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TMI Blog2003 (5) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... lers claimed set-off of the tax said to have suffered on the raw material purchased by the dealers and the said set-off was granted by the assessing officer while computing the tax due on the finished products. However, the revising authority, i.e., the Deputy Commissioner (CT), holding that the said assessment orders are erroneous and prejudicial to the interest of the revenue, invoking the revisional power, issued show cause notices to the dealers-assessees proposing to deny the benefit of set-off on the ground that the raw material purchased by them did not suffer any tax. In response to the said show cause Oral. notices, the dealers filed their explanations. After considering the explanations, the revising authority came to the conclusion that the M.S. scrap purchased by the dealers was taxable under entry 2A of the Third Schedule to the Act and not as claimed by the dealers under entry 2(xvi) of the said Schedule where tax is payable on the first sale whereas under entry 2A tax is payable by the last purchaser in the State. The revising authority also enumerated the items of raw material purchased and thereafter denied the benefit of set-off and recomputed the amount of tax d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding to the learned counsel, when once the present dealers have purchased the raw material from an identifiable dealer, then the burden is not on the dealer to prove that tax was paid by the first seller and it is for the department to proceed and recover tax from such sellers. The learned counsel also referred to and relied upon various orders of the Government under which the benefit of set-off was provided on the tax payable on the finished products in respect of tax that was paid on the raw material. The learned counsel also contended that irrespective of the payment of tax by the first seller, as the first seller is an identifiable person being a registered dealer, the dealers-assessees are entitled to the benefit of set-off in respect of tax payable on the finished products. In support of his contentions, the learned counsel relied upon the decisions of this Court in Apex Steel Re-rolling Mills v. Deputy Commissioner of Commercial Taxes, Hyderabad [1992] 87 STC 32 and State of A.P. v. Thungabhadra Industries Ltd. [1986] 62 STC 71. 5.. Sri Bhaskar Reddy, learned Special Government Pleader for Commercial Taxes, on the other hand contended that in fact the items, which the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government Pleader contended that there is absolutely no merit in the T.R.Cs. and they are liable to be dismissed. 6.. From the above rival contentions, the issue to be considered is whether the dealers are entitled for the benefit of set-off as claimed by them in respect of the tax payable on the finished goods in terms of the Government Orders. 7.. The answer to the above question depends upon the answer to the question whether the raw materials purchased by the dealers would fall under entry 2(xvi) or 2-A of the Third Schedule to the Act. Though the said question was decided in favour of the dealers by the Tribunal the matter was remanded to the assessing officer for verification whether the purchases made by the dealers had suffered tax and on verification if it is found to have suffered tax then the dealers are entitled for the benefit of set-off. As already stated earlier a division Bench of this Court in Arun Ispat Udyog case (Special Appeal No. 37 of 1994 dated 10th January, 2003) (printed at page 152 infra) held that M.S. scrap purchased by the dealers would fall under entry 2A and not under entry 2(xvi) of the Third Schedule to the Act and, therefore, it is liable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id finding arrived at by the Tribunal, the final fact-finding authority, is clearly not supported by any material. The description of the above items of raw material purchased by the dealers clearly shows that they are all used material and sold as scrap. Therefore, it would fall only under entry 2A and not under entry 2(xvi) of the Third Schedule to the Act as claimed by the dealers-assessees. In that view of the matter, the purchasers of those raw materials are liable to tax at the last purchase within the State. 10.. Apart from this, the verification of the sale bills also go to show that the sellers have claimed exemption on the ground that they are the items enumerated under entry 2A of the Third Schedule to the Act and are exempt from tax under the first and subsequent sales except the last sale. The petitioners/dealers, being the last purchasers within the State, are liable to pay tax on the purchase of raw material. 11.. In the background of the above facts, let us proceed to consider the decisions relied upon by the learned counsel for the dealers/assessees. In Apex Steel Re-rolling Mills case [1992] 87 STC 32 (AP), the dealer questioned the notice issued by the departme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State does not shift the liability to pay the tax on the second seller. 13.. In view of the above decisions, the learned counsel for the dealers-assessees contended that as the dealers/assessees purchased the scrap items from real and identifiable dealers who are registered dealers, they are not liable to prove that those dealers have paid the tax. This contention of the learned counsel cannot be accepted. The above two decisions relied upon by the learned counsel for the dealers can be distinguished on facts. In the present case the very liability to pay tax, whether on the first sale or on the last purchase was in dispute. The petitioner's claim is that the raw material is exigible to tax at the point of first sale which is contrary to sale bills produced by the dealers where the sellers claimed exemption on the ground that the same is exigible to tax on the last purchases in the State. As per the decision of this Court in Arun Ispat Udyog case (Special Appeal No. 37 of 1994 decided on January 10, 2003) (in one of the petitioner's case) the scrap, which the dealers have purchased is liable to tax on the last purchase within the State and not on the first sale. In that view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that case, "a notification under rule 8(1) of the Central Excise Rules, 1944 granted exemption from excise duty on iron or steel products falling under sub-item (i-a) of the item 26-AA made from any of the following materials or a combination thereof, namely, (i) fresh unused re-rollable scrap on which the appropriate amount of duty of excise has already been paid ......." The apex Court after taking into account the purpose and the intendment of such exemption, as it was only to reduce the cascading effect on the cost of the finished product, held that for the purpose of getting the benefit of the exemption under the notification the goods must be made from raw material on which excise duty had, as a matter of fact, been paid, and had been paid at the "appropriate" or correct rate and that unless the manufacturer had paid the correct amount of duty he was not entitled to the benefit of the exemption and reversed its opinion in Usha Martin Industries' case [1998] 111 STC 254 (SC); (1997) 7 SCC 47. The relevant observations of the apex Court in para 8 reads as follows: "An exemption notification that uses the said phrase applies to goods which have been made from duty-paid mat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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