1975 (12) TMI 106 - AT - VAT and Sales Tax

Summary

Issues Involved:
1. Whether the sales of waste yarn are casual sales or sales in the course of business.
2. Whether a deduction should be allowed on the ground that the sales are resales.

Issue-wise Detailed Analysis:

1. Casual Sales or Sales in the Course of Business:

The primary issue in this case was to determine whether the sales of waste yarn by the appellant, a processing factory, were casual sales or sales in the course of business. The appellant argued that the waste yarn was not a bye-product but merely a result of the mechanical process of warping. The appellant contended that waste yarn did not undergo any change and was not intended for sale, thus it should be considered a casual sale.

The Tribunal referred to the Supreme Court's ruling in Raipur Manufacturing Co. Ltd. which established that when a subsidiary product is regularly and continuously turned out in the factory and sold from time to time, an intention to carry on business in such product may reasonably be attributed to the assessee. The Tribunal compared the waste yarn to 'kolsi' and 'waste caustic liquor' in the Raipur case, which were considered subsidiary products obtained in the course of manufacture and sold regularly.

The Tribunal found that the process of warping and sizing in the appellant's factory constituted a manufacturing process, and the waste yarn obtained was a subsidiary product. The fact that the waste yarn was sold regularly and continuously supported the inference that there was an intention to carry on business in waste yarn. The Tribunal rejected the appellant's argument that the waste yarn did not undergo any change, stating that the decisive factor was that the product was turned out in the course of manufacture.

2. Deduction on the Ground of Resale:

The appellant argued alternatively that even if the sales were considered in the course of business, a deduction should be allowed as the sales were resales. The Tribunal examined the definition of resale under Section 2(26)(iii) of the Bombay Sales Tax Act, 1959, which requires that the goods sold must be the same as those purchased without any change.

The Tribunal noted that cotton yarn when purchased fell within Schedule B, Part I, entry 2, but waste yarn was covered by Schedule C, entry 1. Since the waste yarn was not the same as the purchased cotton yarn, the sale could not be considered a resale for the purpose of deduction from turnover.

Conclusion:

The Tribunal upheld the findings of the Asstt. CIT and the STO, concluding that the sales of waste yarn were sales in the course of business and not casual sales. The Tribunal also rejected the appellant's claim for deduction on the ground of resale, as the waste yarn did not meet the criteria for resale under the relevant statutory provisions. Consequently, the appeal was dismissed.