1964 (8) TMI 63 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Nature of the transaction between the assessee and the rolling mills.
2. Whether the delivery of copper scrap by the assessee constitutes a sale.
3. Applicability of the principles laid down in previous judgments to the present case.

Issue-wise Detailed Analysis:

1. Nature of the transaction between the assessee and the rolling mills:
The assessee, a merchant dealing in brass and copper vessels, accumulates scrap from old vessels, which is then delivered to Nellai Metal Rolling Mills Private Limited for conversion into brass alloy discs and sheets. The rolling mills maintain a running account for the supply of scrap and delivery of brass discs and sheets. The procedure involves the assessee sending scrap to the mills, which is recorded in an "own conversion account" without any sale or price consideration at this stage. The scrap from various dealers is melted, and the resultant brass sheets or discs are delivered back to the merchants, with a fixed conversion charge levied by the rolling mills. The transaction is essentially one of conversion and manufacture rather than a sale.

2. Whether the delivery of copper scrap by the assessee constitutes a sale:
The department treated the delivery of copper scrap as sales, considering the value of the brass discs and circles plus manufacturing charges and rebate for the addition of zinc during the melting process. However, the court found no evidence that the delivery of scrap was a sale. The accounts showed no calculation of price or adjustment for differences in weight at the time of delivery. The settled accounts indicated a contract for the manufacture and delivery of brass sheets and discs in lieu of the scrap supplied, with certain charges levied for the process. The court concluded that there was no transfer of property in the scrap at the time of delivery, and the transaction was not a sale.

3. Applicability of the principles laid down in previous judgments to the present case:
The court referred to previous judgments, notably Raju Chettiar and Brothers v. State of Madras [1955] 6 S.T.C. 131 and South India Metal Works and Rolling Mills v. State of Madras [1960] 11 S.T.C. 507. In Raju Chettiar's case, it was held that the transaction did not constitute a sale as there was no transfer of property in the silver supplied to the manufacturers. Similarly, in South India Metal Works, the court ruled that the transaction between the merchant and the manufacturer was not a sale but a contract for conversion and manufacture. The court applied these principles to the present case, concluding that the nature of the transaction did not change whether copper or brass scrap was supplied. The running account and the absence of price calculation at the time of delivery indicated a contract for manufacture rather than a sale.

Conclusion:
The court allowed the revision cases, setting aside the assessments on the disputed turnover, and concluded that the transactions in question were not sales but contracts for the manufacture and supply of brass discs and sheets from the scrap delivered. The petitions were allowed with no order as to costs.