LexCOMMR. OF COMMERCIAL TAXES AND ORS. versus CHITRAHAR TRADERS
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A B [2011] 3 S.C.R. 910 COMMR. OF COMMERCIAL TAXES AND ORS. v. CHITRAHAR TRADERS (Civil Appeal No. 2686 of 2011) MARCH 16, 2011 [DR. MUKUNDAKAM SHARMA AND ANIL R. DAVE, JJ.] Sa/es tax: Agreement between NLC, a government C undertaking and assessee for sale of iron and steel scrap to the assessee - Dispute arose between the sales authorities and the assessee as to nature of the article - According to authorities, the article was plant and machinery taxable @ 12% with 5% surcharge while as per assessee, it was scrap D and liable to tax @ 4% - Held: Assessee is liable to pay sales tax @ 4% only - In the agreement between the NLC and the assessee, what was sought to be sold was iron and steel scrap and rejected/condemned and obsolete secondary arisings - Terms and conditions of e-auction also indicated that what was E being sold was scrap - Moreover, there was an application by assessee to District collector for using explosives for dismantling the machinery - Sale in question was made by public sector undertaking and the said sale was conducted for and on behalf of another public sector undertaking - F Selling agent was a/so engaged in the business of metal scraps - Sale took place 36 years after the purchase of machineries - Affidavit of NLC clearly established that those machineries became obsolete and condemned - It was also established from the contemporaneous documents that the G plant and machineries had outlived its utility and had no value except scrap. H Rainbow Steels Ltd. and Anr. v. The Commissioner of Sa/es Tax, Uttar Pradesh, Lucknow and Anr. ·1981 (47) STC 298 - Distinguished. 910 COMMR. OF COMMERCIAL TAXES AND ORS. v. 911 CHITRAHAR TRADERS Case Law Reference: 1981 (47) ST.C 298 Distinguished Para 13 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2686 of 2011. From the Judgment & Order dated 26.2.2010 of the High Court of Madras in W.A. No. 639 of 2008. R. Nedumaran for the Appellants. A B Shyam Diwan, B. Raghunath, Vijay Kumar for the C Respondent. The following Order of the Court was delivered ORDER Delay condoned. Leave granted. D This appeal arises out of the judgment and order passed by the Division Bench of the Madras High Court dismissing the E writ appeal filed by the Appellants herein whereby the Division Bench affirmed the judgment and order passed by the learned Single Judge allowing the writ petition filed by the respondent herein. Since the facts leading_ to filing of the aforesaid writ petition by the respondent are not disputed, we are not required F to set out herein the entire factual position at length. However .• for the purpose of deciding the present appeal, wh·atever fact$' are required to be dealt with and stated are being stated hereinafter. Th~ N.L.C., namely, Neyveli Lignite Corporation is a Government of India :-""terprise and a company, and is involved G in the activity of generation and supply of electric energy to various State Electricity Boards. The said company set up a plant to produce Leco, which is a form of lignite in the year H 912 SUPREME COURT REPORTS [2011] 3 S.C.R. A 1965. The said plant, however, was having frequent breakdowns and was incurring huge losses. Consequently, an effort was made to upgrade the plant which, however, turned out to be a failure due to which the entire plant was closed down on 4.4.2001 as unviable. Thereafter the company proceeded B to dispose of the entire plant and machinery as according to the company, the plant was of not marketable value and also because it had lost its use and outlived its utility and had no value except as scrap. The said company thereafter c:ippointed Mis. Metal Scrap and Trading Corporation Ltd. (hereinafter C referred to as 'MSTC') on 3.11.2004, a Government of India enterprise, engaged in the business of scrap to arrange for disposal of condemned plant. An agreement was entered into between the said company and MSTC. Clause 2.0 of the said agreement reaC:~ D as follows:- "2.0 Whereas MSTC has approached the Principal with a request to engage MSTC as Selling Agent for disposal of Iron & Steel Scrap and Rejected/Condemned/obsolete E Secondary arisings (ferrous & non-ferrous) as well as surplus obsolete Stores, equipments and miscellaneous· articles etc." F Reference may also be made to Clause 4.1 which reads as follows:- "This Agreement covers disposal of all scraps.secondary arisings, surplus stores and equipme
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