STATE OF KERALA Vs. A.K.P.METALS

JUDGEMENT

(1.) REVISION is filed by the State against the order of the Tribunal passed pursuant to remand by this Court in the earlier round of litigation between the same parties. Respondent is engaged in purchase of scrap, recovery of metal therefrom in the refinery in sheet, round forms, etc and completing some of the items to utensils and selling the same. The items purchased are scrap of aluminium bronze etc. which after completion are sold in sheet, circles, rounds and as utensils. Respondent claimed exemption on the sale of metal in various forms and on sale of utensils on the ground that scrap metal purchased by them from out of which products are made have suffered tax at the point of assignment in the state and so much so second sales are entitled to exemption. In the first round of litigation this Court felt that the Tribunal has not taken into account the relevance of entry 121 of the first schedule which provided for separate rate of tax on model scrap other than those covered under second schedule. However, even after remand by this Court, the Tribunal confirmed their earlier order declining eligibility for second sale exemption for respondent against which state has filed this revision.

(2.) WE have heard special Govt. Pleader appearing for the petitioner and Smt. S.K.Devi appearing for the respondent.

(3.) THE question to be considered is whether purchase of scrap of the above items of metal by paying tax at first sale point, conversion of the same in the form of sheet, round, circles or as utensils will entitle the respondent for exemption on the sale of such items. Obviously the claim is exemption on second sales in terms of Rule 32(13) of the KGST rules while entitles towards the claim exemption on purchase and sale of same goods. Apparently what respondent purchases is scrap and what they sell is not scrap as such and apparently they are not entitled to exemption on second sales in terms of Rule 32(13) of the KGST Rules. However, since respondent has claimed identity of the item purchased is not lost in the manufacture of the process and same is not accepted by the Tribunal we have to necessarily examine the scheme of taxation with reference to entries contained in the first schedule. It is clear from entry 121A above referred that metal scraps are identifiable in legislature in the two groups one falling under second schedule which are essential steel scrap of various types. The metal scrap of all other forms are other than those of second schedule covered by entry 121A of the first schedule to the KGST Act of which tax on such scrap at the point of first sale in the State. Even though various types of metals like aluminium, copper, brass, bronze etc covered by separate entries of the first schedule it is clear from 121A that those specific entries provide for rate of tax on those items of metal will not take in scrap form of such metal if the specific entries for each item of metal covers its scrap form also then legislature would have specifically mentioned in entry 121A "other than metal scraps of metals covered by other entries of this schedule." In other words in the absence of such an exclusion clause in entry 121A which is clear that the specific entries in the first schedule provide for rate of tax on other items of metals do not have any scrap of such metal. This necessarily presupposes that the items referred to in the entries cover various metal items which entries provide for rate of tax on the said metal in its pure form. Metal is recovered in refinery process either by processing the ore by metal in recovery from scrap. Both the process involve elimination of waste and impurities and the process involves recovery of metal in its pure form. It may be in the form of metal recovered in any refinery may be in the form of sheet, circle, rods etc. All these items fall within the entry providing for rate of tax on the metal. No matter the original form in which the metal is recovered may itself act as a product for a good consumer depending on its use. However it cannot be said that the ore of the metal or the scrap which are raw materials used for manufacture or recovery of metal can be treated as metal by itself. Both are commercially different because one is raw material and the other is product viz., the metal produced out of ore or scrap. In fact it is common knowledge that percentage of recovery of metal from scrap will vary depending on the concentrates of the metal in the scrap. Further the metals of different types are also recovered from combination scrap and so much so the scrap cannot in any way equated or identified with the metal got therefrom. Though not directly arising in this issue we are constrained to hold that products made of copper, zinc, manganese, brass, bronze, magnesium etc. are covered by entry 121 of the first schedule because the specific entries providing for rate of tax on these items of metals cover only metal as such whatever be the form in which it is sold and not products made out of such metal. We therefore hold that the metal produced by the respondent in the form of sheet, round, circles etc from out of scrap metal cannot be treated as the raw material viz., scrap purchased by them by paying tax. On the other hand the metal recovered from scrap purchased is a different product taxable at the relevant entries referred above. In fact utensils is a final product made out of metal recovered in various forms and so the utensils are not even comparable with the original metal viz., scrap used for the production. We therefore hold that the respondent is not entitled to exemption sales turnover of copper and brass sheets, aluminium sheets, circles and utensils made and sold by them from out of scrap purchased by them merely because these commodities are different from raw materials viz., scrap. We therefore reverse the order of the Tribunal and that of the first appellate authority and restore the assessment on the items sold by the respondent.