1988 (1) TMI 338 - HC - VAT and Sales Tax

Summary

Issues:
- Whether old aluminium vessels purchased by the appellant are liable to tax under section 6 of the Karnataka Sales Tax Act of 1957?

Analysis:
1. The appellant, a metal works company, purchased aluminium scrap and old aluminium vessels for manufacturing new aluminium vessels. The assessing authority proposed to levy tax on the purchase turnover of old aluminium vessels, considering them as scrap. The appellant objected, citing exemption for aluminium vessels under the Act.

2. The appellate authority allowed the appellant's contention, but the Commissioner, invoking suo motu revisional power, set aside the appellate order and upheld the assessing authority's decision to tax the purchase turnover of old aluminium vessels. The appellant appealed against this decision.

3. The appellant's counsel argued that old aluminium vessels should not be considered scrap, referencing decisions from Andhra Pradesh and Bombay High Courts regarding the tax liability of materials used in manufacturing. The counsel contended that old aluminium vessels retained their original character and should not be taxed.

4. The High Court disagreed with the appellant's argument, emphasizing that the common or commercial meaning of words in tax laws must be considered. It referenced a Gujarat High Court decision where old parts of machinery were considered scrap for reprocessing purposes. The Court held that old aluminium vessels, purchased only for their metal value and not sold as vessels, should be treated as scrap.

5. The Court noted that the appellant admitted the old aluminium vessels were not sold as vessels but for reprocessing. As there was no difference between the aluminium metal pieces and old vessels in terms of usage, the vessels were essentially purchased as scrap for their metal value. Therefore, the Court affirmed that the old aluminium vessels were liable to tax under section 6 of the Sales Tax Act.

6. In conclusion, the Court answered the question in the affirmative, dismissing the appeals and upholding the tax liability on the purchase turnover of old aluminium vessels.