JAINULAVUDHEEN Vs. STATE OF KERALA

JUDGEMENT

(1.) Question raised in the connected revision cases is whether the Tribunal was justified in confirming the order of the first Appellate Authority modifying the penalty levied on the Petitioner under Section 67(1) of the K.V.A.T. Act. We have heard counsel appearing for the Petitioner and Government Pleader appearing for the Respondent.

(2.) The facts leading to the controversy are the following. The Petitioner is a dealer in scrap materials having shop at Palakkad. In the course of business Petitioner purchased old vehicles from various persons, dismantled the same and sold the items as scrap taxable at 4%. During inspection the Intelligence Officer noticed that scrap portion of the dismantled vehicle is sold in the breaking yard itself and usable automobile spare parts are recovered by the Petitioner from the dismantled vehicles and the same are brought to shop and sold as automobile spares. The Petitioner's case is that old spares also are sold as scrap in as much as sale is by weight and so much so tax collected at the rate applicable to scrap materials that is 4% is correct. The Intelligence Officer found on inspection that the items sold are spare parts of automobiles usable as such and so much so tax payable is at the rate shown under the specific entry in the Act and the Petitioner's effort by showing sale as by weight is only to avoid payment of actual rate of tax. Even though penalty at double the differential tax amount is levied by the Intelligence Officer, in appeal the first appellate authority though upheld in principle the levy of penalty on the Appellant reduced the penalty to equal amount of tax. On second appeal, Tribunal confirmed the same against which these revisions are filed by the Petitioner.

(3.) During hearing counsel for the Petitioner relied on the sale bills which show that the spares are sold by weight. However, what is clear from the findings of the Intelligence Officer and what is evident from the sale bills is that sales though are shown by weight, the price is at different rates per unit weight. Most of the automobile spare parts are items of iron and steel and it is common knowledge that the price of scrap steel should not vary substantially because price of scrap will depend on the recoverable metal content in it. So much so the spare parts sold at different rates of price even though the sale is shown as made by weight in the bills are in fact spare parts sales and what is disclosed in bill is unit price and not scrap price. It is common knowledge that the spares and components recovered on dismantling an old automobile would not have suffered uniform erosion because items would have been replaced in the course of use of the automobile periodically and there may not be uniform erosion in the quality on all such items leaving sizable number of spare parts obtained on dismantling the vehicles as fit for re-use as such. Scrap is purchased only for melting and for re-rolling the primary metal. However, when old spare parts are sold as such, those are for use as spare parts in Automobiles and so much so tax is leviable at the rate applicable for the commodity. However, the only difference is that the dealer of second hand spare parts will be liable to pay tax on those items at reduced value at which the same are sold. This does not mean that the Petitioner can claim rate of tax applicable to scrap for old spare parts sold as such by him. Scrap is invariably old but old is not always scrap is true of automobile spares. So much so, the findings of the Intelligence Officer that the rate of tax applicable for sale of old automobile spare parts is the rate applicable to automobile spare parts is perfectly correct.