REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.    4752              OF 2008 [Arising out of SLP (Civil) No. 12480 of 2007]

Baby Varghese …Appellant

Versus

State of Kerala …Respondent

J U D G M E N T  

S.B. SINHA, J :

1. Leave granted.

2. This  appeal  is  directed  against  a  judgment  and  order  dated

18.08.2006  passed  by a  Division  Bench  of  the  Kerala  High  Court  in

S.T.R.V. No. 451 of 2004 allowing a revision application filed by the

State  of  Kerala  and  thereby  restoring  the  order  of  assessment  of

‘purchase turnover’ of aluminium scrap and old utensils and vessels at

the rate applicable as provided for under Entry 83 of the First Schedule

of the Kerala General Sales Tax Act, 1963 (for short “the Act”).

3. Appellant herein is a dealer within the meaning of the provisions

of the Act.  It manufactures aluminium utensils from scraps out of old

utensils made of aluminium and aluminium alloys.   

The  First  Schedule  appended  to  the  Act  contains  entries

concerning aluminium and household utensils, which read as under:

Sl. No.

Description of Goods Point of Levy Rate  of tax  Per cent

5. Aluminium  household  utensils whether made of aluminium and aluminium alloys

At the point  of  first  sale in  the  State  by  a  dealer who is liable to tax under Section 5

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6. Aluminium  products  (including aluminium  extrusion)  and products,  aluminium  alloys  not elsewhere  mentioned  in  this schedule

-do- 8

83. Metal  scraps  other  than  those specified in the second schedule

-do- 8%

4. Indisputably,  prior  to  its  amendment  which  took  place  on

23.02.1992,  the  word  “and”  occurred  in  between  “aluminium”  and

“household utensils made of aluminium” in Entry 5 aforementioned.   

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The Assessing Authority held that in the instant case Entry 83 was

attracted.  The Appellate Authority upheld the said view.  In a second

appeal  preferred  before  the  Sales  Tax Appellate  Tribunal,  however,  a

different view was taken opining that despite omission of the word “and”

occurring  in  between  the words  “aluminium” and  “household  utensils

made of aluminium”, the same should be read, holding:

“…What  the  appellant  purchased  was  old aluminium  vessels  and  aluminium  scrap  and used the same in the manufacture of aluminium household utensils.  The rate of tax applicable in  respect  of  the  purchase  turnover  taxable under section 5A is disputed.  According to the authorities below old Aluminium vessesls  and Aluminium scraps will not come under entry 5 of the 1st Schedule, but can be taxed only under entry 83 of  the said  schedule.   We reproduce below the relevant entries which are valid from 1-4-1992.

5. Aluminium  household  utensils whether  made of aluminium and aluminium alloys

F.S. 4%

83. Metal  scraps  other  than  those specified in the second schedule

F.S. 8%

We find much force in the contention of the learned Advocate of the appellant that entry 5 as such viz., “Aluminium household utensils made  of  aluminium…”  does  not  make  any sense.   The earlier  entry before recasting was “Aluminium  and  household  utensils  made  of aluminium” also.  We are of the view that the

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intention of the legislature was to retain the old entry as such but an inadvertent omission of the word  “and”  was  occurred  while  recasting  the schedule.  However, even in the relevant entry, Aluminium  and  household  utensils  made  of aluminium are clearly embedded.  We find that in  the  light  of  the  present  entry  5,  old aluminium  vessels  and  aluminium  scrap purchased  need  not  be  taxed  under  entry  83 which  takes  in  “metal  scraps  not  mentioned elsewhere in Schedule II”.  

5. Revision  applications  were  filed  thereagainst  by  the  State  of

Kerala before the High Court and by reason of the impugned judgment, it

reversed the decision of the Tribunal, opining:

“We are  unable  to  accept  this  contention  for more than one reason.  In the first place, even if aluminium independently comes under Entry 5, aluminium  scrap  cannot  be  treated  as aluminium as such.  Probably scrap aluminium predominantly consists of aluminium but still it cannot  be  said  to  be  aluminium  pure  and simple.  It is common knowledge that scrap is always  melted  or  otherwise  processed  to recover  the  metal  after  removing  the  waste. Therefore, aluminium scrap is used to recover aluminium after removing the waste.  Secondly, the  intention  of  the  Legislature  to  bring  all metal scrap under Entry 83 is very clear from the  wording  itself  which  excludes  from  its scope only such of the metal scraps which are referred  to  in  Second  Schedule  to  the  KGST Act.   Therefore,  a  clear  reading  of  Entry  83 makes  it  clear  that  all  metal  scrap  other  than iron  and  steel  scrap  referred  to  in  Second

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Schedule  will  fall  under  Entry  83.   Since aluminium is a metal, all items purchased in the form  of  aluminium  scrap  or  old  aluminium vessels  will  fall  under  Entry  83.   As  already held,  aluminium  scrap  cannot  be  treated  as aluminium falling under Entry 5 and so much so, we are unable to sustain the finding of the Tribunal to the contrary…”

6. Mr.  Sreekumar,  learned  counsel  appearing  on  behalf  of  the

appellant, raised the following contentions:

(i) As the Assessing Authority in the earlier years of assessment

had taken the view that Entry 5 is attracted in terms whereof

4%  tax  was  only  to  be  levied,  the  same  should  have  been

followed by it.   

(ii) Once utensils have been subjected to sales tax, no purchase tax

can be levied thereon in view of Section 5A of the Act.

7. Mr. P.V. Dinesh, learned counsel appearing on behalf of the State,

conceded that if sales tax has been paid on the goods, no purchase tax

can be levied thereupon.

The learned counsel, however, would submit that the question as

to whether the aluminium scrap, with which the appellant deals in, has

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suffered  sales  tax  or  not  is  essentially  a  question  of  fact  and  as  the

appellant  has  raised  the  question  for  the  first  time,  the  Assessing

Authority must get an opportunity to deal therewith.  It was furthermore

submitted that the Tribunal Committed a serious error insofar as it read

the word “and” in between aluminium and household utensils made of

aluminium.

The  learned  counsel  would  contend  that  Entry  83  which  is  a

general entry being clear and unambiguous, it  was wholly unnecessary

for the Tribunal  to enter into the question of interpretation of Entry 5

which was a special entry.   

8. Appellant is a dealer under the Act.  It deals in purchase and sale

of aluminium household utensils.  It entrusts the said utensils to another

unit for manufacture of new aluminium vessels on job work basis.   

9. A  finding  of  fact  has  been  arrived  at  by  the  Tribunal  that  the

appellant used to purchase old aluminium vessels and scrap which were

used  for  conversion  to  new  aluminium  household  utensils.   Old

aluminium vessels are pressed to convert the same as scrap.  Appellant,

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thus, is a scrap dealer and not a dealer in aluminium vessels within the

meaning of Entry 5.   

The dictionary meaning of “scrap” is ‘a small piece or amount of

something especially one that is left over after the greater part has been

used or material, especially metal, discarded for reprocessing’.

10. The Entries contained in the First Schedule appended to the Act

are in three parts.  Entry 5 deals in aluminium household utensils.  Entry

6 deals with aluminium products and products of aluminium alloys and

Entry 83 deals with metal scraps.  Indisputably, aluminium metal scraps

would also come within the purview of Entry 83.  As the appellant deals

in metal scrap, its case will come within in the purview of Entry 83.  All

aluminium products do not come within the purview of Entry 5.  It deals

with only domestic utensils.  For other aluminium products, a different

rate of tax has been prescribed in Entry 6.  If there exists an entry which

covers the goods in question, by necessary implication, the same would

be considered to have been excluded from another entry.   

We will assume that Entry 5 is capable of two interpretations.  It

may be read in the manner in which the Tribunal did, but it can also be

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read as “household utensils made up of aluminium or aluminium alloys”.

Use of the word “aluminium” at the beginning may be superfluous.  In

any event,  the appellant  cannot  be said  to  be dealing  with aluminium

household  utensils  or  household  utensils  made  up  of  aluminium  and

aluminium alloys.  We, therefore, are of the opinion that it was Entry 83

which is attracted to the facts of the present case.

11. Reliance placed by Mr. Sreekumar on  Berger Paints India Ltd. v.

Commissioner of Income Tax, Calcutta [(2004) 12 SCC 42] is misplaced.

Therein the Revenue did not challenge the correctness of the law laid

down by the High Court.  In fact it was accepted.  It was in that situation,

this  Court  held  that  it  was not  open to  the  Revenue to  challenge  the

correctness of the said decision in the case of other assesses, without any

just cause.   

12. In this case, there exists a cause, viz., a wrong reading of the Entry.

The  Tribunal  committed  a  manifest  error  in  construing  the  relevant

‘Entry’.  It failed to take into consideration the principles governing the

interpretation of a taxing statute.  On technical grounds, the Tribunal’s

view cannot be upheld.  Entry 5 speaks of utensils and not scraps made

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out of old utensils.  They are two different commodities coming under

two different entries.   

13. We, therefore, are of the opinion that there is no legal infirmity in

the judgment of the High Court.  However, there cannot be any doubt

whatsoever and particularly in view of the stand taken by the parties that

if  sales tax has been paid on an article, purchase tax cannot be levied

thereupon,.   However,  as  argued  by  Mr.  Dinesh,  the  same  involves

determination of pure questions of fact.  As the said question of fact has

not been gone into by the Assessing Authority, the matter is remitted to

the Assessing  Authority  for  consideration  of  the said question  afresh.

Parties would be at liberty to adduce fresh evidence on the said issue.   

14. The appeal is dismissed with the aforementioned observations and

directions.  No costs.

………………………….J. [S.B. Sinha]

..…………………………J. [Cyriac Joseph]

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New Delhi; August 01, 2008

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