The appellants had posed question for determination as to what was the rate of purchase tax payable on the purchases of old condemned scrap batteries. The Commissioner held it to be covered by schedule entry C-II-152, liable to purchase tax @ 13%. (Transaction dated 8-12-1995 and 21-1-1996.)

In appeal before the Tribunal, the appellant stated that the Commissioner failed to gather intention of buying/selling condemned batteries, which was to acquire property in old material; i.e., lead, a non-ferrous metal scrap. The scrap batteries could not be used except for extracting lead out of it, which is used in manufacturing new batteries. It was pointed out that price of scrap batteries varies depending on its lead contents. Reliance was placed on M/s Prakash Metal Company (S.A. No. 19 of 1979 dated 14-3-1980) and M/s Central Railway (S.A. No. 221 of 1996 dated 8-11-1996)

The Revenue pointed out that reference application has been filed in respect of M/s Central Railway's case (cited supra).

The Tribunal considered ratios of these two cases. It observed that there was no reason to deviate from the above decisions, which were based on valid grounds and sound reasoning.

It was held that scrap batteries are covered by schedule entry C-I-23 chargeable @ 4%.

[M/s Exide Industries Ltd. Appeal No. 115 of 1996 decided on 15-6-2002. Shri Ketan Shah, STP appeared on behalf of the appellant. The judgment is delivered by Shri G. D. Parekh, President, First Bench.]

The appellant was assessed u/s 33(3) for the financial year 1992-93. During the said period, no sales whatsoever were effected by the appellant. The purchases included electrical overhead crane-purchase, on which set-off u/r 41-D was granted. Assistant Commissioner (Adm.) issued revision notice as he felt grant of set-off to be erroneous. In reply, the appellant admitted the fact that the impugned crane was not used in manufacturing till the date of passing of assessment order. It was, however, contended that the crane was subsequently used in manufacturing in the year 1998 and manufactured goods were sold. Revision order was passed withdrawing the set-off.

In appeal against this order, it was submitted that though the relevant conditions of use in manufacturing and sale of manufactured goods were not fulfilled before passing of assessment order, yet they were certainly fulfilled before the initiation of the revision proceedings. Reliance was placed on M/s Sudha Instant Soft Drinks and Essences (S.A. No. 318 of 1985 dated 28-1-1988) and others.

The Tribunal observed that in those cited cases, use of machinery and sale of manufactured goods were proved before actually passing of the assessment order. In the present case, the crane in question was never used in the appellant's own manufacturing till the date of passing of the assessment order. The first and last use of the crane in the manufacturing was claimed to be in October 1998. As this was not prior to the assessment the appellant was not legally entitled to set-off u/r 41-D. As such the revision order withdrawing the said set-off was justified.

The Tribunal further observed that at the most, where the relevant conditions were not fulfilled by the time of assessment, set-off could have been worked out and could have been carried forward to the particular year in which the conditions are fulfilled. But in view of peculiar facts of the case on hand, even carrying forward set-off was not justified. It would be justified only in such cases, where the claimant dealer had a reasonable consistent activity of manufacturing. Hence it would be appropriate to examine the set-off claim and decide it in the assessment for the year in which conditions were fulfilled.

[M/s Doshi Slitters Pvt. Ltd. Appeal No. 68 of 2001 dated 29-6-2002. Shri T. M. Chhatpar, Advocate appeared on behalf of the appellant. The judgment is delivered by Shri G. G. Kochrekar, Member, Second Bench.]

The appellant was assessed u/s 33(3) for the year 1990-91 on 7-3-1994. The assessing authority had allowed sales u/s 8(1) of Rs. 2,36,58,207/- under the CST Act. The Revision proceedings u/s 57 were initiated on the ground of following improprieties noticed in order.

1. Out of the allowed claim, C forms to the tune of Rs. 1,81,15,516/- were on record. Out of these, two 'C' forms amounting to Rs. 12,37,128/- were defective in the sense they did not bear date of the fact of CST RC and

2. Insurance claim to the tune of Rs. 32,307 was wrongly allowed.

The appellant pointed out that the assessing authority had not taken 'C' forms of less than Rs. 25,000/- on record in view of circular instructions. But the learned Deputy Commissioner set aside the assessment order and remanded the proceedings back to the assessing authority with the direction to verify the claim of inter-State Sales against form 'C'.

The appellant preferred appeal against this order. It was contended that section 57 empowers the Revising authority to revise the Assessment Order and it does not include setting aside of assessment order. There is no specific power in this section to the Revisional authority to remand back the matters as given to the appellate authority under section 55 of the Bombay Act. It was argued that if the assessing officer had allowed the claim of appellant after perusal of 'C' forms, and not taking some counterfoils on record as per circular instructions, then remand back of the case directing to produce all 'C' forms was not justified. Rule 54 of the Bombay Rules, 1959 was referred to which casts statutory obligation to preserve record only up to 5 years. Thus he would have preserved books only up to 31-3-1996, where as revision notice was issued on 26-12-1996. Decision in the case of M/s R. M. Rathi. [R. A. No. 380 of 1964 dated 17-6-1966] was relied upon.

The Tribunal perused section 57 and several case laws, to name a few, K. M. Cheria Abdulla (16 STC 895), Swastik Oil Mills (21 STC 383), MEC Corporation (70 STC 25) etc. It observed that assumption of jurisdiction of Revising authority is only on the basis of examination of reward of any order passed under the Act. Once jurisdiction is assumed, revisional authority is empowered to pass such order as he thinks just and proper.

Looking into facts of the case, the Tribunal observed that except two defective forms, there was nothing in assessment order to show that acceptance of these forms was erroneous in law or were inadmissible. Since the counterfoils of those 'C' forms were on record, revising authority should have allowed or disallowed the claim and he was not justified in remanding the matter back for fresh assessment. The revision order was set aside. As the appellant and revenue both agreed, the matter was remanded back for verifying letters produced to cure defects in 2 'C' forms.

As regards, allowance of insurance claim, the Tribunal accepted appellant's reliance on M/s McDowell and Co. Ltd. (46 STC 79) (Ker) in which it was held, "As general insurance has become so much of a part of the commercial activity of the country and risk and insecurity attendant on the delivery of the goods is so great so as to make insurance of the goods an absolute necessary part of bargain between the parties to a sale transaction, the cost of freight or delivery should include the cost of insurance of the goods. Therefore, in computing the turnover of a dealer the insurance in respect of the goods sold should be excluded."

[M/s Bombay Metal and Alloys Manufacturing Co. Ltd. Appeal No. 209 of 1999 decided on 4-5-2002. Shri A. B. Ghanekar, STP appeared on behalf of the appellant. The judgment is delivered by Smt. S. A. Basu, Member, Third Bench.]

The appellant is a reseller/importer and deals in general goods, cosmetics goods, kajal and kumkum. At the time of assessment, it was contended that kajal was medicine exigible to tax @ 4% but assessing authority taxed it @ 15% treating it as cosmetics. The order being confirmed in first appeal, the appellant was before the Tribunal.

The Tribunal observed that there was absolutely no evidence on record either to hold the variety of 'Kajal' that has been dealt with by the appellant, was used either as medicine or cosmetics. It did refer to the correspondence produced by the appellants but stated that not a single letter or any material was produced either before the assessing authority or appellate authority to show that the variety of kajal dealt with by the appellant was used for eye treatment by the customers. Similarly there was absolutely no record to show that the said kajal was used for beautification of eyes. It was pertinent to note that certain articles like kajal; hair oil may either be used for beautification of body or medicine. Unless and until, therefore, there was material evidence on record that particular variety of product has been used for particular purpose no inference can be drawn by either way, as observed in M/s Western India Chemical Co. by Bombay High Court (59 STC 313). Since there was no material on record about ultimate use, the Tribunal held the said variety of kajal as covered by residuary entry, C-II-102, liable to tax @ 10%.

[M/s Kandhari Traders, S.A. No. 166 of 1996 decided on 15-6-2002. Shri K.G. Budharaja, C.A. appeared on behalf of the appellant. The judgment is delivered by Shri G.D. Parekh, President, First bench.]

The REP licence/Exim scrip scheme under Import and Export (Control) Act, 1947 is discussed at length in the beginning of the judgment while dealing with the facts of the case. The appellants stated that in M/s Vikas Sales Corpn. (102 STC 106), the Supreme Court held that exim scrips/REP licences are goods of incorporeal/ intangible nature. This was so held in the context of transfer of right to use licences granted by the Government by issuing exim scrips/REP licences to other dealers. It was canvassed at the Bar that after 1-3-1992, since the Government had discontinued the said policy and system under which these licences were issued, the position had changed. After discontinuation of the said policy, these exim scrips/REP licences ceased to be goods as they had lost their marketability and hence the ratio of M/s Vikas Sales Corporation (Supra) was not applicable to the present set of facts. There was extinguishment of right by surrendering these exim scrips/licences to the Government. Particularly, when the purpose for which they were issued had come to an end on discontinuation of the policy.

It was reiterated that the premium offered by the Government was of the nature of reward given to the exporters for their contribution to gain foreign exchange. It was pointed out that in the case of M/s P.S. Apparels (94 STC 139), the Madras High Court proceeded on the footing that these exim scrips had been purchased by banks like any other trader. It had not been considered that the policy and system under which they were issued had been discontinued from 1-3-1992 and they had lost their trading value and ceased to be property, which could have been passed on to others. It (Madras HC) lost sight of the fact that the scrips/licences were in fact returned to the grantor; i.e., Government of India. The appellants relied on the certain decisions under Income Tax Act, M/s Vania Silk Mills Pvt. Ltd. (191 ITR 647)(SC) and M/s Pink Star (66 TTJ Mumbai 885), wherein it was held that premium received by assessee on surrender to Government of import licences earned against its own exports under the changed Government policy constituted cash assistance and did not form part of total turnover.

The revenue argued that all ingredients of sale were present in the disputed cases. The right of property held by the appellants was transferred to SBI on behalf of Director General of Foreign Trade. Considering the explanation to the definition of sale in section 2(28) about 'compulsory acquisition', the transaction was nothing but a sale. Reliance on Income tax case was not applicable to the controversy relating to the passing of property.

The Tribunal ventured through all important judgments cited above threadbare. In Para 27, it has stated that, "As such having regard to the object and intention of issuing these exim scrips to encourage the exports and calling them back after change in fiscal policy but keeping promise to fulfil obligation of granting some incentive for exports already done, it cannot be said that impugned transaction finds the necessary ingredients of sale. Neither the bank authorities that had merely acted as agents nor the licence-issuing authority can be termed as 'buyer' as well as holder of the scrips as 'seller' while handing over the same to the grantor. They cannot be taken as understood under the contract of sale. After discontinuance of permit policy, the scrips no more remain as property as pointed above and there was no question of transfer of property. The amount of premium is certainly not a consideration but somewhat in the nature of compensation, reward, reparation or so. Obviously, there was no agreement of sale for consideration. There was no alternative for holders of the scrips but to surrender the same and accept whatever amount they get as these scrips had lost their utility since 1-3-1992 and practically became scrap paper."

The Tribunal answered the question in negative and in favour of the appellants.

[M/s Agra Engineering Co. Ltd. and Others, S.A. No. 185 of 1997 along with other 14 – second appeals decided on 30-4-2002. S/Shri B.C. Joshi, P.C. Joshi, P.V. Surte, B.K. Sharma, S.S. Gaitonde, V.P. Patkar, Smt. N.R. Badheka-Advocates S/Shri D.V. Shintre, R.T. Kotak, M.S. Deora-STPs appeared on behalf of the appellants. The judgment is delivered by Shri G.D. Parekh, President, First Bench.]