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TMI Blog2010 (2) TMI 1087X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that it was not viable to continue the operation. Accordingly, the factory was closed and an intimation to that effect was given to the Deputy Chief Inspector of Factories and the Central Excise Department. The factory licence was surrendered by NLC on July 10, 2002. Subsequently NLC has taken a decision to auction the plant and machinery in "as is where is" condition and for the said purpose, permission was obtained from the Ministry of Coal, Government of India. M/s. Metal Scrap and Trading Corporation Ltd. (hereinafter referred to as "MSTC"), a Government of India enterprise was engaged for the purpose of auctioning the scrap. MSTC, engaged in the business of scrap, entered into an agreement with Neyveli Lignite Corporation on November 3, 2004 in and by which, it was agreed to pay 2.5 per cent of the sale proceeds as service charges to the selling agent. MSTC called for e-tenders and M/s. Chitrahar Traders, Tirupur, respondent in W.A. No. 639 of 2008, was the successful bidder. Accordingly, the bid was confirmed in their favour for a total consideration of Rs. 70,01,00,019. Since Neyveli Lignite Corporation was not in a position to dismantle the machinery, they have perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been described as "B & C" plant and machinery on "as is where is and no complaint" basis and as such, it was an outright sale of plant and machinery. Since the sale was characterized as old plant and machinery, there was no question of payment of sales tax at four per cent, applicable to steel scrap. According to the appellants, the successful bidder was liable to pay sales tax at 12 per cent with surcharge at five per cent as the sale was purely a transaction in old plant and machinery. The learned single judge adopted the test of "intention of the parties" and was of the view that the auction was to sell the machinery as scrap and even in the gate pass, it was described only as scrap and therefore, the successful bidder was liable to pay only the tax applicable to scrap. The learned judge placed reliance on a judgment of a Division Bench of this court in State of Madras v. Raman & Co. [1974] 33 STC 1 wherein a similar question was considered by the Division Bench, which was subsequently affirmed by the Supreme Court in State of Tamil Nadu v. Govindan & Co. [1994] 93 STC 185. Accordingly, the learned judge quashed the impugned proceedings and directed the appellants to collect t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p and accordingly, MSTC was appointed as a selling agent for disposal of iron and steel scrap. MSTC on their part invited e-tenders and in the said tender, M/s. Chitrahar Traders became the successful bidder. Accordingly, the bid was confirmed in their favour. The sales tax authorities originally intimated NLC and the auction purchaser that the transaction was in the realm of scrap trade and as such, the tenderer was liable to pay sales tax only at four per cent. Accordingly, sales tax was paid and it was only at a later point of time, the appellants have raised a demand that the sale was in respect of machinery on "as is where is and no complaint" basis and as such, the successful bidder was liable to pay sales tax at 12 per cent with surcharge at five per cent irrespective of the fact that the machinery was dismantled and it was transported as metal scrap. It is true that in the confirmation of acceptance of offer dated February 16, 2005, M/s. Neyveli Lignite Corporation has indicated that the sale was in respect of "B & C" plant and machinery as a whole on "as is where is and no complaint" basis. It was the said communication which was heavily relied on by the learned A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at all points of time as a sale of scrap and it was never intended to be a sale of old machinery. In Uma Devi Sizing Industries v. State of Tamil Nadu rep. By the Commercial Tax Officer II, Rajapalayam case [1993] 4 MTCR 265, the appellant who was engaged in the business of purchasing condemned and old machinery was the successful bidder in an auction conducted by Neyveli Lignite Corporation for breaking and dismantling machinery into ferrous and non-ferrous scrap and selling them as scrap. Before the sales tax authorities, the appellant claimed exemption from payment of tax on the ground that the condemned articles which they have purchased from Neyveli Lignite Corporation were subjected to tax already and as such, there was no necessity to pay sales tax on second sale. The Division Bench found that the cutting and dismantling of the condemned machinery by the appellant after their purchase from Neyveli Lignite Corporation resulted in emergence of scrap which is a distinct commercial commodity. Therefore, when the condemned machineries were transformed into scrap by a dismantling process it became a separate and distinct commercial commodity for the purpose of sales tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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