2004 (5) TMI 569 - HC - VAT and Sales Tax

Summary

Issues involved:
Levy of tax on the sale of iron scrap, tin scrap, and copper scrap when the turnover of electric stamping and ceiling fans has been granted exemption under section 4A of the Act.

Analysis:
The revision before the High Court challenged the order passed by the Trade Tax Tribunal regarding the assessment year 1988-89. The dealer, a new unit under section 4A of the U.P. Trade Tax Act, was engaged in manufacturing electric stamping, ceiling fans, and scraps. While exemption was granted on the turnover of electric stamping and ceiling fans, tax was levied on the sale of iron scrap, tin scrap, and copper scrap. The core issue revolved around whether these scraps were also entitled to exemption under section 4A of the Act.

The Tribunal granted exemption on the scraps based on a Full Bench decision and a circular issued by the Commissioner of Sales Tax. The dealer argued that these scraps were waste products generated during the manufacturing process of electric stamping and ceiling fans and should be exempted as the main items were granted exemption. The State Government notification ST-II-604/X-9(208)-1981 granted exemption for "any goods" manufactured in a new industrial unit. The dealer contended that prior to April 1, 1990, there was no requirement to specify goods for eligibility certificates.

The Court considered the circular dated April 24, 1992, which clarified that new units established between October 1, 1982, and March 31, 1990, were entitled to exemption on all goods manufactured, including by-products and waste products. The circular also addressed situations where a unit started manufacturing different products later. The Court noted that waste products were not defined in the Act but referred to dictionary meanings, concluding that scraps left over from the manufacturing process qualified as waste products and should be exempt from tax.

The Court rejected the argument that scraps of copper, tin, and iron were not waste products, emphasizing that scraps resulting from the manufacturing process were considered waste products. As the dealer was the manufacturer of the scraps and held an eligibility certificate, the turnover of scraps was deemed exempt from sales tax. Therefore, the revision was dismissed, upholding the exemption of scraps from tax liability.

In conclusion, the High Court upheld the exemption of scraps from sales tax under section 4A of the Act, emphasizing that waste products generated during the manufacturing process were eligible for exemption based on the eligibility certificate held by the dealer. The Court's decision was supported by relevant legal provisions, circulars, and dictionary definitions of waste products, ensuring a comprehensive analysis of the issues involved in the judgment.