Supreme Court of India
BABY VARGHESEversusSTATE OF KERALA
- Citation
- 2008 INSC 895
- Decided
- 1 August 2008
- Disposal
- Disposed off
- Bench
- S B SINHA
Holding
The purchase turnover of aluminium scrap and old utensils is taxable under Entry 83 (metal scraps) and not under Entry 5, as the appellant is a scrap dealer and the entries are mutually exclusive.
Summary
The appellant, a dealer in aluminium household utensils, purchased old aluminium vessels and scrap which were processed into new utensils. The issue was whether the purchase turnover of such scrap and old utensils fell under Entry 5 (aluminium household utensils) or Entry 83 (metal scraps) of the First Schedule of the Kerala General Sales Tax Act, 1963. The Supreme Court held that the appellant was a scrap dealer, not a dealer in household utensils, and therefore the transaction is taxable under Entry 83, as the entries are mutually exclusive. The Court also noted that if sales tax has already been paid on the articles, purchase tax cannot be levied, but that question is factual and was remitted to the Assessing Authority. Consequently, the appeal was dismissed and the matter sent back for factual determination.
Issues considered
- Whether purchase turnover of aluminium scrap and old utensils is taxable under Entry 83 of the First Schedule of the Kerala General Sales Tax Act, 1963.
- Whether Entry 5 of the First Schedule applies to such purchases.
- Whether the principle of mutual exclusivity of schedule entries governs the taxability.
- Whether purchase tax can be levied when sales tax has already been paid on the same article.
Legislation cited
Subjects
Kerala General Sales Tax Actpurchase turnoverEntry 83metal scraptaxabilityinterpretation of taxing statutesmutual exclusivitysales tax vs purchase taxremand
Judgment
[2008] 11 S.C.R 749
~
BABv VARGHESE A
v.
STATE OF KERALA
(CIVIL APPEAL No. 4752 of 2008)
AUGUST 1, 2008
B
[S.8. SINHA AND CYRIAC JOSEPH, JJ.]
-~
Kera/a General Sales Tax Act, 1963 - s. 5A, First Sched-
ule Entry 83 - Aluminium scrap and old utensils and vessels
- Purchase turnover of- Held: Is taxable under Entry 83 since c
the assessee deals in metal scrap - It purchases old alu-
minium vessels which are pressed to convert the same as
scrap - Order of tribunal that Entry 5 dealing in aluminium
household utensils is attracted cannot be upheld - Tribunal
erred in construing the relevant 'Entry' - However, matter re-
D
mitted to Assessing Authority for consideration of the ques-
..,,. tion if sales tax has been paid on the article or not.
The question which arose for consideration in this
appeal was whether 'purchase turnover' of aluminium
scrap and old utensils and vessels is taxable at the rate E
provided under Entry 83 of the First Schedule of the Kera la
General Sales Tax Act, 1963.
Disposing of the appeal, the Court
HELD: 1.1 Appellant is a dealer under the Kerala Gen- F
,.. eral Sales Tax Act, 1963. It deals in purchase and sale of
aluminium household utensils. It entrusts the said uten-
.. sils to another unit for manufacture of new aluminium
vessels on job work basis. [Para 8] [755-D]
1.2 A finding of fact has been arrived at by the Tribu- G
nal that the appellant used to purchase old aluminium
vessels and scrap which were used for conversion to new
aluminium household utensils. Old aluminium vess.els are
pressed to convert the same as scrap. Thus, the appel-
749 H
750 SUPREME COURT REPORTS [2008] 11 S.C.R.
A lant is a scrap dealer and not a dealer in aluminium ves-
sels within the meaning of Entry 5. The dictionary mean-
ing 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 re-
B processing'. [Para 9] [755-E-F]
1.3 The Entries contained in the First Schedule ap-
pended to the Act are in three parts. Entry 5 deals in alu-
minium household utensils. Entry 6 deals with aluminium
products and products of aluminium alloys and Entry 83
C deals with metal scraps. Indisputably, aluminium metal
_scraps would also come within the purview of Entry 83.
As the app~llant 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
o 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; [Para 1O] [755-G-
E H; 756-A-B]
1.4 Entry 5 is capable of two interpretations. It may
be read in the manner in which the Tribunal did, but it can
also be read as "household utensils made up of alu-
minium or aluminium alloys". Use of the word "aluminium"
F 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 alu-
minium and aluminium alloys. Therefore, it was Entry 83
which is attracted to the facts of the instant case. [Para
G 10] [756-C-D]
1.5 In the instant case, the tribunal committed a mani-
fest error in construing the relevant 'Entry'. It failed to take
into consideration the· principles governing the interpre-
tation of a taxing statute. On technical grounds, the
H Tribunal's view cannot be upheld. Entry 5 speaks of uten-
BABY VARGHESE v. STATE OF KERALA 751
[S.B. SINHA, J]
sils and not scraps made out of old utensils. They are two A
different commodities coming under two different entries.
[Para 12] [756-F-G]
1.6 There is no legal infirmity in the judgment of the
High Court. However, in view of the stand taken by the
parties that if sales tax has been paid on an article, pur- B
chase tax cannot be levied thereupon. However, the same
involves determination of pure questions of fact. As the
said question of fact has not been gone into by the As-
sessing Authority, the matter is remitted to the Assessing
Authority for consideration of the said question afresh. C
[Para 13] [756-H; 757-A-B]
Berger Paints India Ltd. v. Commissioner of Income Tax,
Calcutta 2004 (12) SCC 42 - referred to.
Case Law Reference D
2004 (12) SCC 42 Referred to. Para 11
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 4752
of 2008
From the final Judgment and Order dated 18.8.2006 of E
the High Court of Kerala at Ernakulam in S.T. Revision No. 451
of 2004
V.K. Sidharthan for the Appellant.
P.V. Dinesh for the Respondent. F
The Judgment of the Court was delivered by
S.B. SINHA, J : 1. Leave granted.
2. This appeal is directed against a judgment and order G
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 ap-
,.- plication 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 H
752 SUPREME COURT REPORTS [2008] 11 S.C.R.
A 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 aluhlin1um
8 alloys.
The First Schedule appended to the Act contains entries
concerning aluminium and household utensils, which read as
under:
c
SI. Description of Goods Point of .Levy Rate of tax
No. Per cent
5. Aluminum household At the point of 4
utensils whether made of first sale in the
D aluminium and aluminium State by a
alloys dealer who is
liable to tax un-
der Section 5
6. Aluminium products (in- -do- 8
E eluding aluminium extru-
sion) and products, alu-
minium alloys not else-
where mentioned in this
schedule '
F 83. Metal scraps other than -do- 8%
those specified in the
second schedule
4. Indisputably, prior to its amendment which took place
G on 23.02.1992, the word "and" occurred in between "aluminium"
and "household utensils made of aluminium" in Entry 5 afore-
mentioned.
The Assessing Authority held that in the instant case Entry
83 was attracted. The Appellate Authority upheld the said view.
H In a second appeal preferred before the Sales Tax Appellate
BABY VARGHESE v. STATE OF KERALA 753
[S.B. SINHA, J]
Tribunal, however, a different view was taken opining that de- A
spite 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 sa.me in the 8
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 C
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 F.S. 4%
whether made of aluminium and alu- D
minium alloys
83. Metal scraps other than those speci- F.S. 8%
fied in the second schedule
We find much force in the contention of the learned E
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 intention of F
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 G
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 im- H
754 SUPREME COURT REPORTS [2008] 11 S.C.R.
~
A pugned judgment, it reversed the decision of the Tribunal, op in-
ing:
"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
B cannot be treated as aluminium as such. Probably scrap --r~
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
c 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
D 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
Schedule will fall under Entry 83. Since aluminium is a
metal, all items purchased in the form of aluminium scrap
E 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
F 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.
G
(ii) Once utensils have been subjected to sales tax, no
purchase tax can be levied thereon in view of Section ~
SA of the Act.
7. Mr. P.V. Dinesh, learned •ounsel appearing on behalf
H
BABY VARGHESE v. STATE OF KERALA 755
[S.B. SINHA, J]
of the State, conceded that if sales tax has been paid on the A
goods, no purchase tax can be levied thereupon.
The learned counsel, however, would submit that the ques-
tion as to whether the aluminium scrap, with which the appellant
deals in, has suffered sales tax or not is essentially a question
of fact and as the appellant has raised the question for the first B
time, the Assessing Authority must get an opportunity to deal
therewith. It was furthermore submitted that the Tribunal Com-
mitted a serious error insofar as it read the word "and" in be-
tween aluminium and household utensils made of aluminium.
c
The learned counsel would contend that Entry 83 which is
a general entry being clear and unambiguous, it was wholly un-
necessary for the Tribunal to enter into the question of interpre-
tation of Entry 5 which was a special entry.
8. Appellant is a dealer under the Act. It deals in purchase D
and sale of aluminium household utensils. It entrusts the said
utensils to another unit for manufacture of new aluminium ves-
sels 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 E
which were used for conversion to new aluminium household
utensils. Old aluminium vessels are pressed to convert the same
as scrap. Appellant, thus, is a scrap dealer and not a dealer in
aluminium vessels within the meaning of Entry 5.
F
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, dis-
carded for reprocessing'.
10. The Entries contained in the First Schedule appended G
to the Act are in three parts. Entry 5 deals in aluminium house-
hold utensils. Entry 6 deals with aluminium products and prod-
ucts 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, H
756 SUPREME COURT REPORTS [2008] 11 S.C.R.
y
A 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 differ-
ent rate of tax has been prescribed in Entry 6. If there exists an
entry which covers the goods in question, by necessary impli-
B cation, the same would be considered to have been excluded -r~
from another entry.
We will assume that Entry 5 is capable of two interpreta-
tions. It may be read in the manner in which the Tribunal did, but
it can also be read as "household utensils made up of aluminium
c or aluminium alloys". Use of the word "aluminium" at the begin-
ning may be superfluous. In any event, the appellant cannot be
said to be dealing with aluminium household utensils or house-
hold utensils made up of aluminium and aluminium alloys. We,
therefore, are of the opinion that it was Entry 83 which is at-
D tracted 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 chal-
lenge the correctness of the law laid down by the High Court. In
E 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.
F 12. In this case, there exists a cause, viz., a wrong reading
of the Entry. The Tribunal committed a manifest error in constru-
ing 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 out of old utensils. They
G
are two different commodities coming under two different en-
tries.
-<
13. We, therefore, are of the opinion that there is no legal
infirmity in the judgment of the High Court. However, there cari-
H not be any doubt whatsoever and particularly in view of the star.d
BABY VARGHESE v. STATE OF KERALA 757
[S.B. SINHA, J]
taken by the parties that if sales tax has been paid on an article, A
purchase tax cannot be levied thereupon,. However, as argued
by Mr. Dinesh, the same involves determination of pure ques-
tions of fact. As the said question of fact has not been gone into
by the Assessing Authority, the matter is remitted to the Assess-
ing Authority for consideration of the said question afresh. Par- B
ties would be at liberty to adduce fresh evidence on the said
issue.
14. The appeal is dismissed with the aforementioned ob-
servations and directions. No costs.
c
N.J. Appeal disposed of.
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