M. Rama Jois, J.@mdashIn these two sales tax appeals, the following question of law arises for consideration :
Whether the Commissioner for Commercial Taxes was right in holding that old aluminium vessels purchased by the appellant were liable to tax u/s
6 of the Karnataka Sales Tax Act of 1957 ?
2. The facts of the case, in brief, are as follows :
The appellant is M/s. Prabhat Rolling Metal Works, Amargol, having its industry at Amargol, Hubli. The assessment years concerned are 1st
January, 1981 to 31st December, 1981 and 1st January, 1982 to 31st December, 1982. During the assessment years, the appellant had
purchased aluminium scrap, in that pieces of aluminium metal as also old aluminium vessels, both of which were used in the manufacture of new
aluminium vessels. These purchases were made from unregistered dealers, under the circumstances, no tax was leviable. There is also no dispute
that the pieces of aluminium metals as also old aluminium vessels, which the appellant purchased, were used for manufacturing new aluminium
vessels for sale. Therefore, the assessing authority proposed to levy tax on the purchase turnover of the old aluminium vessels also. The appellant,
however, objected on the ground that as aluminium vessels as such were exempt from tax under the provisions of the Act, the tax was leviable only
on the pieces of aluminium metals purchased by the appellant and not on the old aluminium vessels. This contention was negatived by the assessing
authority. The relevant portion reads :
The main contention of the dealers is that they are not liable to purchase tax u/s 6 in respect of unregistered dealers purchases of old aluminium
vessels on the ground that aluminium vessels are exempt from tax from 29th March, 1981. They have no objection to assess tax u/s 6 in respect of
unregistered dealers purchases of aluminium scrap. On verification, I found that the dealers have no doubt purchased aluminium vessels from
registered dealers and unregistered dealers and also aluminium scrap to some extent, and the same have been consumed in the manufacture of new
aluminium vessels. In my view, old aluminium vessels are nothing but scrap which were ultimately used in the manufacture of new aluminium
vessels. They have not sold old aluminium vessels but used them for manufacture and thus disposed of the same other than by way of sale in the
State and as such I hold that the said purchases of old aluminium vessels are nothing but only scrap. Further, I find from the trading profit and loss
account filed by the dealers that they have purchased only scrap. I therefore overrule their contentions in this behalf. As regards purchases of
aluminium scrap and vessels of Rs. 46,453.25 made from registered dealers, the same having been purchased from registered dealers for which a
list has been filed in being allowed. Further, the sales turnover of aluminium utensils up to 8th March, 1981 is adopted as per form 3 filed at Rs.
2,36,795.33 and consequently the exempted sales turnover of aluminium utensils works out as under.
Accordingly, the purchase turnover relating to old aluminium vessels was also brought to tax. Aggrieved by the order of the assessing authority the
appellant presented appeals before the appellate authority. Appeals were allowed accepting the contention of the appellant. The Commissioner,
however, was of the view that the order of the appellate authority was prejudicial to the Revenue and therefore proposed to revise the order of the
Deputy Commissioner (Appeals) in exercise of his suo motu revisional power u/s 22-A of the Karnataka Sales Tax Act, 1957. Accordingly, a
notice was issued to the appellant. The appellant filed its objections. The objections were overruled and the order of the appellant authority was set
aside and that of the assessing authority was resorted. Aggrieved by the said order, the appellant has presented these appeals.
3. Sri E. R. Indrakumar, learned counsel for the appellant, contended that by no stretch of imagination the old aluminium vessels purchased by the
appellant could be treated as scrap and therefore the view taken by the appellate authority was correct and the view taken by the Commissioner
was not correct. It is in these circumstances, the question set out first arises for consideration.
4. In support of the submission that the old aluminium vessels could not be treated as scrap, the learned counsel relied on two decisions, one of
Andhra Pradesh High Court and another of Bombay High Court. They are Narayan Venkat and Co. Vs. State of Andhra Pradesh, and Punjab
Business and Supply Co. (P.) Ltd. Vs. State of Maharashtra, In the said two cases, the question for consideration was whether the turnover
relating to purchase of rags from tailor shops for purposes of manufacturing paper was liable to tax. The contention assessee in each of the cases
was that as cotton fabric was exempt from tax, the turnover was not liable to tax. Both the High Courts have taken the view that as the cotton
fabrics were exempt from tax under the provisions of the Act, notwithstanding the fact that what was purchased was rags and chindhis of cotton
fabric they still retained the character of cotton fabric and therefore not liable to tax even on their consumption in the manufacture of a different
commercial commodity. On the same analogy the learned counsel submitted that old aluminium vessels purchased by the assessee, continued to be
aluminium vessels and therefore the purchase turnover relating to old aluminium vessels was not liable to tax notwithstanding the fact that they were
not sold as aluminium vessels as such.
5. It is true that the reasoning in the aforesaid two decisions do support the contention of the appellant. With great respect, we are unable to agree
with the view taken by the two High Courts. It is settled position in law that in understanding the meaning of the words used in the law levying sales
tax the words must be given the meaning, as understood in common or commercial parlance. It appears to us that the word ""cotton fabric"" at
common parlance conveys the meaning of the cotton cloth used as such or for manufacturing clothing and other cotton goods, but dos not include
rags and chindhis which are waste products of tailoring industry or old pieces of cloth which has lost utility as cotton fabrics. On the other hand, the
ratio of the decision of the Gujarat High Court in Commissioner of Sales Tax, Gujarat v. Bharat Iron and Brass Foundries [1971] 28 STC 455, on
which the Commissioner has relied is apposite. In the said case the question for consideration was whether old parts of machineries purchased by
a dealer could be treated as scrap for purposes of reprocessing. The Gujarat High Court held that the old parts purchased would fall within the
meaning of the word ""scrap"" as meaning of the word ""scrap"" according to dictionary was not only pieces of something or fragment, but also metal
collected for reworking. We are in respectful agreement with the view taken by the Gujarat High Court.
6. From the facts stated above, it is clear that as far as the pieces of aluminium purchased by the appellant is concerned, the appellant has stated
that it was scrap and therefore taxable as a general item u/s 5 of the Sales Tax Act. But the plea taken by the appellant was that as far as old
aluminium vessels were concerned, as they were purchased as vessels and aluminium vessels are exempt from tax under the provisions of the Act,
they could not be treated as scrap.
7. In the present case, as pointed out by the Commissioner, admittedly the old aluminium vessels purchased by the appellant were not sold as
vessels. In fact they were purchased only for its metal value. In other words, between the pieces of aluminium metal which the appellant purchased
and the old aluminium vessels, there was no difference at all. The latter was purchased only for its metal value for reprocessing and not for being
sold as such. It is also not disputed by the assessee that the old aluminium vessels were not sold by it as such and were used for reprocessing.
8. In the circumstances, we answer the question set out in the affirmative and dismiss the appeals.
9. Appeals dismissed.
