1970 (11) TMI 79 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of entry 22 of Schedule E and entry 3 of Schedule B under the Bombay Sales Tax Act, 1959 for claiming set-off on purchase of unserviceable machinery and spare parts.

Detailed Analysis:

1. The case involved a reference from the Gujarat Sales Tax Tribunal regarding the classification of unserviceable machinery and spare parts purchased by the assessee under the Bombay Sales Tax Act, 1959. The Tribunal referred the question of whether the goods fall under entry 22 of Schedule E or entry 3 of Schedule B for claiming set-off.

2. The opponent, a firm purchasing unserviceable machinery and spare parts for melting and manufacturing castings, claimed a setoff under rule 41 of the Act. The dispute arose when the Sales Tax Officer rejected the claim, leading to appeals before the Assistant Commissioner and the Tribunal.

3. The set-off amount in question was Rs. 2,785.61, claimed by the assessee under rule 41, which provides for drawback, set-off, etc., of tax paid on purchases by a manufacturer.

4. The key contention revolved around whether the goods purchased by the assessee were covered by entry 3 of Schedule B, relating to iron and steel scraps, as argued by the department, or by entry 22 of Schedule E, the residuary entry, as claimed by the assessee.

5. The department argued that the goods were covered by entry 3 of Schedule B, making the assessee ineligible for set-off, while the assessee contended that the goods fell under entry 22 of Schedule E, making them eligible for the set-off.

6. The Tribunal held that the goods purchased were not covered by entry 3 of Schedule B, allowing the assessee to claim the set-off. This decision was challenged by the department, leading to the reference to the High Court.

7. The High Court analyzed whether the purchased machinery and spare parts constituted "scrap" under entry 3 of Schedule B. The court considered the definition of "scrap" and concluded that unserviceable machinery suitable only for reprocessing or manufacturing other materials qualified as scrap under the Act.

8. The court rejected the argument that unserviceable machinery should be considered scrap only if dismantled or broken, stating that even machinery sold by weight due to being unserviceable qualifies as scrap under the Act.

9. The court also dismissed the common parlance test argument, affirming that unserviceable machinery referred to as scrap even in common language. The court emphasized that when machinery becomes unserviceable and is used as metal, it meets the definition of scrap under the Act.

10. The court further clarified that the classification of goods under Schedule B is not based on their significance in inter-State trade but on whether they fit the criteria of specific entries in the Schedules attached to the Act.

11. Ultimately, the court held that the machinery purchased by the opponent fell under entry 3 of Schedule B and not under the residuary entry 22 of Schedule E, thereby denying the set-off claimed by the assessee.

12. The High Court disposed of the reference accordingly, ruling in favor of the department and ordering the opponent to bear the costs of the reference.

This detailed analysis provides a comprehensive overview of the legal judgment, focusing on the interpretation of relevant entries under the Bombay Sales Tax Act, 1959, and the determination of eligibility for claiming a set-off on the purchase of unserviceable machinery and spare parts.