Tata Steel Loses Tax Battle: HC Declares HR Sheets a Separate Taxable Commodity

The Department filed a revision under the U.P. Value Added Tax Act and the Entry Tax Act, challenging an order of the Commercial Tax Tribunal dated 13 June 2024, which had deleted the penalty imposed on Tata Steel Processing and Distribution Ltd. The assessee purchases HR Coils and, as per its requirement, cuts them into HR sheets for sale. The assessing authority treated HR Coils and HR Sheets as two different taxable commodities, concluded that the assessee was liable for entry tax on HR sheets, and imposed a penalty.

The first appeal was dismissed, but the Tribunal in the second appeal set aside the levy, holding that the assessee had not undertaken any manufacturing activity and that coils and sheets were essentially the same goods.

Issue Raised: Whether HR Coils and HR Sheets constitute the same commodity for purposes of entry tax, or whether HR Sheets are a distinct taxable commodity, justifying the levy and penalty.

HC’s Order: The Court held that HR Coils and HR Sheets are commercially distinct commodities, both in identity and in use. Referring to Section 14 of the Central Sales Tax Act and the specific exemption granted only to HR Coils under Notification No. 2643, the Court found that the legislative intent was clear, HR Sheets were never meant to be exempt. It further relied on the Constitution Bench judgment in A. Hajee Abdul Shukoor & Co. v. State of Madras, which established that goods in different stages or forms can constitute separate commodities even if derived from the same source.

The High Court therefore quashed the Tribunal’s order, restored the tax and penalty, and answered the substantial question of law in favour of the Revenue and against the assessee.

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