G.C. Bharuka, J.
1. The appellant is a public limited company. It is engaged in the business of manufacture of steel tubes out of the raw materials like steel skull, stripes and coils, etc. During the assessment years 1978-79 and 1979-80, it had purchased the said raw materials within the State of Karnataka from the registered dealers and were subjected to tax at the first point under section 5 of the Karnataka Sales Tax Act, 1957 ('the State Act', for short). Thus, the raw materials consumed by the appellant in the manufacture of steel tubes were tax-paid goods.
2. During the assessment years in question, the appellant had sold the steel tubes manufactured by it, both within the State as also in the course of inter-State trade and commerce. While assessing the inter-State sales of steel tubes, the assessing officer rejected the dealer's contention that the benefit of 'set-off' envisaged by Explanation II under the Fourth Schedule to the Act was also available to the appellant in the assessment of its inter-State sales under the Central Sales Tax Act, 1956 ('the Central Act', for short). According to the assessing officer, sub-section (2A) of section 8 of the Central Act was of no avail to the appellant. But on an appeal, the Deputy Commissioner granted the desired relief to the appellant by holding that the set-off or reduction envisaged under Explanation II of the Fourth Schedule to the 'State Act' will amount to 'reduction of tax generally' for the purpose of section 8(2A) of the Central Act. The Joint Commissioner, by his impugned order dated April 11, 1990, passed under section 22A of the State Act, has set aside the said appellate order and restored the assessment order. The appellant being aggrieved by the said revisional order has come up with appeal before this Court.
3. It is not in dispute that the raw materials acquired as well as the steel tubes manufactured by the appellant are declared goods within the meaning of section 14 of the 'Central Act', as also under Sl. No. 2 of the Fourth Schedule to the State Act.
4. Explanation II under the Fourth Schedule to the State Act as it stood during the period April 1, 1978 to October 30, 1982 was to the following effect :
'Act 13 of 1982 (1-4-1978 to 30-10-1982)
Explanation II. - Where tax has been levied in respect of any item of goods of iron and steel referred to in entries (i) to (xvi) of serial number 2, and out of the said goods any other item of goods of iron and steel referred to under the said serial number is manufactured in Karnataka and sold, the tax on the sale of such manufactured goods shall be reduced by the amount of tax already paid under this Act on the relative items of goods of iron and steel used in its manufacture.'
5. Under the Fourth Schedule to the State Act, the rate of tax at 4 per cent. was provided for all the goods of iron and steel referred to under Sl. No. 2, including the raw materials and finished products in question, which was uniform for all the dealers. But the Explanation II, as quoted above, provided for reduction in the amount of tax payable on the sales of manufactured items by the amount of tax already paid on the raw materials consumed therein. This reduction was made applicable only in respect of tax already paid under the State Act. But the contention of Sri Indra Kumar, learned counsel for the appellant, is that in view of sub-section (2A) of section 8 of the Central Act the said benefit of reduction in tax liability was available in respect of inter-State sales as well.
6. Sub-sections (1) and (2A) of section 8 of the Central Act which are the only relevant provisions for appreciation of the submissions advanced by Mr. Indra Kumar, may be reproduced hereunder :
'8. Rates of tax on sales in the course of inter-State trade or commerce. -
(1) Every dealer, who in the course of inter-State trade or commerce -
(a) sells to the Government any goods; or
(b) sells to a registered dealer other than the Government, goods of the description referred to in sub-section (3), shall be liable to pay tax under this Act, which shall be four per cent. of his turnover.
2 ...................
(2A) Notwithstanding anything contained in sub-section (1A) of section 6 or in sub-section (1) or clause (b) of sub-section (2) of this section, the tax payable under this Act by a dealer on his turnover in so far as the turnover or any part thereof relates to the sale of any goods, the sale or, as the case may be, purchase of which is, under the sales tax law of the appropriate State, exempt from tax generally or subject to tax generally at a rate which is lower than four per cent. (whether called a tax or fee or by any other name), shall be nil or, as the case may be, shall be calculated at the lower rate.
Explanation. - For the purposes of this sub-section a sale or purchase of any goods shall not be deemed to be exempt from tax generally under the sales tax law of the appropriate State, if under that law the sale or purchase of such goods is exempt only in specified circumstances or under specified conditions or the tax is levied on the sale or purchase of such goods at specified stages or otherwise than with reference to the turnover of the goods.'
7. From the above provisions it is clear that under sub-section (1) of section 8 of the Central Act the appellant was liable to pay tax at the rate of 4 per cent. of his turnover of inter-State sales effected to the registered dealers. But according to the appellant, in view of the Explanation II of the Fourth Schedule to the 'State Act' read with sub-section (2A) of section 8 of the Central Act, there was a general reduction in the rate of tax and therefore the benefit of reduction provided in the said Explanation II of the Fourth Schedule to the State Act has to be extended in respect of the inter-State sales as well.
8. For the present purposes, for application of sub-section (2A) of section 8 of the Central Act, one needs to understand the meaning of expression 'subject to tax generally' at a 'rate' which is lower than 4 per cent. under the sales tax law of the appropriate State. The key words requiring interpretation are 'generally' and 'rate'.
9. In common parlance, in the context of sales tax laws, the meaning of the word 'rate' is the percentage of the turnover which is required to be paid as tax. Therefore, the 'rate' generally applicable would be the rate which is uniformly applied in respect of the turnover of all the dealers covered by the 'State Act'. Under the Fourth Schedule to the State Act, the general rate prescribed for the goods of iron and steel was 4 per cent., but under the Explanation II to the said Schedule, certain reductions were made admissible. These reductions were based on the quantum of tax paid on the raw materials consumed in the manufacture of finished products. Therefore, the reductions were bound to vary from dealer to dealer. If the rate of tax is to be calculated after allowing the reductions, then the rate on finished products will work out to be different for different dealers. Therefore, such a rate cannot be said to be the rate of tax prescribed 'generally' under the State Act in respect of the manufactured goods of iron and steel.
10. The said aspect of the matter has been considered by a Division Bench of this Court in the case of Mangalore Metal House v. State of Karnataka [1986] 63 STC 482. In para 8 of the judgment it has been held that :
'.......... The relevant part of the IV Schedule, extracted earlier, levies tax only at single point, namely, sale by the first or earliest of successive dealers in the State and that the rate of tax fixed is 4 per cent. No discrimination is made in the rate of tax in respect of iron and steel manufactured within the State or outside the State. The levy is uniformly 4 per cent. But the contention of the petitioner is that Explanation II in so far it relates to the period after 1st April, 1978, is discriminatory because the tax burden is less on items of iron and steel manufactured within the State. In our view the said submission is based on an erroneous interpretation of the provision. All that the explanation provides is that though the rate of tax on a particular item of iron and steel on its first sale after manufacture in the State should be computed at 4 per cent., if it is established that such item was manufactured from another item of iron and steel in respect of which same 4 per cent. of tax had already been paid, the amount of tax so paid shall be deducted in the sale turnover of the latest manufactured items. In other words, the explanation is intended to ensure that there shall not be repetitive tax at 4 per cent. when every item of iron and steel is converted into another item and to see that only 4 per cent. tax is paid finally. Therefore, the contention of the petitioner that there is difference in the rate of tax on the same item of iron and steel manufactured within the State and outside the State is fallacious. It is quite natural that the sale turnover of an item of iron and steel would be higher compared to the sale turnover of another item of iron and steel out of which the former is manufactured. For instance, the turnover of the sale of iron angles, rods and sheets made out of scrap iron would be certainly lesser than the sale turnover of windows and doors manufactured out of angles, rods and sheets. The clear effect of the explanation is that if the sale of iron angles, rods and sheets have already been subject to 4 per cent. tax and out of such tax suffered items, windows or doors, as the case may be, one manufactured, while the levy on sale turnover of windows or doors would be 4 per cent., the amount of tax paid on the sale turnover of iron angles, rods and sheets should be deducted. The resultant position is that in respect of the latest manufactured goods of iron and steel, the levy is 4 per cent. on its sale turnover and nothing short. The fact that deduction is given in respect of tax already paid on items of iron and steel, out of which the latter goods were manufactured, is no basis to hold that the rate of tax on the latter goods is less than 4 per cent.'
11. On behalf of the appellant two decisions of the Andhra Pradesh High Court in the cases of Aitha Narasaiah & Co. v. State of Andhra Pradesh [1979] 43 STC 183 and in State of Andhra Pradesh v. Srinivasa Trading Co. [1986] 61 STC 208 were sought to be relied upon.
12. In our opinion, the said decisions have no bearing on the concept and true construction of the word 'rate' in the context of section 8(2A) of the Central Act. In the said decisions, it was held that keeping in view the provisions contained in section 15(c) of the Central Act, the tax leviable under that Act on rice procured out of such paddy and sold in the course of inter-State trade or commerce has to be reduced by the amount of tax levied on such paddy by the State law. On the other hand, in the case of Sri Ganesh Trading Company v. State of A.P. [1988] 71 STC 431 a Division Bench of the same High Court has given the same meaning to the expression 'rate' as has been inferred by us and has distinguished the earlier judgment of the court by holding that -
'Sri Dasaratharama Reddi, the learned counsel appearing for the petitioner, however, relies upon the decision of a Division Bench of this Court in Aitha Narasaiah & Co. v. State of Andhra Pradesh [1979] 43 STC 183, in respect of his submission that the word 'rate' occurring in section 8(2)(a) of the Act, could only mean the amount of tax which becomes actually payable after giving rebate as provided under Explanation III to entries 21 and 22 of the Third Schedule to the Act. We have carefully perused the said decision. There is nothing in the decision which supports the submission of the learned counsel for the petitioner.'
13. For the foregoing reasons, it is held that the reduction in quantum of tax liability under the State Act by operation of the Provisions contained in Explanation II of the Fourth Schedule to the said Act, will not amount to general reduction in the rate of tax under the State Act for the purposes of section 8(2A) of the Central Act.
14. Accordingly, the appellant is not entitled to any relief as claimed. The appeal thus stands dismissed but of course without any costs.
15. Appeal dismissed.