conferred upon it, declared certain goods to be of special importance in inter-State trade or commerce and has imposed certain restrictions and conditions in regard to the levy, rates of tax on the sales or purchases of these Central Act. Chapter IV of the Central Act is headed 'Goods of Special Importance in Inter-State Trade or Commerce'. This Chapter consists of two sections, namely, sections 14 and 15. Section 14 sets out the goods which the Parliament has declared to be of special importance in inter-State trade or commerce. Among the goods so declared are iron and steel, and item (iv) of the said section 14 deals with them. The relevant provisions of item (iv) are as follows :
'(iv) iron and steel, that is to say, -
(ii) steel semis (ingots, slabs, blooms and billets of all qualities, shapes and sizes);
(iv) steel bars (rounds, rods, squares, flats, octagons and hexagons, plain and ribbed or twisted, in coil form as well as straight lengths);
(x) steel melting scrap in all forms including steel skull, turnings and borings;'
The relevant provisions of section 15 of the Central Act are as follows :
15. Restrictions and conditions in regard to tax on sale or purchase of declared goods within a State -
Every sales tax law of a State shall, in so far as it imposes or authorises the imposition of a tax on the sale or purchase of declared goods, be subject to the following restriction and conditions, namely :-
(a) the tax payable under that law in respect of any sale or purchase of such goods inside the State shall not exceed four per cent of the sale or purchase price thereof, and such tax shall not be levied at more than one stage;'
Clause (c) of section 2 of the Central Act defines the expression 'declared goods' as meaning 'goods declared under section 14 to be of special importance in inter-state Trade or Commerce.'
10. Turning now to the Bombay Act, clause (10) of section 2 defines the expression 'Declared goods' as meaning 'declared goods as defined in the Central Sales Tax Act, 1956'. Section 7 of the Bombay Act provides for a single point levy of sales tax or general sales tax on declared goods. It is unnecessary to reproduce the whole of that section for we are concerned only with the levy of sales tax on sale of declared goods made by Shree Ram Steel Rolling Mills to Ms. V. K. Steel. There is no dispute that the ingots which were purchased and the rounds which were sold were declared goods. Sub-sections (1) and (3) of [section 7 as in force at the relevant time provided as follows :
'7. Single point levy of sales tax or general sales tax on Declared goods -
(1) There shall be levied a sales tax, on the turnover of sales of Declared goods specified in Part I of Schedule B at the rate set out against each of them in column 3 thereof, but after deducting from such turnover -
(i) sales of goods on the purchased of which the dealer is liable to pay purchase tax under section 14,
(ii) re-sales of goods purchased by him on or after the appointed at from a registered dealer, if a certificate as provided in section 12A is furnished as provided, and
(iii) sales of goods, or re-sales of goods to which clause (ii) does not apply, to an Authorised dealer, or to a Commission Agent holding a Permit who purchases on behalf of a principal who is an Authorized dealer upon such dealer or Commission agent, as the case may be, furnishing a certificate as provided in section 12.
(2) * * * * *
(3) In order to ensure that after the due date of the coming into force of section 15 of the Central Sales Tax Act, 1956, tax shall not be levied on the sales or purchase of Declared goods at more than one stage, it is hereby provided that if under this Act, or any earlier law, any tax has been levied or is leviable on the sale or purchase of such goods, then no further tax shall be levied under this Act on any subsequent sale or purchase thereof; and accordingly for the purpose of arriving at the taxable turnover of sales or purchases of a dealer, there shall be deducted from his total turnover, of sales or as the case may be, of purchases, the sales or purchases of such declared goods as have borne tax at an earlier stage.'
11. Schedule B to the Bombay Act reproduces the list of goods which have declared by Section 14 of the Central Act to be of special importance in inter-State trade and Commerce and sets out against each item the rate of tax payable in respect of a transaction of sale or purchase thereof. Part I of Schedule B sets out the declared goods which are made subject to sales tax. Part II of Schedule B sets out the declared goods which are made subject to general sales tax. Entry 3 in Part I reproduces item (iv) of Section 14 of the Central Act. In view of certain arguments which were advanced before us, it is necessary to reproduce Part I of Schedule B in extenso. Part I of Schedule B as in force at the relevant time provided as follows :
'Declared goods the sale or purchase of which is subject to sales tax or general sales tax or purchase tax and the rates of tax.
PART I. ---------------------------------------------------------------------Sl. Description of goods Rate of Rate ofNo. Sales tax Purchase tax---------------------------------------------------------------------(1) (2) (3) (4)---------------------------------------------------------------------1. Coal including coke in all Four paise Four paise inits forms. in the rupee. in the rupee.2. Cotton yarn, but not including Four paise in Four paise incotton yarn waste. the rupee. the rupee.3. Iron and Steel, that is to Four paise Four paise insay, - in the rupee. the rupee.(i) pig iron and cast ironincluding ingot moulds, bottomplates, iron scrap, cast ironscrap, runner scrap and ironskull scrap;(ii) steel semis (ingots,slabs, blooms and billets ofall qualities, shapes andsizes);(iii) skelp bars, tin bars,sheet bars, hoe-bars andsleeper bars;(iv) steel bars (rounds, rods,squares, flats, octagons andhexagons, plain and ribbed ortwisted, in coil form as wellas straight lengths);(v) steel structurals (angels,joints, channels, tees, sheetpiling sections, sections orany other rolled sections);(vi) sheets, hoops, strips andskelp, both black andgalvanished, hot and coldrolled, plain and corrugated,in all qualities, in straightlengths and in coil form, asrolled and in rivetted condition;(vii) plates both plain andchequered in all qualities;(viii) discs, rings, forgingsand steel castings;(ix) tool, alloy andspecial steels of any of theabove categories;(x) steel melting scrap inall forms including steelskull, turnings and borings;(xi) steel tubes, bothwelded and seamless, of alldiameters and lengths includingtube fittings;(xii) tin-plates, both hotdipped and electrolytic andtin free plates;(xiii) fish plate bars, bearingplate bars, crossing sleeperbars, fish plates, bearingplates, crossing sleepers rails-heavy and light crane rails;(xiv) wheels, tyres, axlesand wheel sets;(xv) wire rods and wires-rolled,drawn, galvanised aluminised,tinned or coated such as bycopper;(xvi) defectives, rejects,cuttings or end pieces of anyof the above categories.'-----------------------------------------------------------------
12. As the tax liability which is contended for in the case of Metro Steel Rolling Mills is of purchase tax under section 13 of the Bombay Act, it will be convenient to reproduce the said section. Section 13 at the relevant time provided as follows :
'Purchase tax payable on certain purchases of goods from unregistered dealer. - Where a dealer, who is liable to pay tax under section 3, purchases any goods specified in Schedules B, C, D or E from a person or a Government, who or which is not a registered dealer, then unless the goods so purchased are resold by the dealer, there shall be levied, subject to the provisions of sub-section (3) of section 7, a purchase tax on the turnover of such purchases at the rate set out against each of such goods in the schedules aforesaid,'
On reading these two sections, it is obvious that if there was a re-sale of goods purchased by Shree Ram Steel Rolling Mills their turnover of such re-sale would be deducted from their turnover of sale of goods, that is to say, the sale by them of M.S. rounds to Ms. V. K. Steel would not be liable to any tax under section 7(1) and equally if the sale of M.S. rounds by Metro Steeling Rolling Mills was a re-sale by this mill to Tilak Talkies, they would not be liable to pay purchase tax on the purchase of rolling scrap made by them from the unregistered dealer. Of course, neither of the two Applicants have sold to their customers what they had actually purchased, but here we are not concerned with the meaning of the word 're-sale' in its ordinary sense but with the meaning of that word as defined in the Bombay Act. In the Bombay Act, re-sale is given an artificial meaning by clause (26) of Section 2. Section 2(26) defines re-sale as follows :
'resale', for the purpose of sections 7, 8, 9, 10, 12 and 13, means a sale of purchased goods :
(i) in the same form in which they were purchased, or
(ii) without doing anything to them which amounts to, or results in, a manufacture, or
(iii) being goods specified in any entry in Schedule B, without doing anything to them which takes them out of the description thereof in that entry, and the word 're-sale' shall be constructed accordingly;'
13. It will be noticed that a re-sale for the purposes of levy of tax under sections 7, 8, 12 and 13 of the Bombay Act takes place when a sale of goods purchased is effected in the circumstances set out in any of the three sub-clauses of clause (26). It is pertinent to note that these sub-clauses are not cumulative but disjunctive. Thus a particular transaction of sale of purchased goods would be re-sale if it fell under any of these three sub-clauses. It can conceivably fall under more than one of the these sub-clauses, but if it falls under any one of them, it is sufficient.
14. Sub-clause (ii) of clause (26) uses the word 'manufacture'. The word 'manufacture' is not used in that sub-clause in its ordinary sense but is used in the artificial sense given to it by clause (17) of section 2. Section 2(17) defines the word 'manufacture' as follows :
'manufacture', with all its grammatical variations and cognate expressions, means producing, making, extracting, altering, ornamenting, finishing or otherwise processing, treating, or adapting any goods; but does not include such manufactures or manufacturing processes as may be prescribed.'
By its very language this definition expressly excludes certain manufactures and manufacturing processes from amounting to manufacture. These are manufactures and manufacturing processes which are to be prescribed by the rules made under the Act. Rule 3 of the Rules has prescribed such manufactures and manufacturing processes. That rule states that 'For the purposes of clause 17 of section 2 'manufacture' shall not include the following manufactures and manufacturing processes, namely,'. Then follow several clauses in which these manufactures and manufacturing processes are listed. Clause (xviii) of rule 3 is as follows :
'Subjecting the goods specified in any entry in Schedule B to any process or doing anything to them, which does not take out of the description thereof in that entry;'
15. The contention of the Application in both these References is that there was a re-sale of goods purchased by them, because the goods sold by them fell within sub-clauses (ii) of clause (26) of section 2. The contention of the Department is that the transaction of sale by these two Applicants cannot be said to be a re-sale in view of the Supreme Court judgment in State of Tamil Nadu v. Pyare Lal Malhotra referred to earlier. As mentioned earlier, it is the contention of the Department, which was accepted by the Tribunal.
16. The Tribunal has in both these References referred three questions to us. They are the same except for question No. 1 in each of these two References. Both the parties are also agreeable that in question No. 1 referred to us in each of these two References the words and figures 'section 2(26)(ii)' in order to bring out the real controversy between the parties. We accordingly set out below the question referred to us in Sales Tax Reference No. 51 of 1977 made at the instance of Shree Ram Steel Rolling Mills with the correction agreed upon the parties : !!!! '1. Whether on the facts and in the circumstances of the case the Tribunal was correct in law that in spite of the provisions of section 2(26)(ii) of the Bombay Sales Tax Act, 1959, and Rule 3(xviii) of the Bombay Sales Tax Rules, 1959, re-rolling of ingots into M.S. rounds of 25 mm. was an activity of manufacture as defined in section 2(17) of the Act and the sale of Rs. 11,973.23 effected under invoice No. 983 dated 28-4-1976 was not exempt from the levy of sales tax under section 7(1)(ii) of the Act, but was taxable
2. Whether the Tribunal was correct in law that the words 'description thereof' in section 2(26)(iii) and in Rule 3(xviii) means description in each sub-item only in entry No. 3 of Schedule B Part I, both at the time of purchase and sale, and does not refer to the description of goods in the said entry as a whole.
3. Whether the Tribunal was justified in law in not accepting the interpretation of section 2(26)(iii) of the Bombay Sales Tax Act, 1959, and Rule 3(xviii) of the Bombay Sales Tax Rules, 1959, adopted by the Department as also by the Tribunal, for over 16 years and thus departing from the principle of stare decisis ?'
So far as Sales Tax Reference No. 7 of 1978 made at the instance of Metro Steel Rolling Mills is concerned, questions Nos. 2 and 3 are identical with questions Nos. 2 and 3 in Sales Tax Reference No. 51 of 1977, and it is necessary to set them out. Question No. 1 in Sales Tax Reference No. 7 of 1978 with the correction agreed upon by the parties is as follows :
'1. Whether on the facts and in the circumstances of the case the Tribunal was correct in law that in spite of the provisions of sections 2(26)(ii) of the Bombay Sales Tax Act, 1959, and rule 3(xviii) of the Bombay Sales Tax Rules, 1959, re-rolling of rolling scrap into rounds of 6 mm. was an activity of manufacture as defined in section 2(27) of the Act and that purchase tax under section 13 was payable on the purchase of Rs. 1,657.50. effected on 5-2-1976 ?'
17. The circular of the Commissioner of Sales Tax was issued, the orders in the aforesaid determination proceedings were passed and the appeals filed by the Applicants before the Tribunal were decided upon an interpretation placed by the Department and the Tribunal upon the judgment of the Supreme Court in the State of Tamil Nadu V. Pyare Lal Malhotra [(1976) 37 S.T.C. 319 :1983 E.L.T. 1582 (S.C.). This was a common judgment delivered by the Supreme Court in several appeals against the judgment of a Division Bench of the Madras High Court. What the Madras High Court had held was that steel rounds, flats, angels, plates, bars or similar goods in other forms and shapes, could not reason of the provisions of section 15 of the Central Act be taxed again if the material out of which they were made had already been subjected to sales tax once as iron and steel scrap as both were 'iron and steel' and were goods declared by section 14 of the Central Act as being of special importance in inter-State trade and commerce. Reversing the judgment of the Madras High Court, the Supreme Court held that each item in the various entries in section 14 was a separate taxable commodity, and was, therefore, a taxable item. The Supreme Court held that if the object of Parliament was to make iron and steel taxable as a substance, the entry could have 'Goods of iron and steel', or preferably 'Iron and Steel irrespective of change of form or shape or character of goods made out of them'. The Supreme Court said (at p. 324-5) :
'..... We, however, prefer the more natural and normal interpretation which follows plainly from the fact of separate specification and numbering of each item. This means that each item so specified forms a separate species for each series of sales although they may all belong to the genus : 'iron and steel'. Hence if iron and steel 'plates' are melted and converted into 'wire' and then sold in the market, such wire would only be taxable once so long as it retains its identity as commercial goods belonging to the category 'wire' made of either iron or steel. The mere fact that the substance or raw material out of which it is made has also been taxed in some other form, when it was sold as a separate commercial commodity, would make no difference for purposes of the law of sales tax. The object appears to us to be to tax sales of goods of each variety and not the sale of the substance out of which they are made.'
18. The Respondents before the Supreme Court relied upon an earlier decision of the Supreme Court in The State of Madhya Bharat (now the State of Madhya Pradesh) v. Hiralal (1966) 17 S.T.C. 313. Prior to the enactment of the Central Act, Parliament in pursuance of power conferred upon by the said clause (3) of Article 286 as it then stood had enacted the Essential Goods (Declaration and Regulation of Tax on Sales or Purchases) Act, 1952. (Act No. LII of 1952), which came into force on August 9, 1952. In Schedule I to the said Act, iron and steel were declared essential for the life of the community. Thereafter, the Government of Madhya Bharat in exercise of powers conferred upon it by section 5 of the Madhya Bharat Sales Tax Act, Samvat 2007 (Act No. XXX of 1950) issued two notifications, namely, notifications Nos. 58 and 59. Under Schedule I of the said notification No. 58, no tax was payable inter alia on the sale of iron and steel. Notification No. 59 described the goods, the sales of which were taxable and the stage of sale at which they were taxable. Under Schedule IV to the said Notification No. 59 goods prepared from any metal other than gold and silver were subject to goods prepared from any metal other than gold and silver were subject to sales tax when the sale was by an importer or producer. Counsel for the State contended that the expression 'iron and steel' used in the relevant part of Schedule I of the said notification No. 58 meant iron and steel in the original condition, and not iron and steel in the shape of bars, flats and plates. The Supreme Court rejected this contention. It held that a comparison of the said two notifications brought out the distinction between raw materials of iron and steel and the goods prepared from iron and steel and while the former was exempted from tax the latter was taxed. The Court further held that so long as iron and steel continued to be raw materials, they enjoyed the exemption and as the scrap iron purchased by the Respondent was merely re-rolled into bars, flats and plates, and processed for the convenience of sale and it did not there by lose its character as iron and steel. In Pyare Lal Malhotra's case, the Supreme Court distinguished its earlier judgment in Hiralal's case on the ground that the language of the two notifications before the Supreme Court in Hiralal's case made it clear that the exemption was for the metal used, and that in the case before them, namely, Pyare Lal Malhotra's case, the object of single point taxation was the commercial commodity and not he substance out of which it was made. The exigibility to tax in Pyare Lal Malhotra's case arose under the Tamil Nadu General Sales Tax Act, 1959. Section 4 of the Tamil Nadu Act provides as follows :
'4. Tax in respect of declared goods. - Notwithstanding anything contained in section 3, the tax under this Act shall be payable by dealer on the sale or purchase inside the State of declared 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, whatever be the quantum of turnover in that year.'
In will be noticed that under the Tamil Nadu Act, sale declared goods is made taxable at one stage only, that being the point specified against each of the declared goods in the Second Schedule to the said Act and irrespective of the quantum of turnover of sales or purchases of declared goods in a year. No provision appears to have been made in the Tamil Nadu Act for Making any deduction from the turnover of sales or purchases of declared goods and none has been referred to by Their Lordships of the Supreme Court in Pyare Lal Malhotra's case. The scheme of the Tamil Nadu Act so far as taxing declared goods is concerned appears to be radically different from the scheme of taxing declared goods in the Bombay Act. Unlike section 4 of the Tamil Nadu Act, section 7 of the Bombay Act does not tax the entire turnover of sales of declared goods but so far as the levy of sales tax is concerned only that part of the turnover of sales which remains after deducting from the turnover of sales of goods specified in clauses (i), (ii) and (iii) of sub-section (i) of section 7. Similarly, in the case of general sales tax which has now been abolished by the Maharashtra Tax (Amendment) Act, 1981 (Maharashtra Act XXXII of 1981), what was made exigible to tax was turnover which remains after deducting from turnover of sales of all declared goods, the sales of goods specified in clauses (i), (ii) and (iii) of sub-section (2) of section 7. So far as purchase tax is concerned, it is not the dealer's entire turnover of purchases of declared goods which is made subject to tax, but only that part of the turnover of purchases of declared goods which is made subject to tax, but only that part of the turnover of total purchases which remains after deducting therefrom the turnover of purchased goods re-sold by the dealer. It is no doubt true that as now held by the Supreme Court in Pyare Lal Malhotra's case each of the items mentioned in different sub-entries in section 14 of the Central Act is commercially a separate item for the purposes of sales tax. It is, therefore, open to the State to levy either sales tax or purchase tax, on each these types of goods irrespective of the fact that such goods were manufactured from other goods specified in the same entry without violating the provisions of section 15 of the Central Act. The fact, however, that the State is clothed with the power to tax, does not mean that it has exercised the power or must exercise that power. It is open to the State to tax a particular transaction of sale or purchase or not to tax it. By section 4 of the Tamil Nadu Act, the Government of Tamil Nadu chose to levy such tax but so far as the Bombay Act is concerned specifically there are certain sales which are not made taxable. According to the Applicants, even though in view of the judgment in Pyare Lal Malhotra's case the goods sold by them may constitute a separate taxable commodity, the State Government has by enacting clause (ii) in section 7(1) exempted from the levy of sale tax the sale of goods in question made by the Applicants Shree Ram Steel Rolling Mills and by virtue of the provisions of section 13 exempted from the levy of purchase tax the purchase of goods in question made by the Metro Steel Rolling Mills inasmuch as both the Applicants have resold the goods purchased by them.
19. The first question which, therefore, falls for determination is whether there has been a resale of goods purchased by these two Applicants within the meaning of that expression as defined in section 2(26) of the Bombay Act. For this purpose, the Applicants rely upon the sub-clause (ii) of clause (26). Under that sub-clause it would be a resale if purchased goods are sold 'without doing anything to them which amounts to, or results in, a manufacture'. It is the submission of Mr. Jetly, learned Counsel for the Applicants in both these References, that what was done by the Applicants in these cases to the goods purchased by them in order to convent them into M.S. rounds, whether it would amount to manufacture or not in its ordinary sense, has been expressly excluded from the definition of the term 'manufacture' contained in clause (17) of section 2. For this purpose, Mr. Jetly relied upon the last part of that clause, namely, that the term 'manufacture' does not include 'such manufactures or manufacturing processes as may be prescribed'. As mentioned earlier, these manufacture and manufacturing processes which have been statutorily excluded from the definition of manufacture are set out in rule 3 of the Rules and it is clause (xviii) of rule 3 us earlier. Under that clause if 'the goods specified in any entry in Schedule B' to the Bombay Act are subjected to any process or if anything is done to them, 'which does not take them out of the description thereof in that entry', it would not amount to 'manufacture' within the meaning of section 2(17). According to Mr. Jetly, learned Counsel for the Applicants in both the References, the words 'the description thereof in that entry' means the description of the processed both fall in the same entry in Schedule B, clause (xviii) will apply even though the description of these two types of goods are different. On the basis of this submission Mr. Jetly contended that ingots, scrap and rounds are all described in different sub-entries of entry 3 in Part I of Schedule B, the conversion of ingots and scrap into M.S. rounds, therefore, does not take them 'out of the description thereof' in entry 3. Mr. Phadkar on behalf of the Department on the other hand, contended that the expression 'the description thereof in that entry' means the description in that entry of the goods purchased and if the description of the purchased goods is different from the description of the processed goods even though both may be described in the same entry, clause (xviii) will not apply. He submitted that ingots, scrap and rounds are goods of different description described in separate sub-entries of entry 3 and therefore the Applicants were not entitled to the benefit of clause (xviii). Mr. Phadkar further submitted that in view of what the Supreme Court had held in Pyare Lal Malhotra's case, the word 'entry' in clause (xviii) must be read as sub-entry or rather as referring to each item in a sub-entry.
20. We find ourselves unable to accept the contention of the Department. The question which fell for the determination in Pyare Lal Malhotra's case is different from the one which we have to decide. In Pyare Lal Malhotra's case the Supreme Court Act. That interpretation is binding upon us. We are, however, concerned with interpretation of the statutory provisions of the Bombay Act and the Rules on the strength of which the Applicants contend that they are entitled to a deduction from their turnover of sales in the case of Shree Ram Steel Rolling Mills and from their turnover of purchases in the case of Metro Steel Rolling Mills. According to the Applicants they have resold the purchased goods within the meaning of section 2(26) of the Bombay Act and, therefore, they are entitled to the deduction claimed by them. The case before us, therefore, falls to be decided on the correct interpretation to be placed upon clauses (17) and (26) of section 2 of the Bombay Act and clause (xviii) of rule 3 of the Rules and not on the interpretation of section 14 of the Central Act. In order to test the correctness of the rival submissions we must bear in mind the purpose which rule 3 was made. It was expressly made to exclude certain types of manufacture and manufacturing processes from amounting to manufacture within the meaning of section 2(17). Rule 3(xviii) expressly speaks of declared goods being subjected to a process. Now, the description of processed goods must necessarily differ from the same goods before they were subjected to a process. Now, it is difficult to conceive of any manufacturing process applied to scrap or ingots which would not change their description as scrap or ingot. The same would apply to the other types of goods specified in the different entries in Schedule B. If the interpretation of clause (xviii) of rule 3 canvassed by Mr. Phadkar on behalf of the Department were to be accepted, it would make clause (xviii) redundant. We also find no reason for reading the words 'the description thereof in that entry' in the narrow sense canvassed by Mr. Phadkar. The language of the clause shows that the word 'thereof' refers to the goods specified in an entry in Schedule B. So long as the result of the manufacture or manufacturing process is not to change the article which is manufactured or processed to an article which would not conform to an article of a description given in a particular entry, such manufacture or manufacturing process would not be manufacture within the meaning of section 2(17) of the Bombay Act. The word 'entry' occurring in different sections of the Bombay Act, is used as meaning an entire entry and not as meaning a sub-entry or a part of an entry. Whenever the Legislature intended to refer to a part of an entry, it has expressly done so in the Bombay Act. For instance, under section 17 of the Bombay Act, the State Government has the power by notification in the Official Gazette to reduce any rate of tax specified in Schedules B, C, D or E in respect of 'any entry (or part thereof) in the said Schedules'. Under that section the State Government has equally the power by notification to omit or amend 'any entry or part thereof' but not so as to enhance the rate of tax in any case. Where classes of goods which are enumerated in different Schedules are required to be separately set out or mentioned, the Legislature has done so by adopting appropriate language. This is shown by the opening words of sections 7, 8, 9, 10 to mention but a few instances. This is shown by the opening words of section 7(1) are 'There shall be levied a sales tax, on the turnover of sales of declared goods specified in part I of Schedule B at the rate set out against each of them in column 3 thereof'. Similar language is used in sub-section (2) of section 7 and also in sections 8, 9 and 10, with respect to different types of taxes which are levied. Each Schedule to the Act numbers the entries therein in serial order which is shown in column in one under the heading 'Serial Number'. Column 2 give the description of goods. Column 3 gives the rate of sales tax and column 4 the rate of purchase tax. Iron and steel is dealt with in entry 3 of part I Schedule B and that entry is sub-divided into 16 different sub-entries of items. The rate of sales tax and the rate of purchase tax against the said entry 3 in both cases was four paise in the rupee at the relevant time. This rate, however, is mentioned in the Schedule only against the main heading 'Iron and steel, that is to say, -' and not against each of the sub-entries. None of the sub-entries contain anything to show that the same rate will apply to each sub-entry. The reason for this is obvious. It is that the whole of entry 3 has been treated by the Legislature as constituting but one single entry. If the contention made by Mr. Phadkar were correct, the words 'or part thereof' that is, 'or part of an entry' in section 17 would be redundent. We are further fortified in the conclusion we have reached by a reference to the Bombay Sales Tax (Amendment) Act, 1973 (Maharashtra Act XXXII of 1973). By section 6 of that Act, entry 3 in Part I of Schedule B was wholly substituted. The said section provided :
'In Schedule B appended to the principle Act, - (a) in Part I, for entry 3, the following entry shall be substituted, namely :-
21. Thereafter the whole of entry 3 as reproduced earlier was set out except that the rate of tax specified was three paise in the rupee, the rate of four paise in the rupee being substituted in that entry with effect from July 1, 1975 by the Bombay Sales Tax (Amendment) Act, 1975 (Maharashtra Act XXIII of 1975). The above instances clearly show that whenever the Legislature wanted to refer to an entire entry it used the word 'entry' and when it wanted to refer to a part of an entry, it used expressions to that effect. Specifically with reference to entry 3 in Part I of Schedule B, the Bombay Sales Tax (Amendment) Act, 1973, clearly shows that the Legislature intended that the whole of entry 3 should be considered as just one entry. On well-known principles of interpretation of a statute expressions used in rules made under a statute bear the same meaning as in the Act unless otherwise provided. This principle of interpretation has found statutory recognition in section 20 of the Bombay General Clauses Act, 1904 (Bombay Act No. I of 1904), which section provides :
'Where, by any Bombay Act or Maharashtra Act, a power to issue any notification, order, scheme, rule, bylaw or form is conferred, then expression used in the notification, order, scheme, rule, bylaw or form, if it is made after the commencement of this Act, shall, unless there is anything repugnant in the subject or context, have the same respective meaning as in the Act conferring the power.'
22. The expression 'entry' in clause (xviii) of rule 3 must, therefore, mean an entire entry in Schedule B, and not a part of that entry. Thus, the correct interpretation of clause (xviii) would be that where goods specified in any entry in Schedule B are subjected to a process or where anything is done to these goods, which does not take them out of the description of the goods specified in that entry, the manufacturing process or the manufacture would not amount to 'manufacture' within the meaning of clause (17) of section 2. There is no dispute that the goods purchased by the Applicants in both these References were of the description specified in entry 3 in Part I of Schedule 2. Equally, there is no dispute that the goods sold by the Applicants in both these References after processing the purchased goods were goods which are described in the very same entry 3 in Part I of Schedule B. By reason of sub-clause (ii) of clause (26) of section 2 the sale of these processed goods by the Applicants in each of these two References would, therefore, be a resale for the purpose of section 7 in the case of Shree Ram Steel Rolling Mills and for the purpose of section 13 in the case of Metro Rolling Mills. Consequently, Shree Ram Steel Rolling Mills would be entitled to deduct the turnover of the sale in question from their turnover of sales of declared goods under clause (ii) of section 7(1) and Metro Steel Rolling Mills would be entitled to deduct under section 13 the price they have paid for purchasing the goods in question from their turnover of purchases.
23. It was Mr. Jetly's submission that in addition to the case of these Applicants falling under sub-clause (ii) of section 2(26), it also fell under sub-clause (iii) of section 2(26). If the case of the Applicants is a resale by reason of clause (ii) of section 2(26), it is immaterial whether it is also a re-sale by reason of sub-clause (iii) of section 2(26). As, however, considerable arguments were advanced before us on this aspect of the case and as almost the entire arguments before the Tribunal were advanced on this aspect of this case, we will proceed to deal with sub-clause (iii) also.
24. Though at the first blush it may appear that the language used in clause (xviii) of rule 3 is very much the same as in sub-clause (iii) of section 2(26), on a careful examination of these two provisions it would appear that the language used is different. Clause (xviii) of rule 3 is in positive terms. It speaks of subjecting the goods specified in any entry in Schedule B to any process or doing anything to them, while sub-clause (iii) of section 2(26) is couched in a negative form and refers to a sale of purchased goods being goods specified in any entry in Schedule B without doing anything to them which would take them out of the description thereof in that entry. There is no reference (xviii). Thus, while clause (xviii) speaks of subjecting the goods to a process or doing something to the goods which but for clause (xviii) and the exclusive part of section 2(17) would amount to manufacture, sub-clause (iii) makes no reference to any process or manufacture. If there is no manufacture in respect of purchased goods, a sale of such goods would be a re-sale by virtue of sub-clause (ii). Under sub-clause (iii) if anything is done to the goods which are specified in any entry in Schedule B, as long as the goods are not taken out of the description in that entry it would still be a re-sale. It is difficult to conceive of a case where there can be any such activity without such activity at the same time not being covered by clause (xviii) of rule 3. But even assuming clause (xviii) of rule 3 were not there, even then if such activity amounted to manufacture or manufacturing process for the purpose of sub-clause (ii) as long as the result was not to take the goods manufactured or processed out of the description given in the entry, the sale of such goods would be a re-sale. It may not be out of place to mention here that while sub-clause (iii) featured in section 2(26) when the Act was originally enacted, clause (xviii) was inserted in rule 3 by a Government notification dated August 8, 1963 and is thus subsequent in point of time.
25. Mr. Phadkar, however, contended that the word 'description thereof' in sub-clause (iii) must be construed narrowly even if a different meaning were to be attributed to the same expression used in clause (xviii) of rule 3. In Mr. Phadkar's submission, the words 'description thereof in that entry' in sub-clause (iii) of section 2(26) qualify the words 'purchased goods' in the opening part of clause (26) of section 2 and not the words 'being goods specified in any entry in Schedule B' in sub-clause (iii) of section 2(26). We are unable to accept this submission. Reading sub-clause (iii) as a whole it is obvious that the phrase 'the description thereof in that entry' means the description of the goods specified in that entry in Schedule B. The words 'description thereof' have relation to the opening words of sub-clause (26) of section 2, namely, 'a sale of purchased goods'. It, therefore, follows that if nothing is done to the goods which will take them out of the description of goods contained in the entry in Schedule B in which will take them out of the description of goods occurs the sale of such goods would amount to a re-sale. Here in the cases before us, entry 3 in Part I of Schedule B to the Act contains the description of both the goods purchased as will as the goods sold, and the Applicants were entitled to the deductions claimed by them also on the ground that the respective sales by them were re-sales by reason of sub-clause (iii) of section 2(26).
26. In our opinion, both the Commissioner and the Tribunal were in error in coming to the conclusion that the decision of the Supreme Court in Pyare Lal Malhotra's case governed the cases of the two Applicants. They failed to take into account that there were no provisions in the Tamil Nadu Act corresponding to the provisions on the basis of which we have reached our conclusions. The error was in treating the Tamil Nadu Act and the Bombay Act as if their provisions and the scheme of taxation thereunder were the same.
27. So far as the third question in both these References was concerned, it was Mr. Jetly's submission that it was not open to the Department and the Tribunal to take a view contrary to that which it had taken for over 16 years. In support of this contention, Mr. Jetly relied upon a decision of the Supreme Court in the case of Commissioner of Income-tax, West Bengal III v. Balkrishna Malhotra, : [1971]81ITR759(SC) . In that case, the Supreme Court observed that years back the High Court of Madras had reached a particular conclusion on the interpretation of a section, that no other High Court had taken a contrary view and that the revenue must have in all these Supreme Court said :
'Interpretation of a provision in a taxing statute rendered years back and accepted and acted upon by the Department should not be easily departed from. It may be that another view of the law is possible but law is not a mere mental exercise. The Courts while reconsidering decisions rendered a long time back particularly under taxing statutes cannot ignore the harm that is likely to happen by unsettling law that had been once settled.'
It is obvious that taxing authorities are not entitled to act capriciously, and according to their whims. If it were open to taxing officer to follow his own whims and notions contrary to what has been done in the past by all his predecessors in office, it would result in chaos and great prejudice, and considerable harm would be caused to the tax payers who have throughout proceeded upon the basis of the view adopted by the Department. If, however, there is judgment of a superior Tribunal or of a High Court or the Supreme Court according to which the view taken by the authorities was wrong, the authority must in future follow that judgment. In the present case, the Department did not capriciously or whimsically change its opinion according to which it had acted for all these years. As the Circular of the Commissioner dated April 20, 1976, which we have referred to earlier, shows the Department changed its view by reason of the judgment of the Supreme Court in Pyare Lal Malhotra's case. The Department obviously believed that the cases referred to in the said circular were covered by that judgment and proceeded by that circular to give notice of its change of opinion to the entire trade so that none may suffer prejudice thereafter. That the Department had not acted capriciously in placing the interpretation it did on Pyare Lal Malhotra's case is shown by the fact that the Tribunal accepted the Department's point of view. The fact that we have not accepted their interpretation and pointed out the fallacy into which the Commissioner and the Tribunal have fallen cannot make the wrong interpretation placed by the Commissioner and the Tribunal upon the judgment of the Supreme Court capricious.
28. According to the Applicants, the Tribunal should not have accepted the interpretation placed by the Department upon section 2(26)(iii) and rule 3(xviii) of the Rules contrary to the interpretation earlier placed by the Department upon this statutory provisions and in doing so the Tribunal departed from the principle of stare decisis. We are unable to appreciate this argument. The Tribunal is a superior authority to the sales tax authorities and irrespective of whatever view the Department may have taken over the years, the Tribunal as a superior appellate or a revisional authority has the right to say that the view taken by the Department was wrong just as this High Court has the power to say that the view taken by the Tribunal is wrong and just as the Supreme Court has the power to say that the view taken by any High Court is wrong. A superior Tribunal should have while deciding the appeals adopted the view taken by the Department prior to the said Circular dated April 20, 1976 is unsustainable in law and on principle.
29. In the result, we answer Questions Nos. 1 and 2 in each of these References in the negative, that is in favour of the assessees and against the Department. We answer Question No. 3 in each of these References in the affirmative, that is, in favour of the Department and against the assessees, inasmuch as the Tribunal purported to follow the decision of the Supreme Court in State of Tamil Nadu v. Pyare Lal Malhotra (1976) 37 S.T.C. 319 : 1983 E.L.T. 1582 (S.C.).
30. The Respondents will pay to the Applicants in each of these two References the costs of the Reference fixed at Rs. 300.