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TMI Blog2008 (3) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... to accept it as scrap by the impugned order is clearly impermissible. Writ petitions will stand allowed as prayed for and the respondents are hereby directed to restore the tax at four per cent and refund the balance to the appropriate parties. X X X X Extracts X X X X X X X X Extracts X X X X ..... . No. 15072 of 2007). The sale was given on the basis of E auction and it was stated that the entire B & C plant and machineries will be sold as a whole lot on "as-is-where-is" basis and "no complaint" basis. The sales tax at 12 per cent and five per cent surcharge charge will be directed to be charged. Further condition was imposed regarding income-tax and education cess on the total value of scrap to be paid. On April 5, 2005, the Income-tax Office at Tirupur, issued a TDS certificate on account of sale of scrap being plant and machineries and materials in the B & C plant. After the purchase, the plant and machineries were dismantled and taken by lorries outside the NLC. In the delivery--cum--gate pass No. 52 issued on May 19, 2005, the goods were noted as B & C plant and machineries. However, on the next day, i.e., on May 20, 2005, delivery--cum--gate pass No. 53 was issued describing the goods as B & C plant and machineries (iron scrap). Subsequently, licence was also obtained from the District Revenue Officer for use of explosives for blasting the plant and the machineries and the District Revenue Officer called for remarks from the District Superintendent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GST Act was a non-speaking order and, therefore, the same should be set aside. This court, by an order dated December 19, 2006 allowed the writ petition and remitted the matter to the Commissioner of Commercial Taxes for reconsideration and also to take into account the representation of the petitioner dated April 7, 2005 and other materials and pass appropriate orders after giving opportunity to the parties. It was thereafter, by a proceedings dated April 16, 2007, the Commissioner of Commercial Taxes held that since the sale of B & C plant and machineries was done on "as-is-where-is" basis and "no complaint" basis, it is taxable at 12 per cent under entry 20 of Part D of the First Schedule to the TNGST Act. It was held that the intention of the NLC was to sell the whole plant and the intention of the buyer was to buy on those terms and the notings in the delivery--cum--gate passes of the disposal wing of the NLC clearly spell out the intention of the parties. It is against this order, both the writ petitions have been filed as noted already. W.P. No. 15072 of 2007 was admitted on April 24, 2007 and W.P. No. 28254 of 2007 was directed to be posted along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Chitrahar Traders refuting the averments made by the respondents and also distinguished the cases relied on by the department. Mr. C. Natarajan, learned Senior Counsel appearing for the petitioners, contended that originally in the sale order, it was stated that a sales tax at 12 per cent and five per cent surcharge on the total value of scrap and after a clarification was sought for by the auction purchaser, the matter was taken up with the department and thereafter, on April 15, 2005, the auction purchaser paid four per cent sales tax to NLC and the balance was to be kept as a bank guarantee. While the NLC filed sales tax returns, their liability was declared at four per cent. In view of the adverse ruling of the Commissioner of Commercial Taxes, the NLC requested the auction purchaser to remit the balance statutory levy and also reminded the auction purchaser to pay the balance. On November 22, 2005, NLC informed the auction purchaser that they are adjusting Rs. 5.22 crores besides other charges against the security deposit. It was thereafter, that NLC paid the difference of eight per cent sales tax over and above the four per cent, under protest and without prejudice to thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery by assessee who was involved in purchase of iron and steel will amount to purchase of scrap. The following passages found in paragraphs 12 and 13 found in the said judgment may be usefully extracted below: "12 . . . The only contention which is found to have been raised by the assessee before the lower authorities as well as the Tribunal was whether they amounted to 'scrap' or not. Under the circumstances, we propose to decide this reference on the hypothesis that the goods were of iron and steel. If that is so, the only question which we are called upon to consider is whether they amounted to 'scrap' as contemplated by entry 3. On this question Shri Pathak, who appeared on behalf of the assessee-opponent, contended that the word 'scrap' connotes broken parts of machinery and not the machinery, which is found to be unserviceable as machinery. In other words, his contention was that if it is found that the machinery is for some reason not useful as machinery and, therefore, if it is sold away by weight not on the basis that it is machinery, but on the basis that it is an old useless article of machinery, it would not amount to 'scrap' as con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer, Akola [1961] 12 STC 286. We find that even if this test is applied, the case of the assessee does not improve. Applying this test the question is what is meant by the word 'scrap' in common parlance or what the persons, who are usually associated with 'scraps' of unserviceable machinery meant when they use the word 'scrap' in relation to the said machinery. We are of the opinion that the machinery which is totally unserviceable as such, is referred to even in common parlance as 'scrap'. A piece of machinery, which is admittedly unserviceable and which cannot be put to any use even after some repairs, is always referred to as 'scrap' in common parlance. When every hope of putting it to its original use even after repair is given up, the only use to which it can be put to use is as a 'scrap'. Therefore, when such machinery is made of some metal, it is purchased not as machinery but as metal and is also put to use as metal simplicitor. Speaking of the facts of this case, the old machinery and spare parts on which the assessee is found to have paid tax, at the time of their purchase have actually been put to use as metal and not as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hased in public auction is scrap and that when he sold the scrap later he was only a second seller. A similar question came up for consideration in T.C. No. 17 of 1964. In that case, certain condemned machineries which cannot be put to use had been sold which was claimed to be scrap iron falling within the Second Schedule of the Act. The Revenue contended that the said condemned articles cannot be treated as scrap. But the court rejected that contention and held that any condemned article made of iron which is of no further use can be regarded as iron scrap and that iron scrap in any form wherever it comes from, is of special importance to the industry in the country. The court observed thus: 'In our view, the condemned articles fall within the description of iron scrap in item 4 of the Second Schedule. It appears to us also impossible to hold that condemned articles come within the purview of item 23 in the First Schedule which relates to machinery including hardware, iron and steel. Hardware, iron and steel referred to there must be in the form of machinery. Iron scrap consisting of condemned articles can hardly be described as machinery under item 23 of the First Schedule& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sale would suggest that what was purchased was a ship and not scrap. In the application under section 52 of the said Act, made on September 19, 1968, what the respondents have stated is that they have purchased a ship and not that they have purchased iron and steel scrap, although it has been stated that the ship was purchased for breaking and scrapping purposes. It has not been urged anywhere by the respondents, either before the Deputy Commissioner of Sales Tax or before the Tribunal, that what they had purchased was scrap and not a ship at all. The mere fact that the respondents had purchased the said ship for the purpose of breaking up and scrapping the same would, in our opinion, not convert the ship into scrap. There is nothing on the record to show that the said ship had become unserviceable or had been condemned. As we are of the view that there is nothing on the record to show that the said ship was purchased as scrap or had become unserviceable and, on the other hand, the evidence brought on the record shows that it was purchased as a ship, we need not consider the arguments of Mr. Sheth based on the assumption that the said ship was purchased as scrap." (emphasis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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